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
--------------------------------------------
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
-------------------------------------------------------------
(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: September 30, 2005
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Item 1. Reports to Stockholders.
[Logo] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
World ex-U.S. Value Fund
- --------------------------------------------------------------------------------
For the period November 15, 2004 commencement
of operations) to September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[Logo] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth. We wish to thank
you for your business and confidence in Mellon Institutional Funds. Please feel
free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
- -----------------------
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
The Boston Company World ex US Value Fund return since inception November 15,
2004 ending September 30, 2005 was 11.72% compared to the 17.29% for its
benchmark MSCI ACWI ex US index. International markets moved up sharply during
the period on the back of strong global economic growth, demand for commodities,
and rising corporate earnings. The Fund trailed its benchmark primarily due to a
sell discipline that aims to reduce portfolio risk. Stocks that were reduced or
sold continued to appreciate beyond what the investment team deemed reasonable
in relation to potential risks.
Low interest rates and tepid inflation continued to support consumption and
industrial production around the world. Robust demand and supply constraints
caused by weather in the US Gulf Coast sent oil over $70/bbl. China's insatiable
demand for raw materials sent commodity prices higher. Countries rich in natural
resources and lower cost manufacturing soared during the period, particularly
emerging markets and Canada. The Fund's lower relative weightings in the
materials and energy sectors detracted from performance, as did limited exposure
to Canadian natural resource companies. One of the Fund's portfolio holdings,
chemical producer Ciba Specialty, declined as input costs surged with oil
prices. However, the Fund's energy stocks posted sizeable gains, including its
holdings in Petroleo Brasileiro S/A, Total, and Repsol.
Japan rebounded from an extended period of weak performance after Prime Minister
Koizumi's LDP party scored a resounding victory in early elections. Indications
of a domestic economic recovery provided further support for Japanese equities,
which surged over 20% this quarter. A higher weight in Japan added value to the
Fund's return, but the Fund's overall stock selection slightly lagged its index.
Sumitomo Mitsui Financial Group Inc., one of Japan's largest commercial banks,
rose with prospects for Japan's continued recovery.
International markets are deep into a 3-year recovery, yet there are still
several trends that should support long term price appreciation. At the same
time, there will no doubt be periods of weakness caused by slower economic
activity, geopolitical events, and general investor sentiment. Regardless of
macroeconomic trends or geopolitical events, we continue to search for value in
overlooked segments of the market while taking profits in stocks that we believe
are trading near peak earnings. As always, we remain committed to our time
tested investment philosophy and continue to seek high quality companies that
have been discounted by the market.
/s/ D. Kirk Henry /s/ Carolyn Kedersha /s/ Clifford A. Smith
- ----------------- -------------------- ---------------------
D. Kirk Henry Carolyn Kedersha Clifford A. Smith
2
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
World ex-U.S. Value Fund and MSCI ACWI ex-U.S. Index
- --------------------------------------------------------------------------------
[The data in the line chart is a representation from the printed material]
TBC
PERIOD World ex-U.S. Value Fund MSCI ACWI ex-U.S. Index *
11/15/04 100,000 100,000
11/30/04 100,300 101,722
12/31/04 104,100 106,263
1/31/05 102,900 104,706
2/28/05 107,550 110,102
3/31/05 104,600 107,038
4/30/05 101,950 104,151
5/31/05 100,900 104,428
6/30/05 102,700 106,913
7/31/05 105,657 110,818
8/31/05 108,413 113,262
9/30/05 111,721 119,301
Total Return
(for period ended 9/30/2005)
- --------------------------------------------------------------------------------
Since
Inception
11/15/2004
- --------------------------------------------------------------------------------
Fund 11.72%
* Source: Bloomberg Inc.
Average annual total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains.The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemp-tion of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than itwould be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- ------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,068.10 $4.67
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.56 $4.56
- ------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.90%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -----------------------------------------------------------------------------------------------------
Total SA France Energy 1.6%
Sumitomo Mitsui Financial Group Japan Financials 1.6
GlaxoSmithKline PLC United Kingdom Consumer Noncyclical 1.6
Vodafone Group PLC United Kingdom Communications 1.6
Royal Bank of Scotland Group PLC United Kingdom Financials 1.5
Carrefour SA France Consumer Noncyclical 1.4
Nippon Express Co., Ltd. Japan Industrials 1.3
Novartis AG Switzerland Consumer Noncyclical 1.3
Bank of Ireland Ireland Financials 1.3
France Telecom SA France Communications 1.2
----
14.4%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------------------------
Europe ex U.K. 38.3%
U.K. 18.0
Asia ex Japan 12.9
Japan 22.9
Americas ex U.S. 6.2
Middle East/Africa 1.7
-----
100.0%
* Excludes short-term securities.
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--96.2%
EQUITIES--96.2%
Australia--1.5%
Amcor Ltd. 42,768 $ 218,817
National Australia Bank Ltd. 9,932 250,293
----------
469,110
----------
Belgium--0.9%
Fortis 9,240 266,978
----------
Brazil--1.4%
Petroleo Brasileiro SA 3,470 248,070
Telecommunicacoes Brasileiras SA--ADR 5,680 184,089
----------
432,159
----------
Canada--2.9%
Alcan, Inc. 3,980 126,280
Canadian Imperial Bank of Commerce 2,070 129,353
Quebecor World, Inc. 16,880 316,736
Sobeys, Inc. 5,880 215,097
Torstar Corp. 5,770 115,470
----------
902,936
----------
China--0.6%
China Telecom Corp., Ltd. 455,000 171,562
----------
Finland--1.4%
M-real Oyj 29,670 160,761
Nokia Oyj 6,940 116,228
UPM-Kymmene Oyj 7,180 143,624
----------
420,613
----------
France--8.4%
Banque Nationale De Paris 3,950 300,155
Carrefour SA 8,820 405,628
Credit Agricole SA 9,110 267,052
France Telecom SA 12,618 362,003
Sanofi-Synthelabo SA 3,490 288,261
Schneider Electric SA 1,660 131,027
Thomson 5,000 103,921
Total SA 1,770 482,923
Valeo SA 6,367 264,513
----------
2,605,483
----------
Germany--7.4%
Allianz AG 1,600 215,944
Deutsche Bank AG 3,329 311,238
Deutsche Lufthansa AG 14,940 197,977
Deutsche Post AG 14,420 337,129
Deutsche Postbank AG 2,000 109,351
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
Germany (continued)
Deutsche Telekom AG 12,520 $ 227,729
E.ON AG 2,420 222,212
Hannover Rueckversicherung AG 3,540 122,485
Heidelberger Druckmaschinen AG 3,240 110,976
Infineon Technologies AG 17,380 170,801
KarstadtQuelle AG 1,585 21,442
Medion AG 2,450 38,265
Volkswagen AG 3,570 219,597
----------
2,305,146
----------
Hong Kong--1.3%
Bank of East Asia Ltd. 66,329 194,094
Citic Pacific Ltd. 14,000 39,163
Denway Motors Ltd. 106,000 38,602
Huadian Power International Co. 434,000 120,285
----------
392,144
----------
Hungary--0.5%
Magyar Telekom 29,940 154,204
----------
India--1.5%
Hindalco Industries Ltd. 144A/Reg S GDR 40,000 133,788
Mahanagar Telephone Nigam Ltd.--ADR 18,050 118,950
Reliance Industries Ltd. 144A--GDR 5,810 209,723
----------
462,461
----------
Indonesia--0.3%
PT Gudang Garam Tbk 101,780 107,814
----------
Ireland--1.2%
Bank of Ireland 23,890 375,989
----------
Italy--3.2%
Banco Popolare di Verona e Novara 5,060 95,381
Benche Popolari Unite Scri 1,150 23,335
Benetton Group Spa 10,020 107,379
Eni Spa 11,200 332,490
Finmeccanica Spa 4,627 91,777
UniCredito Italiano Spa 61,590 347,033
----------
997,395
----------
Japan--22.0%
Aeon Co., Ltd. 13,400 269,157
Alps Electric Co., Ltd. 6,200 100,666
Astellas Pharma, Inc. 3,700 139,186
Canon, Inc. 5,700 307,823
Credit Saison Co., Ltd. 700 30,711
Dentsu, Inc. 56 158,858
East Japan Railway Co. 8 45,670
Fuji Heavy Industries Ltd. 41,800 188,912
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
Japan (continued)
Fuji Photo Film Co., Ltd. 6,400 $ 210,871
Funao Electric Co., Ltd. 2,100 186,486
JS Group Corp. 9,000 153,264
Kao Corp. 9,100 224,073
KDDI Corp. 60 338,296
Kuraray Co., Ltd. 16,900 149,779
Mabuchi Motor Co., Ltd. 4,400 217,073
Matsumotokiyoshi Co., Ltd. 2,100 68,267
Minebea Co., Ltd. 35,800 147,603
Mitsubishi UFJ Financial Group, Inc. 19 249,405
Murata Manufacturing Co., Ltd. 1,700 94,802
Nippon Express Co., Ltd. 77,700 383,332
Nissan Motor Co., Ltd. 21,000 239,767
Orix Corp. 1,100 198,661
Rinnai Corp. 8,100 186,248
Rohm Co., Ltd. 3,300 286,362
Sekisui House Ltd. 18,000 220,580
Shin-Etsu Chemical Co., Ltd. 6,100 266,012
Skylark Co., Ltd. 10,800 159,179
Sohgo Security Services Co., Ltd. 5,400 79,066
Sumitomo Bakelite Co., Ltd. 13,600 93,215
Sumitomo Chemical Co., Ltd. 18,900 116,887
Sumitomo Mitsui Financial Group 51 480,751
Takeda Pharmaceutical Co., Ltd. 830 49,430
Takefuji Corp. 4,030 314,206
TDK Corp. 1,100 78,398
The 77 Bank Ltd. 30,200 221,891
Toyoda Gosei Co., Ltd. 8,600 163,651
----------
6,818,538
----------
Malaysia--0.5%
Sime Darby Berhad 98,600 162,218
----------
Mexico--1.6%
Cemex S.A. de C.V.--ADR 1,685 88,126
Coca-Cola Femsa, S.A. de C.V.--ADR 7,620 203,530
Telefonos de Mexico SA de CV--ADR 10,260 218,230
----------
509,886
----------
Netherlands--4.7%
ABN Amro Holding NV 9,104 217,985
Aegon NV 17,540 260,246
Heineken NV 9,370 300,678
Koninklijke Philips Electronics NV 11,460 304,411
VNU NV 4,820 151,428
Wolters Kluwer NV 11,410 212,199
----------
1,446,947
----------
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
Portugal--0.7%
EDP-Energias de Portugal SA 72,520 $ 202,131
----------
Singapore--1.5%
DBS Group Holdings, Ltd. 33,710 314,786
United Overseas Bank Ltd. 19,750 164,583
----------
479,369
----------
South Africa--1.7%
Nampak Ltd. 58,500 146,170
Nedcor Ltd. 12,126 175,803
Sappi, Ltd. 16,830 197,821
----------
519,794
----------
South Korea--3.6%
Hyundai Motor Co. 2,120 165,593
Kookmin Bank--ADR 3,070 181,898
Korea Electric Power Corp. 4,770 162,749
KT Corp.--ADR 8,630 194,175
Samsung Electronics Co., Ltd. 361 203,439
SK Telecom Co., Ltd.--ADR 9,270 202,457
----------
1,110,311
----------
Spain--1.9%
Banco Sabadell SA 3,250 83,089
Endesa SA 6,810 182,203
Repsol YPF SA 10,200 330,375
----------
595,667
----------
Sweden--0.9%
Svenska Cellulosa AB (SCA), Class B 7,680 269,121
----------
Switzerland--5.8%
CIBA Specialty Chemicals AG 4,718 278,291
Clariant AG 8,250 118,549
Lonza Group AG Registered Shares 1,155 68,172
Nestle SA 1,120 327,936
Novartis AG 7,420 376,331
Swiss Re 4,570 300,100
UBS AG Registered Shares 3,830 325,479
----------
1,794,858
----------
Taiwan--1.6%
Compal Electronics, Inc. 184,327 182,130
SinoPac Financial Holdings Co., Ltd. 290,000 135,179
United Microelectronics Corp. 275,408 176,986
----------
494,295
----------
United Kingdom--17.2%
Anglo American PLC 11,280 335,970
BAA PLC 17,539 192,883
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
United Kingdom (continued)
BAE Systems PLC 16,410 $ 99,344
Barclays PLC 26,792 270,560
Boc Group PLC 2,018 41,007
Boots Group PLC 25,145 269,660
BP PLC 30,492 361,933
BT Group PLC 54,427 213,187
Centrica PLC 63,300 274,437
Diageo PLC 18,352 263,600
GKN PLC 42,050 218,436
GlaxoSmithKline PLC 18,256 463,954
HSBC Holdings PLC 15,735 254,297
Marks & Spencer Group PLC 26,655 176,045
Old Mutual PLC 64,500 157,724
Rexam PLC 9,660 87,593
Royal Bank of Scotland Group PLC 15,657 443,986
Royal Dutch Sell PLC 9,700 320,124
Sainsbury (J) PLC 29,307 144,364
Unilever PLC 27,390 285,771
Vodafone Group PLC 177,841 462,305
-----------
5,337,180
-----------
TOTAL EQUITIES (Cost $28,035,768) 29,804,309
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $28,035,763) 29,804,309
-----------
AFFILIATED INVESTMENTS--1.3%
Dreyfus Institutional Preferred Plus Money Market Fund(a) (Cost $394,690) 394,690 394,690
-----------
TOTAL INVESTMENTS--97.5% (Cost $28,430,453) 30,198,999
OTHER ASSETS, LESS LIABILITIES--2.5% 771,956
-----------
NET ASSETS--100% $30,970,955
===========
Notes to Schedule of Investments:
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
144A--Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $343,511 or 1.1% of net
assets.
(a) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
The fund held the following forward foreign currency exchange contracts at
September 30, 2005:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date September 30, 2005 to Deliver (Loss)
- ------------------------------------------------------------------------------------------------------------------
British Pound 13,026 10/4/05 $22,957 23,031 $ (74)
Japanese Yen 1,596,597 10/3/05 14,066 14,127 (61)
------- ------- ------
$37,023 $37,158 $ (135)
======= ======= ======
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date September 30, 2005 to Deliver Gain
- ------------------------------------------------------------------------------------------------------------------
Japanese Yen 1,641,610 10/4/05 $14,462 $14,479 $ 17
======= ======= ====
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
Basic Industry 0.4%
Basic Materials 6.8
Communications 8.7
Consumer Cyclical 10.3
Consumer Goods 0.4
Consumer Noncyclical 12.9
Diversified 0.7
Energy 5.9
Financials 24.6
Technology 10.1
Utilities 3.8
Short-term and Net Other Assets 3.8
-----
100.0%
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (Note 7)):
Unaffiliated investments (cost $28,035,763) $29,804,309
Affiliated investments (Note 1H) (cost $394,690) 394,690
Foreign currency, at value (cost $808,952) 784,354
Receivable for investments sold 319,806
Interest and dividends receivable 61,528
Receivable from investment advisor (Note 2) 18,111
Unrealized appreciation on forward currency exchange contracts (Note 6) 17
Prepaid expenses 15,285
-----------
Total assets 31,398,100
Liabilities
Payable for investments purchased $ 382,658
Accrued professional fees 26,417
Accrued accounting, custody, administration and transfer agent fees (Note 2) 14,546
Accrued trustees' fees (Note 2) 681
Unrealized depreciation on forward currency exchange contracts (Note 6) 135
Other accrued expenses and liabilities 2,708
---------
Total liabilities 427,145
-----------
Net Assets $30,970,955
===========
Net Assets consist of:
Paid-in capital $28,341,611
Accumulated net realized gain 635,520
Undistributed net investment income 250,162
Net unrealized appreciation 1,743,662
-----------
Total Net Assets $30,970,955
===========
Shares of beneficial interest outstanding 1,389,479
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $22.29
===========
The accompanying notes are an integral part of the financial statements.
12
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
September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign witholding taxes of $38,795) $ 365,074
Interest income:
Unaffiliated issuers 1,178
Affiliated issuers 14,931
Securities lending income (Note 7) 1,954
----------
Total investment income 383,137
Expenses
Investment advisory fee (Note 2) $ 107,492
Accounting, custody, administration and transfer agent fees (Note 2) 108,300
Registration fees 20,276
Professional fees 37,144
Trustees' fees and expenses (Note 2) 2,534
Insurance expense 1,835
Miscellaneous expenses 13,740
----------
Total expenses 291,321
Deduct:
Waiver of investment advisory fee (Note 2) (107,492)
Reimbursement of fund operating expenses (Note 2) (54,266)
----------
Total expense deductions (161,758)
----------
Net expenses 129,563
----------
Net investment income 253,574
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 635,520
Foreign currency 54,649
----------
Net realized gain 690,169
Change in unrealized appreciation (depreciation) on:
Investment securities 1,768,546
Foreign currency (24,884)
----------
Change in net unrealized appreciation (depreciation) 1,743,662
Net increase from payments by affiliates (Note 2) 5,514
----------
Net realized and unrealized gain (loss) 2,439,345
----------
Net Increase in Net Assets from Operations $2,692,919
==========
The accompanying notes are an integral part of the financial statements.
13
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
September 30, 2005
------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 253,574
Net realized gain (loss) 690,169
Change in net unrealized appreciation (depreciation) 1,743,662
Net increase from payments by affiliates 5,514
-----------
Net increase in net assets from investment operations 2,692,919
-----------
Distributions to Shareholders (Note 1C)
From net investment income (58,146)
-----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 28,528,386
Value of shares issued to shareholders in reinvestment of distributions 57,745
Cost of shares redeemed (249,949)
-----------
Net increase (decrease) in net assets from Fund share transactions 28,336,182
-----------
Total Increase (Decrease) in Net Assets 30,970,955
Net Assets
At beginning of period --
-----------
At end of period (including undistributed net investment income of $250,162) $30,970,955
===========
The accompanying notes are an integral part of the financial statements.
14
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
September 30, 2005
------------------
Net Asset Value, Beginning of Period $ 20.00
From Operations:
Net investment income* (a) 0.32
Net realized and unrealized gains (loss) on investments 2.02
Net increase from payments by affiliates (b) --(c)
-------
Total from operations 2.34
-------
Less Distributions to Shareholders:
From net investment income (0.05)
-------
Net Asset Value, End of Period $ 22.29
=======
Total Return (d) 11.72%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.90%(e)
Net Investment Income (to average daily net assets)* 1.76%(e)
Portfolio Turnover 34%(f)
Net Assets, End of Period (000's omitted) $30,971
- -----------
* 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
net investment income per share and the ratios would have been:
Net investment income per share (a) $ 0.12
Ratios (to average daily net assets):
Expenses 2.02(e)
Net Investment Income 0.64(e)
(a) Calculated based on average shares outstanding.
(b) For the period from November 15, 2004 (commencement of operations) to
September 30, 2005, 0.05% of the Fund's total return consists of a
vol-untary payment by the advisor to compensate the Fund for a trading
error. Excluding this payment, total return would have been 11.67%.
(c) Amount represents less than one penny.
(d) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(e) Computed on an annualized basis.
(f) Not annualized.
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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. Value Fund (the "Fund"), which commenced
operations on November 15, 2004, is a separate diversified investment
series of the Trust.
The Fund's Board of Trustees approved, effective January 28, 2005, the
change in the Fund's name from "The Boston Company International Value
Opportunities Fund" to "The Boston Company World ex-U.S. Value Fund."
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 Fund 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 is available, 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 is then 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 earned, 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.
Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities sold are recorded on the identified cost basis. The
Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distribution from 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.
16
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 among Funds of the Trust 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 are 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 September
30, 2005. Pursuant to this agreement, for the period November 15, 2004
(commencement of operations) to September 30, 2005, TBCAM voluntarily
waived its investment advisory fee in the amount of $107,492 and reimbursed
the Fund for $54,266 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
September 30, 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 was charged
$4,719 for the period November 15, 2004 (commencement of operations) to
September 30, 2005.
17
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Fund has contracted with 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 was charged $103,581 during the period
November 15, 2004 (commencement of operations) to September 30, 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.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of TBCAM or its affiliates
received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(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 September 30, 2005, were $33,111,274 and $5,707,962, respectively. For
the period November 15, 2004 (commencement of operations) to September 30,
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
September 30, 2005
------------------
Shares sold 1,398,390
Shares issued to shareholders in
reinvestment of distributions 2,813
Shares redeemed (11,724)
---------
Net increase (decrease) 1,389,479
=========
At September 30, 2005, three shareholders of record held approximately 97%
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
7 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 September 30, 2005, the Fund did not collect any redemption
fees.
18
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 2005, were as follows:
Aggregate Cost $28,480,381
===========
Unrealized appreciation $ 2,151,074
Unrealized depreciation (432,456)
-----------
Net unrealized appreciation (depreciation) $ 1,718,618
===========
Undistributed ordinary income $ 935,610
Tax character of distributions paid during the fiscal year ended
September 30, 2005, was as follows:
Ordinary income $ 58,146
(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 September 30, 2005. See Schedule of Investments for further
details.
Futures contracts
The Fund may enter into financial futures contracts for the sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to 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 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 counterparty does
not perform under the contract's terms. The Fund 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 September 30, 2005, the Fund did not hold any financial futures
contracts.
19
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 2005 and earned interest on
invested collateral of $9,189 of which, $7,235 was rebated to borrowers or
paid in fees. At September 30, 2005, the Fund had no open security
positions on loan.
(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 0.060 of 1% committed amount,
is allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended September 30, 2005, a facility fee of
$97 was allocated to the Fund.
During the period ended September 30, 2005, the Fund had average borrowings
outstanding of $88,333 on a total of six days and incurred $56 of interest
expense.
20
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company World ex-U.S. Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company World ex-U.S.
Value Fund (the "Fund") at September 30, 2005, and the results of its
operations, the changes in its net assets and the financial highlights for the
period from November 15, 2004 (commencement of operations) through September 30,
2005, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at
September 30, 2005 by correspondence with the custodian and brokers, provides a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
21
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, Decision 33 None $299
c/o Decision Resources, Inc. since Resources, Inc. ("DRI")
260 Charles Street 11/3/1986 (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street Associates since Associates (family
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman c/o Trustee Trustee William Joseph Maier, 33 None $299
Harvard University since Professor of Political
Littaver Center 127 9/13/1989 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt P.O. Box Trustee Trustee formerly Trustee, Mertens 33 None $299
2333 New London, NH 03257 since House, Inc. (hospice)
4/11/35 11/3/1986
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon President and Operating Officer of The
Institutional Asset Chief Executive Boston Company Asset
Management One Officer Management, LLC; formerly
Boston Place Senior Vice President and
Boston, MA 02108 Chief Operating Officer,
7/24/65 Mellon Institutional Asset
Management ("MIAM") and
Vice President and Chief
Financial Officer, MIAM
22
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
Mellon Institutional and Secretary Operations, Mellon Institutional
Asset Management Asset Management; formerly First Vice
One Boston Place President, Mellon Institutional Asset
Boston, MA 02108 Management and Mellon Global Investments
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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, 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
Asset Management Management; formerly Shareholder Representative,
One Boston Place Standish Mellon Asset Management Company LLC
Boston, MA 02108
1/19/71
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional Asset
Mellon Institutional Compliance Management and Chief Compliance Officer,
Asset Management Officer Mellon Funds Distributor; formerly Director,
One Boston Place Blackrock, Inc., Senior Vice President, State Street
Boston, MA 02108 Research & Management Company ("SSRM"), Vice President,
4/8/57 SSRM
23
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[Logo] Mellon
--------------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6612AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
Small/Mid Cap Growth Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
- --------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth. We wish to thank
you for your business and confidence in Mellon Institutional Funds. Please feel
free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
- -----------------------
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
In our commentary last year, terrorism and the upcoming elections were the focus
of our discussion. Now, energy prices, inflation fears, and interest rates are
at the forefront of investor concerns. However, despite these economic fears,
the equity markets continued to post healthy returns. Small-cap stocks continued
to perform well and outpaced their large-cap counterparts, buoyed by strong
profit growth and relatively low interest rates. Overall, the equity markets
sustained their strong positive momentum despite the devastation of the two gulf
coast hurricanes. While we don't see these events derailing the recent U.S.
economic strength, they could lead to slightly lower growth.
For the 12 months ended September 30, 2005, The Boston Company Small-Mid Cap
Growth Fund had a total return of 22.91% versus 17.97% for the Russell 2000
Growth Index and 21.01% for the Russell 2500 Growth Index. The Fund has
maintained strong relative performance during the past year as portfolio
holdings have participated in much of the market's gains, while maintaining an
overall risk averse profile. This is evidenced by the Fund's lower relative
decline during the only negative quarter over the last 12 months. During the
first quarter decline, the Fund declined approximately half as much as the
- -6.83% for the Russell 2000 Growth Index.
Broad sector performance within the Russell 2000 Growth Index was solid during
the year. For the first time since the fourth quarter of 2003, growth issues
within the Russell 2000 marginally outperformed value issues on a trailing
12-month basis, gaining 17.97% versus value's gain of 17.75%. In addition, this
is the tightest 12-month performance margin between the two small-cap styles
since the first quarter of 1987.
We continue to believe the longer-term trend within small-cap equities is
movement away from the lower quality companies. However, factors that have
supported the broader small-cap market have not weakened as expected, as the
sector continues to generate profit growth that has outpaced large-caps for most
of the past five years. We believe small-caps will continue to outperform
large-caps through the end of 2005.
Relative to the indices, the portfolio benefited from its exposure to the
energy, endustrials, and consumer staples sectors. In the financial services
sector, the Fund remains underweighted relative to its benchmark, reflecting our
concern that the rising interest rate environment would impact the sector's
strongest sources of growth over the past few years: mortgages and
re-financings. Within consumer discretionary, we maintained our underweight
because we believe that consumer spending that had been largely fueled by the
meteoric rise in property values with historically low interest rates is past.
Our technology investments remain exposed to areas such as semiconductors,
electronic equipment, and software and services.
2
In healthcare, we are underweight the biotechnology sector and remain focused on
companies whose earnings stand best positioned to benefit from a variety of
opportunities. The energy sector has now become the focal point of inflation
fears. Oil and gas prices hit new highs during the quarter before settling down
slightly, once again driving fears of profit erosion and inflation. We continue
to be marginally overweighted in the energy sector, but remain sensitive to
shifts in the energy markets. Even if shifts within the tight supply-demand
relationship occur, we feel that given the current high commodity prices,
companies within the energy sector should continue to show strong earnings and
cash flows through 2005.
/s/ B. Randall Watts /s/ Todd Wakefield
- -------------------- ------------------
B. Randall Watts Todd Wakefield
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small/Mid CapGrowth Fund with the Russell 2500 Growth Index and the Russell 2000
Growth Index
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS LINE CHART IN THE PRINTED MATERIAL]
TBC
PERIOD Small/Mid Cap Growth Fund Russell 2500 Growth Index * Russell 2000 Growth Index *
9/30/95 100,000 100,000 100,000
12/31/95 102,800 101,746 101,478
3/31/96 109,588 108,865 107,307
6/30/96 120,839 114,428 113,578
9/30/96 117,236 115,998 112,609
12/31/96 120,651 117,080 112,907
3/31/97 105,774 107,711 101,065
6/30/97 127,849 125,218 118,807
9/30/97 154,339 146,049 138,908
12/31/97 138,936 134,356 127,524
3/31/98 157,484 149,331 142,675
6/30/98 146,447 142,046 134,481
9/30/98 112,366 110,503 104,411
12/31/98 141,317 138,520 129,091
3/31/99 150,918 137,062 126,923
6/30/99 165,365 160,095 145,638
9/30/99 161,827 154,540 138,477
12/31/99 253,105 215,373 184,720
3/31/00 311,508 247,997 201,867
6/30/00 282,907 230,862 186,985
9/30/00 271,290 224,075 179,557
12/31/00 204,314 180,719 143,289
3/31/01 160,927 144,728 121,504
6/30/01 191,511 175,506 143,343
9/30/01 144,923 127,988 103,091
12/31/01 172,663 161,140 130,066
3/31/02 171,596 156,384 127,517
6/30/02 152,569 130,375 107,503
9/30/02 126,430 105,520 84,369
12/31/02 132,484 114,257 90,705
3/31/03 126,616 110,600 87,188
6/30/03 150,979 135,728 108,242
9/30/03 168,762 149,260 119,572
12/31/03 193,658 167,175 134,737
3/31/04 209,130 176,377 142,257
6/30/04 208,596 176,614 142,389
9/30/04 200,238 166,713 133,831
12/31/04 228,513 191,566 154,013
3/31/05 220,155 183,277 143,501
6/30/05 229,225 189,798 148,493
9/30/05 246,119 201,738 157,874
Average Annual Total Returns
(for period ended 9/30/2005)
================================================================================
Since
Inception
1 Year 3 Years 5 Years 10 Years 1/1/1988**
- --------------------------------------------------------------------------------
Fund 22.91% 24.86% (1.93)% 9.42% 13.57%
* Source: Lipper Inc.
** Combines the performance of the Fund beginning September 1, 1990 and its
predecessor, the Small Cap Equity Limited Partnership, from
January 1, 1988 to that date.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemp-tion of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,117.90 $5.31
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.05 $5.06
+ Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 183/365 (to
reflect the one-half year period).
5
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ------------------------------------------------------------------------------------------------------
Ingram Micro Inc., Class A Information Technology 2.1%
Fisher Scientific International Health Care 1.9
Matria Healthcare, Inc. Health Care 1.8
Respironics, Inc. Health Care 1.7
Covance, Inc. Health Care 1.7
Consol Energy, Inc. Energy 1.6
Lions Gate Entertainment Corp. Consumer Discretionary 1.6
Crescent Real Estate Equities Co. REIT Financial 1.6
Penn Virginia Corp. Energy 1.5
Performance Food Group Co. Consumer Staples 1.4
------
16.9%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- ------------------------------------------------------------------------
Basic Materials 3.1%
Consumer Discretionary 14.1
Consumer Staples 3.9
Energy 10.4
Financials 7.8
Health Care 21.3
Industrials 16.2
Information Technology 17.9
Utilities 2.3
Short-term and Other Assets 3.0
------
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--101.4%
EQUITIES--97.0%
Basic Materials--3.1%
Airgas, Inc. 5,100 $ 151,113
Cambrex Corp. 4,100 77,736
Cleveland-Cliffs, Inc. 2,100 182,931
Sigma-Aldrich Corp. 3,200 204,992
----------
616,772
----------
Consumer Discretionary--14.1%
California Pizza Kitchen, Inc. (a) 2,490 72,808
Casual Male Retail Group, Inc. (a) 10,000 68,800
Central Garden & Pet Co. (a) 1,340 60,635
DreamWorks Animation SKG (a) 3,800 105,108
Eddie Bauer Holdings, Inc. (a) 7,200 174,600
Education Management Corp. (a) 6,600 212,784
Emmis Communications Corp. (a) (b) 11,200 247,408
International Speedway Corp., Class A Shares 3,400 178,398
Jarden Corp. (a) 2,405 98,773
Lions Gate Entertainment Corp. (a) (b) 31,400 299,556
Marvel Entertainment, Inc. (a) 9,600 171,552
Outback Steakhouse, Inc. 2,500 91,500
Papa John's International, Inc. (a) 3,790 189,955
Polo Ralph Lauren Corp. 5,100 256,530
Thor Industries, Inc. 3,070 104,380
Tractor Supply Co. (a) 4,380 199,947
Wabtec Corp. 3,820 104,210
Williams-Sonoma, Inc. (a) 3,900 149,565
----------
2,786,509
----------
Consumer Staples--3.9%
Church & Dwight Co., Inc. 5,500 203,170
Herbalife Ltd 5,400 162,756
Nu Skin Enterprises, Inc. 4,600 87,630
Performance Food Group Co. (a) 8,590 271,100
Playtex Products, Inc. (a) 3,600 39,600
----------
764,256
----------
Energy--10.4%
Consol Energy, Inc. 4,080 311,182
ENSCO International, Inc. 2,100 97,839
FMC Technologies, Inc. (a) 6,100 256,871
Global Industries, Ltd. (a) 7,100 104,654
Hydril Co. (a) 1,500 102,960
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Energy (continued)
Oceaneering International, Inc. (a) 1,950 $ 104,150
Oil States International, Inc. (a) 6,080 220,765
Peabody Energy Corp. 2,600 219,310
Penn Virginia Corp. 5,040 290,858
Quicksilver Resources, Inc. (a) 2,200 105,138
Tidewater, Inc. 4,900 238,483
----------
2,052,210
----------
Financials--7.8%
Affiliated Managers Group (a) 2,050 148,461
Cathay General BanCorp. 2,900 102,834
City National Corp., Class A 2,080 145,787
Crescent Real Estate Equities Co. REIT 14,600 299,446
Cullen/Frost Bankers, Inc. 3,200 157,888
First Community Bancorp, Inc., Class A 2,100 100,443
First Midwest Bancorp, Inc. 5,350 199,234
Mercantile Bankshares Corp. 2,700 145,476
National Financial Partners Corp. 2,200 99,308
The Colonial BancGroup, Inc. 6,300 141,120
----------
1,539,997
----------
Health Care--21.3%
American Medical Systems Holdings, Inc. (a) 5,100 102,765
Applera Corp.-Celera Genomics Group (a) 6,600 80,058
Community Health Systems, Inc. (a) 3,900 151,359
Cooper Cos, Inc. 2,620 200,718
Covance, Inc. (a) 6,900 331,131
Coventry Health Care, Inc. (a) 1,200 103,224
Cytyc Corp. (a) 6,100 163,785
Fisher Scientific International (b) 5,800 359,890
Human Genome Sciences, Inc. (a) 6,400 86,976
InterMune, Inc. (a) 5,700 94,335
Laboratory Corp. of America Holdings (a) 3,900 189,969
Lifepoint Hospitals, Inc. (a) 2,900 126,817
Matria Healthcare, Inc. (a) 8,910 336,353
Medarex, Inc. (a) 9,000 85,680
Neurocrine Biosciences Inc (a) 1,800 88,542
Omnicare, Inc. 3,600 202,428
PerkinElmer, Inc. 9,900 201,663
Protein Design Labs, Inc. (a) 5,100 142,800
Respironics, Inc. (a) 7,900 333,222
Sybron Dental Specialties, Inc. (a) 4,900 203,742
Triad Hospitals (a) 2,300 104,121
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
VCA Antech, Inc. (a) 7,600 $ 193,952
Vertex Pharmaceuticals, Inc. (a) 4,700 105,045
Waters Corp. (a) 3,200 133,120
ZymoGenetics, Inc. (a) 4,100 67,650
----------
4,189,345
----------
Industrials--16.2%
Bucyrus International, Inc., Class A 4,900 240,737
Evergreen Solar, Inc. (a) 10,700 99,831
FTI Consulting Inc. (a) 9,500 239,970
Global Cash Access, Inc. (a) 3,960 55,836
Huron Consulting Group Inc. (a) 6,800 182,376
Jack Henry & Associates, Inc. 7,600 147,440
Kennametal, Inc. 4,320 211,853
Landstar System 2,940 117,688
LECG Corp. (a) 11,400 262,200
Mercury Computer Systems, Inc. (a) 3,700 97,125
MSC Industrial Direct Co., Inc. 5,810 192,718
Navigant Consulting, Inc. (a) 7,300 139,868
Pacer International, Inc. 7,900 208,244
Stericycle Inc. (a) 2,400 137,160
Stewart & Stevenson Services, Inc. 4,000 95,400
UTI Worldwide, Inc. 2,700 209,790
Valmont Industries, Inc. 4,000 117,440
Washington Group International, Inc. (a) 1,900 102,391
Waste Connections Inc. (a) (b) 5,450 191,186
Watson Wyatt & Co Holdings 5,300 142,835
----------
3,192,088
----------
Information Technology--17.9%
Akamai Technologies, Inc. (a) 15,600 248,820
Anteon International Corp. (a) 2,280 97,493
BEA Systems, Inc. (a) 17,500 157,150
CDW Corp. 3,200 188,544
Cypress Semiconductor Corp. (a) 12,700 191,135
Eclipsys Corp. (a) 2,900 51,736
F5 Networks Inc. (a) 3,250 141,278
Filenet Corp. (a) 7,100 198,090
Informatica Corp. (a) 8,400 100,968
Ingram Micro Inc., Class A (a) 21,300 394,902
Internet Security Systems (a) 4,300 103,243
Jamdat Mobile, Inc. (a) 6,200 130,200
Lam Research Corp. (a) 6,800 207,196
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------
Information Technology (continued)
ManTech International Corp., Class A (a) 3,620 $ 95,604
Marchex, Inc. (a)(b) 5,900 97,704
Mcafee, Inc. (a) 6,340 199,203
Novellus Systems, Inc. (a) 7,800 195,624
SafeNet, Inc. (a) 3,100 112,561
SS&C Technologies, Inc. 5,400 197,856
Varian Semiconductor Equipment Associates, Inc. (a) 1,960 83,045
Verisign, Inc. (a) 8,900 190,193
WebEx Communications, Inc. (a) 5,100 125,001
WebMD Health Corp., Class A Shares (a) 420 10,353
-----------
3,517,899
-----------
Utilities--2.3%
AGL Resources, Inc. 3,900 144,729
Atmos Energy Corp. 7,000 197,750
ITC Holdings Corp. 3,680 106,644
-----------
449,123
-----------
TOTAL EQUITIES (Cost $16,116,881) $19,108,199
-----------
SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value
----- --------- ---------
U.S. Government--0.2%
U.S. Treasury Bill (c) (Cost $44,689) 3.320% 12/15/2005 $ 45,000 44,705
-----------
INVESTMENT OF CASH COLLATERAL--4.2% Shares
--------
BlackRock Cash Strategies L.L.C (Cost $826,460) 3.93% 826,460 826,460
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $16,988,030) 19,979,364
-----------
AFFILIATED INVESTMENTS--2.9%
Dreyfus Institutional Preferred Plus Money Market Fund (d)
(Cost $571,094) 3.73% 571,094 571,094
-----------
TOTAL INVESTMENTS--104.3% (Cost $17,559,124) 20,550,458
LIABILITIES IN EXCESS OF OTHER ASSETS--(4.3%) (841,294)
-----------
NET ASSETS--100% $19,709,164
===========
Notes to Schedule of Investments:
REIT--Real Estate Investment Trust
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at 9/30/05.
(c) Rate noted is yield to maturity.
(d) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan, valued at $791,796 (Note 7)):
Unaffiliated investments (cost $16,988,030) $19,979,364
Affiliated investments (Note 1F) (cost $571,094) 571,094
Interest and dividends receivable 6,744
Receivable for investments sold 518,540
Prepaid expenses 14,396
-----------
Total assets 21,090,138
Liabilities
Collateral for securities on loan (Note 7) $826,460
Payable for investments purchased 492,579
Payable for Fund shares redeemed 22,500
Accrued accounting, custody, administration and transfer agent fees (Note 2) 7,358
Accrued professional fees 29,750
Accrued trustees' fees (Note 2) 1,340
Other accrued expenses and liabilities 987
--------
Total liabilities 1,380,974
-----------
Net Assets $19,709,164
===========
Net Assets consist of:
Paid-in capital $19,025,554
Accumulated net realized loss (2,313,723)
Undistributed net investment income 5,999
Net unrealized appreciation 2,991,334
-----------
Total Net Assets $19,709,164
===========
Shares of beneficial interest outstanding 1,424,249
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 13.84
===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign witholding taxes of $141) $ 92,992
Interest income:
Unaffiliated issuers 1,517
Affiliated issuers 25,785
Securities lending income (Note 7) 15,340
-----------
Total investment income 135,634
Expenses
Investment advisory fee (Note 2) $ 120,046
Accounting, custody, administration and transfer agent fees (Note 2) 74,030
Registration fees 16,500
Professional fees 47,394
Trustees' fees and expenses (Note 2) 5,137
Insurance expense 3,400
Miscellaneous expenses 9,950
----------
Total expenses 276,457
Deduct:
Waiver of investment advisory fee (Note 2) (75,949)
----------
Net Expenses 200,508
-----------
Net investment (loss) (64,874)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 3,026,368
Futures contracts 131,692
----------
Net realized gain 3,158,060
Change in unrealized appreciation (depreciation) on:
Investment securities 855,961
Futures contracts (7,366)
----------
Net change in net unrealized appreciation (depreciation) 848,595
-----------
Net realized and unrealized gain (loss) on investments 4,006,655
-----------
Net Increase in Net Assets from Operations $ 3,941,781
===========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (64,874) $ (145,163)
Net realized gain (loss) 3,158,060 4,785,352
Change in net unrealized appreciation (depreciation) 848,595 (515,620)
----------- -----------
Net increase (decrease) in net assets from investment operations 3,941,781 4,124,569
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 400,565 302,435
Cost of shares redeemed (3,854,864) (7,057,508)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions (3,454,299) (6,755,073)
----------- -----------
Total Increase (Decrease) in Net Assets 487,482 (2,630,504)
Net Assets
At beginning of period 19,221,682 21,852,186
----------- -----------
At end of period [including undistributed
net investment income (loss) of $5,999 and ($383)] $19,709,164 $19,221,682
=========== ===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2005 2004 2003 2002 2001(a)
------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 11.26 $ 9.48 $ 7.10 $ 8.15 $230.48
------- ------- ------- ------- -------
From Operations:
Net investment income/(loss)* (b) (0.04) (0.08) (0.01) (0.02) (0.07)
Net realized and unrealized gain (loss) on investments 2.62 1.86(c) 2.39(c) (1.03)(c) (54.83)(c)
------- ------- ------- ------- -------
Total from operations 2.58 1.78 2.38 (1.05) (54.90)
------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income -- -- (0.00)(d) -- --
From net realized gains on investments -- -- -- -- (167.43)
------- ------- ------- ------- -------
Total distributions to shareholders -- -- (0.00) -- (167.43)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 13.84 $ 11.26 $ 9.48 $ 7.10 $ 8.15
======= ======= ======= ======= =======
Total Return (e) 22.91% 18.78% 33.54% (12.88)% (46.58)%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.00% 0.98% 0.74% 0.74% 0.74%
Net Investment Income/(Loss) (to average daily net assets)* (0.32)% (0.69)% (0.17)% (0.24)% (0.33)%
Portfolio Turnover 167% 157% 252% 248% 136%
Net Assets, End of Period (000's omitted) $19,709 $19,222 $21,852 $18,861 $17,073
- ----------
* 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 net investment income (loss) per share and
the ratios would have been:
Net investment income (loss) per share (b) $ (0.09) $ (0.12) $ (0.07) $ (0.08) $ (0.14)
Ratios (to average daily net assets):
Expenses 1.38% 1.33% 1.40% 1.46% 1.08%
Net Investment Income/(Loss) (0.70)% (1.04)% (0.83)% (0.96)% (0.67)%
(a) Amounts were adjusted to reflect a 1:3 reverse split effective December 14,
2000.
(b) Calculated using the average shares outstanding.
(c) 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 class action suit
recovery.
(d) Calculates to less than $0.01 per share.
(e) Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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/Mid Cap Growth Fund (the "Fund") is a separate
diversified investment series of the Trust.
The Fund's Board of Trustees approved, effective September 1, 2005, the
change in the Fund's name from "The Boston Company Small Capitalization
Equity Fund" to "The Boston Company Small/Mid Cap Growth Fund".
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 is available, 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 cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost 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 coupon interest earned, 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 (loss) 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.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 among Funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuers
Affiliated issuers are 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 September
30, 2005. Pursuant to this agreement, for the period ended September 30,
2005,TBCAM voluntarily waived a portion of its investment advisory fee in
the amount of $75,949. 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 was charged
$8,893 during the period ended September 30, 2005.
The Fund has contracted with 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 was charged $65,137 during the period
ended September 30, 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.
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. Pursuant to this
agreement, Mellon Bank received $6,564, for the period ended September 30,
2005. See Note 7 for further details.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of TBCAM or its affiliates
received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations for the period ended September 30, 2005, were $31,873,585 and
$34,729,102, respectively. For the period ended September 30, 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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Shares sold 30,650 26,941
Shares redeemed (312,833) (624,714)
----------- -----------
Net increase (decrease) (282,183) (597,773)
=========== ===========
At September 30, 2005, two shareholders of record held approximately 76% 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
30 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 September 30, 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.
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 tax basis components of distributable earnings and the federal tax cost
as of September 30, 2005, were as follows:
Unrealized appreciation $ 3,170,660
Unrealized depreciation (190,962)
------------
Net unrealized appreciation/depreciation 2,979,698
Undistributed ordinary income 5,999
Capital loss carry-forward (2,299,535)
------------
Total distributable earnings $ 686,162
============
Cost for federal income tax purposes $ 17,570,760
17
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 2005, the Fund, for federal income tax purposes, has
capital loss carryovers which will reduce the Fund's taxable income arising
from net realized gain on investments, if any, to the extent permitted by
the Internal Revenue Code and thus will reduce the amount of distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal income tax. Such capital loss carryovers are as
follows:
Capital Loss
Carry Over Expiration Date
------------ ---------------
$1,558,449 9/30/2010
$741,086 9/30/2011
(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:
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
September 30, 2005.
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 September 30, 2005, the Fund did not hold futures contracts.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 2005 and
earned interest on the invested collateral of $38,477 of which, $23,137 was
rebated to borrowers or paid in fees. At September 30, 2005, the Fund had
securities valued at $791,796 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 September 30, 2005, a facility fee of
$475 was allocated to the Fund.
During the period ended September 30, 2005, the Fund did not use the line
of credit.
19
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of The Boston Company Small/Mid Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Small/Mid Cap
Growth Fund formerly The Boston Company Small Capitalization Equity Fund (the
"Fund") at September 30, 2005, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
20
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 33 None $299
c/o Decision 11/3/1986 Resources, Inc. ("DRI")
Resources, Inc. (biotechnology research and
260 Charles Street consulting firm); formerly
Waltham, MA 02453 Chairman of the Board and
9/30/40 Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 33 None $311
c/o Essex Street 11/3/1986 Associates (family
Associates investment trust office)
P.O. Box 5600
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 33 None $299
c/o Harvard University 9/13/1989 Professor of Political
Littaver Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since formerly Trustee, Mertens 33 None $299
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon Institutional President and Operating Officer of The
Asset Management Chief Executive Boston Company Asset
One Boston Place Officer Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Institutional Asset
Management ("MIAM") and
Vice President and Chief
Financial Officer, MIAM
21
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
One Boston Place Asset 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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, 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
Asset Management Management; formerly Shareholder Representative,
One Boston Place Standish Mellon Asset Management Company LLC
Boston, MA 02108
1/19/71
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional Asset
Mellon Institutional Compliance Management and Chief Compliance Officer,
Asset Management Officer Mellon Funds Distributor; formerly Director,
One Boston Place Blackrock, Inc., Senior Vice President, State
Boston, MA 02108 Street Research & Management Company ("SSRM"),
4/8/57 Vice President, SSRM
22
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[LOGO] Mellon
-------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6928AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
Large Cap Core Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
- -----------------------
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
Despite global challenges and overall weakness in domestic manufacturing, the
less cyclical US economic signs remain strong. Financial markets have absorbed
the rise in energy costs rather well, notwithstanding the intermittent supply
shocks we have experienced. Much of the focus has been on the tightening pace of
the Federal Reserve, as the recent year ending 9/30/05 captured 7 of the 10
consecutive rate increases. Low nominal inflation is oddly in tandem with low
real bond yields, implying that there is an abundance of savings globally.
For the 12 months ending September 30, 2005, The Boston Company Large Cap Core
Fund had a total return of 13.37%. This put the Large Cap Core Fund ahead of the
S&P 500 at 12.25%. The annual return was distributed more favorably across the
large capitalization spectrum of equities than it has been in the recent three
years.
While small and mid-cap companies have not conceded entirely their 5-year run of
equity market leadership, we believe that 2006 will be a more expensive
operating environment for businesses. From an absolute return perspective, the
energy and utilities sectors led the market, while both information technology
and consumer staples also showed significant strength. Our portfolio stock
selection was overwhelmingly positive, contributing over 95% of our out
performance versus the S&P 500 index.
Regardless of the direction of the economy or the markets, the disciplined
investment approach used to manage the Fund has not varied. Our focus is on
finding undervalued companies with improving business momentum. The process
begins with a computerized ranking of approximately 1000 large and liquid
stocks. The computer modeling identifies those companies that have the most
attractive combination of low valuations and business strength. Using this list
of ranked candidates, the analysts conduct further research to identify those
companies in the best position to maintain their business momentum. The process
allows the Fund's holdings to have what we believe to be an attractive
combination of better than average business strength and better than average
valuations. The strategy does not guarantee superior performance, but we believe
that over time our stock selection will be successful.
Although there is no precise measurement of duration for the mid-cycle slowdown
that we are experiencing, we acknowledge that the post-2002 bull market is
coming up on its third anniversary- which is an average cycle for a bull market.
The economy has been resilient, due to the stimulus within the housing sector,
steady job growth and low inflation. Our outlook is keenly aware of the trend in
rising interest rates and the impact of higher fuel costs on both consumers and
businesses because we understand that these higher input costs
2
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
will eventually become a drag on expansion. Equities remain attractive despite
the continued moderation of corporate profit growth. In addition, consumer goods
prices are more affected by currency and global competitive forces, and despite
the rampant run-up in energy prices, global inflation is trending lower and
slowing demand will keep a lid on goods prices. Against this backdrop we will
seek to find opportunities in the larger, more globally diversified businesses
that produce healthy earnings and consistent cash flow, with a preference for
companies that are returning value to shareholders through dividends and share
repurchases. Thank you for your continued support.
/s/ Martin Stephan /s/ Sean Fitzgibbon
------------------ -------------------
Martin Stephan Sean Fitzgibbon
3
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Large Cap Core Fund and the Standard & Poor's 500 Composite Stock Price Index
- --------------------------------------------------------------------------------
[The data in this line chart is a representation of the printed material]
Standard & Poor's 500
TBC Composite Stock
PERIOD Large Cap Core Fund Price Index *
9/30/95 100,000 100,000
12/31/95 103,899 106,016
3/31/96 111,002 111,705
6/30/96 113,983 116,712
9/30/96 119,636 120,321
12/31/96 131,787 130,341
3/31/97 133,334 133,843
6/30/97 156,827 157,188
9/30/97 178,081 168,960
12/31/97 179,586 173,811
3/31/98 202,286 198,039
6/30/98 198,513 204,614
9/30/98 161,470 184,307
12/31/98 192,528 223,519
3/31/99 179,084 234,651
6/30/99 193,449 251,160
9/30/99 181,314 235,517
12/31/99 192,192 270,532
3/31/00 202,600 276,728
6/30/00 199,261 269,378
9/30/00 211,265 266,767
12/31/00 228,249 245,909
3/31/01 215,944 216,773
6/30/01 219,906 229,450
9/30/01 196,088 195,785
12/31/01 209,692 216,704
3/31/02 214,432 217,302
6/30/02 195,172 188,206
9/30/02 161,388 155,710
12/31/02 172,948 168,829
3/31/03 166,229 163,512
6/30/03 192,419 188,670
9/30/03 196,483 193,662
12/31/03 220,033 217,228
3/31/04 224,622 220,904
6/30/04 225,633 224,704
9/30/04 222,477 220,502
12/31/04 244,254 240,849
3/31/05 241,144 235,677
6/30/05 243,296 238,901
9/30/05 252,153 247,510
Average Annual Total Returns
(for period ended 9/30/2005)
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Since Inception
1/3/1991
- ---------------------------------------------------------------------------------------
Fund 13.34% 16.04% 3.60% 9.69% 12.49%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 Account Value April 1, 2005
Value April 1, 2005 September 30, 2005 to September 30, 2005
- -----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,045.70 $4.36(1)
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.81 $4.31(1)
- --------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.85%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
(1) The example reflects both the expenses of the Fund and the master portfolio
in which the Fund invests all of its assets.
5
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ----------------------------------------------------------------------
Exxon Mobil Corp Energy 3.6%
General Electric Corp Industrials 3.1
Microsoft Corp Information Technology 2.7
Bank of America Corp Financials 2.6
Altria Group, Inc Consumer Staples 2.4
Citigroup, Inc Financials 2.3
Procter & Gamble Co Consumer Staples 2.0
Wachovia Corp Financials 1.9
Pfizer, Inc Health Care 1.9
Johnson & Johnson Health Care 1.8
-----
24.3%
* Excludes short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------------
Basic Materials 2.7%
Consumer Discretionary 11.0
Consumer Staples 11.1
Energy 10.1
Financials 19.2
Health Care 13.4
Industrials 11.3
Information Technology 14.9
Telecommunication Service 2.3
Utilities 3.5
Short-term and Net Other Assets 0.5
-----
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.
6
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Large Cap Core Portfolio ("Portfolio"), at value (Note 1A) $46,049,074
Receivable for Fund shares sold 700
Prepaid expenses 11,733
-----------
Total assets 46,061,507
Liabilities
Accrued transfer agent fees (Note 2) $ 1,485
Professional fees 23,751
Accrued expenses and other liabilities 289
------
Total liabilities 25,525
-----------
Net Assets $46,035,982
===========
Net Assets consist of:
Paid-in capital $35,413,431
Accumulated net realized gain 5,620,304
Undistributed net investment income 212,245
Net unrealized appreciation 4,790,002
-----------
Total Net Assets $46,035,982
===========
Shares of beneficial interest outstanding 1,163,328
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 39.57
=======
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $2,058 $1,057,159
Interest income allocated from Portfolio 22,700
Expenses allocated from Portfolio (390,985)
---------
Net investment income allocated from Portfolio 688,874
Expenses
Transfer agent fees (Note 2) $ 13,693
Registration fees 16,400
Professional fees 36,180
Insurance expense 550
Trustees' fees (Note 2) 1,501
Miscellaneous expenses 11,842
-------
Total expenses 80,166
-------
Net investment income 608,708
-------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities 7,109,706
Future contracts (1,378)
---------
Net realized gain (loss) 7,108,328
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities (561,491)
Future contracts 1,192
---------
Change in net unrealized appreciation (depreciation) (560,299)
Net realized and unrealized gain (loss) 6,548,029
----------
Net Increase in Net Assets from Operations $7,156,737
==========
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 608,708 $ 397,729
Net realized gain (loss) 7,108,328 5,036,921
Change in net unrealized appreciation (depreciation) (560,299) 2,262,590
--------- ---------
Net increase (decrease) in net assets from investment operations 7,156,737 7,697,240
--------- ---------
Distributions to Shareholders (Note 1C)
From net investment income (528,108) (568,427)
--------- ---------
Total distributions to shareholders (528,108) (568,427)
--------- ---------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 5,655,789 6,450,338
Value of shares issued in reinvestment of distributions 376,548 401,721
Cost of shares redeemed (22,691,547) (22,063,953)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions (16,659,210) (15,211,894)
------------ ------------
Total Increase (Decrease) in Net Assets (10,030,581) (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 $212,245 and $138,723) $46,035,982 $56,066,563
=========== ===========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
----------------------------------------------------------------
2005 2004 2003 2002 2001
------ ------ ------ ------ -----
Net Asset Value, Beginning of Period $ 35.24 $ 31.43 $ 26.13 $ 34.00 $ 41.71
------- ------- ------- ------- -------
From Investment Operations:
Net investment income* (a) 0.41 0.23 0.36 0.32 0.39
Net realized and unrealized gains (loss) on investments 4.28(b) 3.92(b) 5.30 (5.77)(b) (2.77)
------- ------- ------- ------- -------
Total from operations 4.69 4.15 5.66 (5.45) (2.38)
------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.36) (0.34) (0.36) (0.21) (0.29)
From net realized gains on investments -- -- -- (2.21) (5.04)
------- ------ ------- ------- -------
Total distributions to shareholders (0.36) (0.34) (0.36) (2.42) (5.33)
------- ------ ------- ------- -------
Net Asset Value, End of Period $ 39.57 $ 35.24 $ 31.43 $ 26.13 $ 34.00
======= ======= ======= ======= =======
Total Return 13.34% 13.23%(c) 21.76%(c) (17.70)%(c) (7.18)%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (d) 0.85% 0.83% 0.71% 0.71% 0.71%
Net Investment Income (to average daily net assets)* 1.10% 0.67% 1.23% 0.96% 1.00%
Net Assets, End of Period (000's omitted) $46,036 $56,067 $64,150 $55,029 $75,489
- -------------
* 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 (a) N/A $ 0.23 $ 0.29 $ 0.27 $ 0.38
Ratios (to average daily net assets):
Expenses (d) N/A 0.84% 0.93% 0.83% 0.73%
Net Investment Income N/A 0.66% 1.01% 0.84% 0.98%
(a) Calculated based on average shares outstanding.
(b) Amounts includes litigation proceeds received by the Portfolio of $0.02 for
the year ended September 30, 2005, $0.06 for the year ended September 30,
2004 and $0.02 for the year ended September 30, 2002.
(c) Total return would have been lower in the absence of expense waivers.
(d) Includes the Fund's share of the Portfolio's allocated expenses.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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
September 30, 2005 the Fund owned 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 among Funds of the
Trust taking into consideration, among other things, the nature and type of
expense and the relative size of the funds or portfolios.
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.
11
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core 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 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 was charged
$13,693 during the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of TBCAM or its affiliates
received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended September 30, 2005, aggregated $6,081,476 and $23,303,488,
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. During
2005, the Fund reclassified from paid-in capital to unrealized appreciation
on investments $1,219,899 that had been allocated to other entities
previously invested in the Portfolio but since ceased operations, as this
amount, when realized by the Portfolio will be allocated to the Fund as the
only investor in the Portfolio.
(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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Shares sold 148,469 185,329
Shares issued to shareholders in
reinvestment of distributions 9,893 11,699
Shares redeemed (585,936) (647,475)
Net increase (decrease) (427,574) (450,447)
At September 30, 2005, one shareholder of record held approximately 19% of the
total outstanding shares of the Fund. 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 30 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 September
30, 2005, the Fund received no redemption fees.
12
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
As of September 30, 2005, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income $1,119,069
Undistributed capital gains $4,867,463
Tax character of distributions paid during the fiscal year ended September
30, 2005, and September 30, 2004 were as follows:
Distributions paid from: 2005 2004
---- ----
Ordinary income $528,108 $568,427
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
13
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company Large Cap Core Fund:
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Boston Company Large Cap Core Fund (the "Fund") at September 30, 2005, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
14
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.6%
EQUITIES--99.5%
Basic Materials--2.7%
Alcoa, Inc. 15,690 $ 383,150
Dow Chemical Co. 10,000 416,700
El Du Pont de Nemours & Co. 6,410 251,080
PPG Industries, Inc. 3,280 194,143
----------
1,245,073
----------
Consumer Discretionary--11.0%
Advance Auto Parts, Inc. (a) 7,395 286,039
Carnival Corp. 4,380 218,912
Coach, Inc. (a) 6,470 202,899
Comcast Corp. (a) 11,176 328,351
Dex Media, Inc. 2,900 80,591
Hilton Hotels Corp. 9,260 206,683
Marriott International, Class A 6,720 423,360
McDonalds Corp. 18,400 616,216
NIKE, Inc., Class B 2,770 226,254
Nordstrom Inc. 6,330 217,246
Omnicom Group 2,670 223,292
J.C. Penny Company, Inc. 6,620 313,920
The Home Depot, Inc. 10,500 400,470
Time Warner, Inc. 30,590 553,985
Walt Disney Co. 21,420 516,865
Whirlpool Corporation 3,300 250,041
----------
5,065,124
----------
Consumer Staples--11.1%
Altria Group, Inc. 14,940 1,101,227
CVS Corp. 9,100 263,991
Dean Foods Corp. (a) 8,500 330,310
Diageo PLC--ADR 3,840 222,758
Gillette Co. 9,870 574,434
Kellogg Co. 4,910 226,498
Pepsico, Inc. 9,640 546,684
Procter & Gamble Co. 15,200 903,792
The Kroger Co. (a) 11,290 232,461
Wal-Mart Stores, Inc. 15,610 684,030
----------
5,086,185
----------
Energy--10.1%
Anadarko Petroleum Corp. 1,870 179,053
BP PLC 3,690 261,437
Chevron Corp. 5,932 383,978
ConocoPhillips 10,870 759,922
Devon Energy Corp. 9,380 643,843
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------
Energy (continued)
Exxon Mobil Corp. 25,714 $ 1,633,868
Transocean, Inc. (a) 5,420 332,300
Weatherford International Ltd. (a) 6,600 453,156
----------
4,647,557
----------
Financial--19.2%
American Express Co. 4,060 233,206
American International Group 5,569 345,055
Axis Capital Holdings Ltd. 12,100 344,971
Bank of America Corp. 28,270 1,190,167
Capital One Financial Corp. 5,700 453,264
Chubb Corp. 5,210 466,556
CIT Group, Inc. 10,030 453,155
Citigroup, Inc. 22,996 1,046,778
Countrywide Financial Corp. 5,710 188,316
E*TRADE Financial Corp. (a) 16,240 285,824
Freddie Mac 3,030 171,074
Fannie Mae 3,620 162,248
Franklin Resources, Inc. 3,130 262,795
Goldman Sachs Group, Inc. 4,080 496,046
Hartford Financial Services Group Inc. 3,020 233,053
JPMorgan Chase & Co. 6,130 207,991
Lehman Brothers Holdings, Inc. 3,680 428,646
Merrill Lynch & Co., Inc. 3,600 220,860
Northern Trust Corp. 4,810 243,146
Radian Group, Inc. 4,440 235,764
The Bear Stearns Companies, Inc. 3,000 329,250
Wachovia Corp. 18,120 862,331
----------
8,860,496
----------
Health Care--13.4%
Amgen, Inc. (a) 2,830 225,466
Cephalon, Inc. (a) 4,760 220,959
Fisher Scientific International 7,200 446,760
Gebzyme Corp. (a) 3,700 265,068
Hospira, Inc. (a) 5,870 240,494
Johnson & Johnson 12,840 812,515
Laboratory Corp. of America Holdings (a) 3,570 173,895
Omnicare, Inc. 4,590 258,096
Pfizer, Inc. 34,140 852,476
St. Jude Medical, Inc. 5,260 246,168
Sanofi-Aventis ADR 5,220 216,891
Thermo Electron Corp. (a) 7,630 235,767
Triad Hospitals (a) 7,380 334,093
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
WebMD Corp. (a) 29,670 $ 328,744
Wellpoint, Inc. (a) 7,740 586,847
Wyeth 15,990 739,857
----------
6,184,096
----------
Industrial--11.3%
Caterpillar, Inc. 3,920 230,300
Danaher Corp. 7,600 409,108
Eaton Corp. 5,140 326,647
Emerson Electric Co. 5,200 373,360
General Electric Corp. 42,320 1,424,914
Honeywell International, Inc. 4,270 160,125
Lockheed Martin Corp. 4,390 267,966
Norfolk Southern Corp. 14,000 567,840
Rockwell Automation, Inc. 5,410 286,189
Textron, Inc. 4,710 337,801
Tyco International Ltd 15,550 433,068
United Technologies Corp. 7,100 368,064
----------
5,185,382
----------
Information Technology--14.9%
Apple Computer, Inc. (a) 7,600 407,436
Applied Materials, Inc. 10,490 177,910
CheckFree Corp. (a) 7,110 268,900
Cisco Systems, Inc. (a) 9,950 178,404
Dell, Inc. (a) 5,320 181,944
EMC Corp./Massachusetts 20,510 265,399
Global Payments, Inc. 3,880 301,554
Google, Inc. (a) 950 300,637
Hewlett-Packard Co. 19,890 580,788
Ingram Micro Inc., Class A (a) 12,840 238,054
Intel Corp. 16,890 416,339
International Business Machines Corp. 9,410 754,870
Microsoft Corp. 47,200 1,214,456
Motorola, Inc. 16,140 356,533
National Semiconductor Corp. 8,600 226,180
Oracle Corp. (a) 27,090 335,645
Qualcomm, Inc. 6,950 311,013
Texas Instruments, Inc. 10,730 363,747
----------
6,879,809
----------
Telecommunication Service--2.3%
SBC Communications, Inc. 22,710 544,359
Verizon Communications, Inc. 16,000 523,040
---------
1,067,399
----------
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------
Utilities--3.5%
Constellation Energy Group, Inc. 10,600 $ 652,960
P G & E Corp. 14,600 573,050
Sempra Energy 7,900 371,772
-----------
1,597,782
-----------
TOTAL EQUITIES (COST $41,028,919) 45,818,903
-----------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
-------- ---------- -----------
U.S. Government--0.1%
U.S. Treasury Bill (b) (Cost$49,654) 3.32% 12/15/2005 $ 50,000 49,672
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $41,078,573) 45,868,575
-----------
AFFILIATED INVESTMENTS--0.6% Shares
---------
Dreyfus Institutional Preferred Plus Money Market Fund
(c) (Cost $295,595) 3.73% 295,595 295,595
-----------
TOTAL INVESTMENTS--100.2% (Cost $41,374,168) 46,164,170
-----------
Liabilities in Excess of Other Assets--(0.2%) (115,096)
-----------
NET ASSETS-100% $46,049,074
===========
Notes to Schedule of Investments:
ADR-American Depository Receipt.
(a) Non-income producing security.
(b) Rate noted is yield to maturity.
(c) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A):
Unaffiliated issuers, at value (Note 1A) (cost $41,078,573) $45,868,575
Affiliated issuers, at value (Note 1E) (cost $295,595) 295,595
Receivable for investments sold 962,376
Interest and dividends receivable 53,869
Prepaid expenses 9,232
-----------
Total assets 47,189,647
Liabilities
Payable for investments purchased $ 1,093,175
Accrued accounting, administration and custody fees (Note 2) 6,295
Accrued trustees' fees and expenses (Note 2) 3,655
Other accrued expenses and liabilities 37,448
-----------
Total liabilities 1,140,573
-----------
Net Assets (applicable to investors' beneficial interest) $46,049,074
===========
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $2,058) $1,057,159
Interest income (Note 1E):
Unaffiliated issuers 306
Affiliated issuers 22,394
----------
Total investment income 1,079,859
Expenses
Investment advisory fee (Note 2) $ 277,529
Accounting, administration and custody fees (Note 2) 76,085
Professional fees 18,622
Trustees' fees and expenses (Note 2) 10,497
Insurance expense 4,900
Miscellaneous 3,352
Total expenses 390,985
----------
Net investment income 688,874
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 7,109,706
Futures contracts (1,378)
----------
Net realized gain 7,108,328
Change in unrealized appreciation (depreciation) on:
Investment securities (561,491)
Futures contracts 1,192
----------
Change in net unrealized appreciation (depreciation) (560,299)
----------
Net realized and unrealized gain (loss) 6,548,029
----------
Net Increase in Net Assets from Operations $7,236,903
==========
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 688,874 $ 457,631
Net realized gain (loss) 7,108,328 5,036,921
Change in net unrealized appreciation (depreciation) (560,299) 2,262,590
------------ ------------
Net increase (decrease) in net assets from operations 7,236,903 7,757,142
------------ ------------
Capital Transactions
Contributions 6,081,476 6,813,122
Withdrawals (23,303,488) (22,706,053)
------------ ------------
Net increase (decrease) in net assets from capital transactions (17,222,012) (15,892,931)
------------ ------------
Total Increase in Net Assets (9,985,109) (8,135,789)
Net Assets
At beginning of period 56,034,183 64,169,972
------------ ------------
At end of period $ 46,049,074 $ 56,034,183
============ ============
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- --------
Total Return (a) 13.49% 13.34% 21.76% (17.69)% (7.11)%
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.70% 0.72% 0.71% 0.70% 0.64%
Net Investment Income (to average daily net assets)* 1.24% 0.77% 1.23% 0.97% 1.06%
Portfolio Turnover 85% 66% 104% 80% 62%
Net Assets, End of Year (000's omitted) $46,049 $56,034 $64,170 $55,007 $124,213
- ---------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed the
Portfolio for a portion of its operating expenses. If this voluntary action
had not been taken, the 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
Net Investment Income N/A N/A 1.17% 0.95% N/A
(a) Total return for the Portfolio has been calculated based on the total return
for the invested Fund, assuming all distributions were reinvested, and
adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
The accompanying notes are an integral part of the financial statements.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 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 September 30, 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 is available, 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 cost upon the value on such date unless the Trustees determine
during such sixty-day period that amortized cost 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 coupon interest earned, 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.
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 are investment companies advised by The Boston
Company Asset Management, LLC ("TBCAM") a wholly-owned subsidiary of
Mellon Financial Corporation, or its affiliates.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to TBCAM for overall investment
advisory and administrative services is paid monthly at the annual rate
of 0.50% of the Portfolio's average daily net assets.
The Portfolio has contracted with 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 $76,085 during the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. No other director, officer or employee of TBCAM or its
affiliates received 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 September 30, 2005, were $45,431,802
and $61,123,843, respectively. For the period ended September 30, 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 September 30, 2005, as computed on a
federal income tax basis, were as follows:
Aggregate Cost $41,528,151
-----------
Gross unrealized appreciation 5,878,960
Gross unrealized depreciation (1,242,941)
-----------
Net unrealized appreciation (depreciation) $ 4,636,019
===========
(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 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.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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.
At September 30, 2005, the Portfolio did not enter into any option
transactions.
Futures contracts
The Portfolio may enter into financial futures contracts for the 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 September 30, 2005, the Portfolio did not hold futures contracts.
(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 September 30, 2005, the expense allocated
to the Portfolio was $1,371.
During the period ended September 30, 2005, the Portfolio had average
borrowings outstanding of $462,933 on a total of fifteen days and
incurred $707 of interest expense.
25
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Master Portfolio and Investors
of The Boston Company Large Cap Core Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Large Cap Core
Portfolio ( the "Portfolio") at September 30, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming c/o Trustee Trustee Chairman Emeritus, Decision 33 None $299
Decision Resources, Inc. since Resources, Inc. ("DRI")
260 Charles Street 11/3/1986 (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer,
DRI
Caleb Loring III c/o Trustee Trustee Trustee, Essex Street 33 None $311
Essex Street Associates since Associates (family
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman c/o Trustee Trustee William Joseph Maier, 33 None $299
Harvard University since Professor of Political
Littaver Center 127 9/13/1989 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, Mertens 33 None $299
P.O. Box 2333 since House, Inc. (hospice)
New London, NH 03257 11/3/1986
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon Institutional President and Operating Officer of The
Asset Management Chief Executive Boston Company Asset
One Boston Place Officer Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Institutional Asset
Management ("MIAM") and
Vice President and Chief
Financial Officer, MIAM
27
Principal Officers who are Not Trustees
Term of Office
Name Address, and Position(s) and Length Principal Occupation(s)
Date of Birth Held with Trust of Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of
Mellon Institutional and Secretary Operations, Mellon Institutional Asset
Asset Management Management; formerly First Vice President,
One Boston Place Mellon Institutional Asset Management and
Boston, MA 02108 Mellon Global Investments
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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, Mellon Institutional Asset
Asset Management Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Compliance
Mellon Institutional President Manager, Mellon Institutional Asset
Asset Management Management ("MIAM"); formerly Shareholder
One Boston Place Services, MIAM and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset
1/19/71 Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional
Mellon Institutional Compliance Asset Management and Chief Compliance
Asset Management Officer Officer, Mellon Funds Distributor; formerly
One Boston Place Director, Blackrock, Inc., Senior Vice
Boston, MA 02108 President, State Street Research &
4/8/57 Management Company ("SSRM"), Vice President,
SSRM
28
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6930AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
International Core Equity Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
- -----------------------
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
The Boston Company International Core Equity Fund's return for the twelve months
ending September 30, 2005, after all expenses, was 31.06% compared to the 25.79%
for the benchmark MSCI EAFE index. This was the third consecutive year of better
than 28% returns for the Fund. The Fund's return exceeded the benchmark by solid
margins for all measurement periods since the change of strategy to actively
manage individual stock holdings in 1996.
During the fiscal year all but one market (Portugal) posted double-digit returns
measured in U.S. dollars. Austria was the best market with a return of 56%.
Portugal lagged with a return of 6.2%. For the second straight year Energy
stocks gained the most among economic sectors rising 39%, the same return as
last year. Also for the second straight year Information Technology stocks
gained the least - this year with a 13% return. Energy stocks were buoyed by oil
prices that continued to make new all-time highs during the year. In addition to
strong demand and a terrorist risk premium, oil benefited from speculative
buying from hedge funds (among others). Technology stocks lagged as the industry
continues to be depressed by very intense price competition, industry
overcapacity, reluctance of buyers to invest in new products, and
valuations levels that still appear to be too high relative to other sectors.
The Fund outperformed the index during the period due to our process of
disciplined stock selection. Contribution to the positive relative performance
was broad based. The Fund outperformed the benchmark in 15 of 21 countries. In
addition the Fund outperformed the benchmark in nine of 10 economic sectors.
We trailed only in Consumer Staples. The Fund's Energy sector outperformed the
benchmarks by nearly 30% and was by far the largest contributor to the strong
relative results.
The global economy continues to grow, but investors are beginning to worry about
inflationary pressures (primarily from oil, other commodities, health care and
housing). Central banks have stopped the easing cycle that began after the
recession and terror attacks early in the decade, and in some cases have begun
to raise rates (the U.S. Federal Reserve has been doing so for some time).
International markets have seen several years of strong returns with very little
volatility. We remain cautiously optimistic over the longer term, but will not
be surprised if volatility returns in the short term. Regardless of the
environment, we continue to manage the Fund as we always have: investing in
stocks of companies that are attractively valued and exhibit improving business
momentum.
/s/ Remi J. Browne /s/ Peter Carpenter
- ------------------ -------------------
Remi J. Browne Peter Carpenter
2
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
International Core Equity Fund and the MSCI EAFE Index
- --------------------------------------------------------------------------------
[The data in the Line Chart is a representation of the printed material]
TBC
PERIOD International Core Equity Fund MSCI EAFE Index *
9/30/95 100,000 100,000
12/31/95 102,437 104,049
3/31/96 104,874 107,056
6/30/96 109,998 108,750
9/30/96 108,738 108,613
12/31/96 110,061 110,341
3/31/97 108,167 108,613
6/30/97 120,988 122,708
9/30/97 118,475 121,844
12/31/97 107,342 112,303
3/31/98 130,428 128,823
6/30/98 135,025 130,190
9/30/98 115,010 111,685
12/31/98 133,670 134,760
3/31/99 130,882 136,635
6/30/99 135,296 140,107
9/30/99 139,460 146,256
12/31/99 157,531 171,097
3/31/00 156,138 170,917
6/30/00 156,775 164,146
9/30/00 149,325 150,906
12/31/00 150,023 146,856
3/31/01 137,595 126,726
6/30/01 144,046 125,402
9/30/01 126,322 107,846
12/31/01 131,916 115,366
3/31/02 136,096 116,487
6/30/02 141,046 113,495
9/30/02 117,768 91,098
12/31/02 123,373 96,977
3/31/03 117,534 89,012
6/30/03 138,241 106,163
9/30/03 151,024 114,791
12/31/03 176,095 134,396
3/31/04 187,740 140,228
6/30/04 188,520 140,529
9/30/04 191,856 140,138
12/31/04 220,282 161,607
3/31/05 223,696 161,340
6/30/05 223,183 159,714
9/30/05 251,447 176,287
Average Annual Total Returns
(for period ended 9/30/2005)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 12/8/1988
- --------------------------------------------------------------------------------
Fund 31.06% 28.77% 10.99% 9.66% 7.74%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- ------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,124.70 $5.38(1)
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.00 $5.11(1)
+ Expenses are equal to the Fund's annualized expense ratio of 1.01%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
(1) The example reflects the expenses of the Fund and the master portfolio in
which the Fund invests all of its assets.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -------------------------------------------------------------------------------------------------------
BP PLC United Kingdom Energy 2.2%
Vodafone PLC United Kingdom Communications 2.2
Societe Generale France Financial 1.8
Ing Groep N.V Netherlands Financial 1.8
OMV Ag Austria Energy 1.6
Credit Suisse Group Switzerland Financial 1.6
Continental Ag Germany Consumer Cyclical 1.5
Total Sa France Energy 1.5
Banque Nationale De Paris France Financial 1.4
Nippon Steel Corporation Japan Basic Materials 1.3
----
16.9%
* Excluding short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- ------------------------------------------------------------------------------------
Europe ex U.K. 43.6%
U.K. 24.2
Asia ex Japan 10.1
Japan 22.1
-----
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.
5
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Assets and Liabilities--September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International $285,796,705
Core Equity Portfolio ("Portfolio"), at value (Note 1 A)
Receivable for Fund shares sold 1,291,884
Prepaid expenses 18,070
------------
Total assets 287,106,659
Liabilities
Payable for Fund shares redeemed $ 599
Accrued professional fees 26,867
Accrued registration fee 11,453
Accrued transfer agent fees (Note 2) 1,058
Accrued trustees' fees (Note 2) 500
Other accrued expenses and liabilities 1,624
-------
Total liabilities 42,101
------------
Net Assets $287,064,558
============
Net Assets consist of:
Paid-in capital $222,418,453
Accumulated net realized gain 17,516,645
Undistributed net investment income 412,285
Net unrealized appreciation 46,717,175
------------
Total Net Assets $287,064,558
============
Shares of beneficial interest outstanding 8,358,847
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 34.34
============
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net foreign witholding taxes $443,660) $ 4,539,476
Interest and securities lending income allocated from Portfolio 119,595
Expenses allocated from Portfolio (1,703,446)
-----------
Net investment income allocated from Portfolio 2,955,625
Expenses
Transfer agent fees (Note 2) $18,409
Registration fees 31,452
Professional fees 40,526
Shareholder reports 8,000
Insurance expense 785
Trustees' fees (Note 2) 1,500
Miscellaneous expenses 6,727
-------
Total expenses 107,399
-----------
Net investment income 2,848,226
-----------
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 16,706,539
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange contracts and foreign currency transactions 28,802,354
-----------
Net realized and unrealized gain (loss) 45,508,893
-----------
Net Increase in Net Assets from Operations $48,357,119
===========
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 2,848,226 $ 1,172,116
Net realized gain (loss) 16,706,539 15,537,985
Change in net unrealized appreciation (depreciation) 28,802,354 5,250,294
----------- ------------
Net increase (decrease) in net assets from investment operations 48,357,119 21,960,395
----------- ------------
Distributions to Shareholders (Note 1D)
From net investment income (2,263,100) (1,441,503)
From net realized gains on investments (2,586,841) --
----------- ------------
Total distributions to shareholders (4,849,941) (1,441,503)
----------- ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 124,417,682 47,227,583
Value of shares issued in reinvestment of distributions 4,058,519 939,636
Redemption fees 35 --
Cost of shares redeemed (9,593,548) (21,738,718)
----------- ------------
Net increase (decrease) in net assets from Fund share transactions 118,882,688 26,428,501
----------- ------------
Total Increase (Decrease) in Net Assets 162,389,866 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 $412,285 and $366,203) $287,064,558 $124,674,692
============ ============
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- ------- ------- -------
Net Asset Value, Beginning of Period $ 27.03 $ 21.62 $ 17.10 $ 18.53 $ 23.45
-------- -------- ------- ------- -------
From Investment Operations:
Net investment income* (a) 0.50 0.31 0.23 0.25 0.24
Net realized and unrealized gains (loss) on investments 7.73 5.49 4.55 (1.48) (3.63)
-------- -------- ------- ------- -------
Total from operations 8.23 5.80 4.78 (3.39) (1.23)
-------- -------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.39) (0.39) (0.26) (0.20) (0.20)
From net realized gains on investments (0.53) -- -- -- (1.33)
-------- -------- ------- ------- -------
Total distributions to shareholders (0.92) (0.39) (0.26) (1.53) (0.20)
-------- -------- ------- ------- -------
Net Asset Value, End of Period $ 34.34 $ 27.03 $ 21.62 $ 17.10 $ 18.53
======== ======== ======= ======= =======
Total Return 31.06% 27.04% 28.23%(b) (6.77)%(b) (15.40)%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (c) 1.01% 1.12% 1.16% 1.00% 1.00%
Net Investment Income (to average daily net assets)* 1.59% 1.22% 1.21% 1.29% 1.13%
Portfolio Turnover N/A N/A 17%(d) 87%(d) 74%(d)
Net Assets, End of Period (000's omitted) $287,065 $124,675 $77,727 $51,087 $48,227
- ----------
* 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 (a) N/A N/A $0.19 $0.18 $0.16
Ratios (to average daily net assets):
Expenses (c) N/A N/A 1.34% 1.33% 1.37%
Net investment income N/A N/A 1.03% 0.96% 0.76%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) 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.
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 93% at September 30, 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 Portfolio
values its securities at value as 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 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
that are not inherent in investments in domestic securities due to the fact
that the Portfolio may invest in foreign 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.
These 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
distributions from 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. 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.
10
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 among
Funds of the Trust 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 was charged
$18,409 during the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund paid $1,134. No
other 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended September 30, 2005, aggregated $127,474,671 and $14,550,254,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on
applicable tax allocations rules. Book/tax differences arise when changes
in proportionate interest for funds investing in the Portfolio occur.
11
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Shares sold 3,919,181 1,806,181
Shares issued to shareholders in
reinvestment of distributions 138,802 38,181
Shares redeemed (312,002) (826,070)
--------- ----------
Net increase 3,745,981 (1,018,292)
========= ==========
At September 30, 2005, one shareholder of record held approximately 22% of
the total outstanding shares of the Fund. 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
30 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 September 30, 2005, the Fund received
$35 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 substantially all of its taxable income for its
fiscal year.
As of September 30, 2005, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income $ 4,528,262
Undistributed capital gains 13,511,154
Tax character of distributions paid during the fiscal years ended September
30, 2005 and September 30, 2004, were as follows:
2005 2004
--------- ----------
Distributions paid from:
Ordinary income 2,263,100 $1,441,503
Long term capital gains 2,586,841 --
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
12
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company International Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Boston Company International Core Equity Fund (the "Fund") at September 30,
2005, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
13
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.1%
EQUITY--98.2%
Australia--4.9%
Australia and New Zealand Banking Group Ltd. 53,500 $ 979,050
Caltex Australia Ltd. 158,400 2,478,406
CSL Ltd. 32,300 945,744
Macquarie Bank Ltd. 57,900 3,326,608
Oil Search Ltd. 513,500 1,515,274
Qantas Airways Ltd. 486,900 1,251,150
QBE Insurance Group Ltd. 68,000 968,558
Rinker Group Ltd. 283,200 3,580,285
-----------
15,045,075
-----------
Austria--2.1%
Boehler-Uddeholm 9,300 1,564,111
OMV AG 83,900 4,980,403
-----------
6,544,514
-----------
Belgium--0.9%
KBC Groupe 33,400 2,704,544
-----------
Denmark--0.7%
Novo Nordisk A/S, Class B 42,100 2,081,674
-----------
Finland--2.3%
Fortum Oyj 74,700 1,498,734
Kesko Oyj 66,200 1,835,614
Nokia Oyj 119,100 1,994,629
Rautaruukki Oyj 74,700 1,677,326
-----------
7,006,303
-----------
France--10.2%
Banque Nationale De Paris 57,100 4,338,946
Bouygues SA 47,800 2,220,699
Elior 88,700 1,230,816
France Telecom SA 51,000 1,463,161
Remy Cointreau 22,500 1,020,439
Renault SA 23,700 2,243,687
Sanofi-Synthelabo SA 27,100 2,238,358
Societe Generale 48,600 5,543,944
Suez SA 29,400 849,474
Total SA 16,255 4,434,981
Vinci SA 19,200 1,652,742
Vivendi Universal SA 120,200 3,922,129
-----------
31,159,376
-----------
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--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------
Germany--5.3%
Bayerische Motoren Werke AG 19,600 $ 919,763
Continental AG 55,000 4,513,059
Deutsche Bank AG Registered Shares 10,600 991,025
Deutsche Telekom AG 70,200 1,276,882
E.ON AG 38,400 3,526,003
Merck KGaA 10,600 891,821
SAP AG 7,900 1,364,814
Schering AG 18,800 1,188,040
Thyssenkrupp AG 85,300 1,780,068
-----------
16,451,475
-----------
Greece--0.5%
Coca-Cola Hellenic Bottling Co. S.A 52,800 1,530,026
-----------
Hong Kong--3.3%
Cheung Kong Holdings Ltd. 83,000 937,273
China Mobile Hong Kong Ltd. 769,300 3,768,453
China Resources Power Holdings Company Ltd. 1,993,403 1,271,991
Kerry Properties Ltd. 396,300 1,003,854
Orient Overseas International Ltd. 236,500 884,124
The Wharf(Holdings) Ltd. 341,000 1,329,730
Wing Hang Bank Ltd. 127,000 934,811
-----------
10,130,236
-----------
Ireland--1.1%
Anglo Irish Bank Corp. PLC 135,500 1,844,407
CRH PLC 11,800 319,681
CRH PLC 50,700 1,373,543
-----------
3,537,631
-----------
Italy--2.4%
Banca Intesa Spa 563,233 2,623,781
Capitalia Spa 257,300 1,406,497
Eni Spa 87,500 2,597,577
Mediaset Spa 71,300 843,321
-----------
7,471,176
-----------
Japan--21.9%
Bridgestone Corp. 76,000 1,626,993
Canon, Inc. 64,000 3,456,259
Chubu Electric Power Co., Inc. 38,600 941,961
Diamond Lease Co., Ltd. 19,000 788,389
Eisai Co. Ltd. 46,600 1,991,102
Fujitsu Ltd. 195,000 1,284,997
Honda Motor Co., Ltd. 61,000 3,450,093
Hoya Corp. 92,500 3,072,196
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------
Japan (continued)
Japan Tobacco, Inc. (a) 114 $ 1,797,727
Kawasaki Kisen Kaisha Ltd. 219,000 1,580,134
Kobe Steel Ltd. 1,276,000 3,878,249
Komatsu Ltd. 250,000 3,404,986
Kubota Corp. 345,000 2,388,953
Kyowa Hakko Kogyo Co., Ltd. 152,000 1,179,737
Matsushita Electric Industrial Co. Ltd. 55,000 931,768
Mazda Motor Corp. 333,000 1,460,964
Mitsubishi Corp. 177,000 3,492,908
Mitsui O.S.K. Lines Ltd. 293,000 2,341,212
Mitsui Sumitomo Insurance Company Ltd. 91,000 1,053,423
Mizuho Financial Group, Inc. 352 2,238,957
Nippon Steel Corp. 1,061,000 3,981,905
Nisshin Seifun Group, Inc. 115,000 1,117,479
NTT Corp. 458 2,251,467
Ono Pharmaceutical Co., Ltd. 32,700 1,523,945
Promise Co., Ltd. 13,800 1,022,447
Sankyo Co., Ltd. 24,700 1,301,260
Santen Pharmaceutical Co., Ltd. 50,000 1,295,040
Sanyo Shinpan Finance Co., Ltd. 31,400 2,550,507
Sumitomo Electric Industries 143,100 1,928,843
Sumitomo Rubber Industries, Inc. 168,000 1,996,582
Sumitomo Trust & Banking Co., Ltd. 257,000 2,114,686
Takeda Pharmaceutical Co., Ltd. 42,800 2,548,921
Toyo Suisan Kaisha Ltd. 81,400 1,389,774
-----------
67,383,864
-----------
Luxembourg--0.5%
Arcelor 70,300 1,643,561
-----------
Netherlands--2.4%
Buhrmann NV 160,100 1,933,059
ING Groep NV CVA 182,900 5,445,060
-----------
7,378,119
-----------
New Zealand--1.5%
DNB NOR ASA 183,100 1,886,793
Fletcher Building Ltd. 187,500 1,026,878
Norsk Hydro ASA 15,200 1,700,904
-----------
4,614,575
-----------
Norway--1.4%
Orkla ASA 54,600 2,071,339
Tandberg ASA 75,100 1,003,183
Yara International ASA 69,600 1,256,442
-----------
4,330,964
-----------
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Singapore--0.3%
Keppel Co., Ltd. 121,900 $ 914,970
----------
Spain--2.9%
ACS Actividades 73,200 2,132,605
Banco Santander Central Hispano SA 70,700 928,383
Corp. Mapfre SA 105,100 1,803,095
Repsol YPF SA 97,200 3,148,283
Union Fenosa, SA 30,400 1,003,640
----------
9,016,006
----------
Sweden--2.9%
Ericsson LM 681,000 2,487,422
Lindex AB 18,300 948,315
Nordea Bank AB 94,600 946,256
Skandinaviska Enskilda Banken AB 97,500 1,786,936
Volvo AB, Class B 60,400 2,631,036
----------
8,799,965
----------
Switzerland--6.8%
Baloise Holdings 13,730 689,470
Compagnie Financiere Richemont AG 43,900 1,738,161
Credit Suisse Group 107,600 4,763,195
Logitech International SA (b) 47,000 1,900,842
Nestle SA 11,580 3,390,621
Novartis AG 45,240 2,294,504
Sulzer AG 4,870 2,468,109
UBS AG Registered Shares 13,200 1,121,755
Zurich Financial Services AG (b) 15,790 2,689,814
----------
21,056,471
----------
United Kingdom--23.9%
Alliance Unichem PLC 107,700 1,644,708
AstraZeneca PLC 71,500 3,320,406
Aviva PLC 266,700 2,925,950
Barclays PLC 275,290 2,780,030
Barratt Developments PLC 148,200 1,973,273
BHP Billition PLC 139,800 2,256,873
BP PLC 575,900 6,835,797
British Airways PLC (b) 284,800 1,469,405
British American Tobacco PLC 90,300 1,895,414
BT Group PLC 446,800 1,750,086
Dairy Crest Group PLC 94,200 848,352
Diageo PLC 69,300 995,395
Enterprise Inns PLC 144,500 2,145,568
Friends Provident PLC 759,700 2,503,734
Greene King PLC 73,100 823,877
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------
United Kingdom (continued)
HBOS PLC 184,900 $ 2,781,281
Inchcape PLC 71,716 2,766,727
International Power PLC 288,200 1,262,190
Kelda Group PLC 179,100 2,217,412
Legal & General Group PLC 403,700 807,531
Old Mutual PLC 1,252,800 3,063,509
Royal Bank of Scotland Group PLC 45,485 1,289,819
Royal Dutch Shell PLC, Class A shares 91,300 3,013,124
Royal Dutch Shell PLC, Class B shares 13,100 452,052
Sage Group PLC 341,300 1,386,474
Scottish Power PLC 189,500 1,908,666
Shire Pharmaceuticals Group PLC 84,100 1,021,962
Stagecoach Group PLC 512,100 1,008,572
Standard Chartered PLC 112,200 2,418,376
Tesco PLC 244,800 1,335,293
Tullow Oil PLC 353,000 1,617,531
Vodafone Group PLC 2,521,100 6,553,700
Wolseley PLC 79,200 1,673,589
Xstrata PLC 112,400 2,909,997
-----------
73,656,673
-----------
Total Equities (Cost $254,450,157) 302,457,198
-----------
PREFERRED STOCKS--0.7%
Germany--0.7%
Fresenius AG 8,400 1,164,589
Henkel KGaA 9,300 845,462
-----------
Total Preferred Stocks (Cost $1,700,273) 2,010,051
-----------
SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.2%
U.S. Treasury Bill (c)(d) (Cost $680,262) 3.32% 12/15/2005 $685,000 680,502
-----------
INVESTMENT OF CASH COLLATERAL--0.0% Shares
--------
BlackRock Cash Strategies L.L.C (Cost $49,856) 3.93% 49,856 49,856
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $256,880,548) 305,197,607
-----------
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Rate Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
AFFILIATED INVESTMENTS--3.9%
Dreyfus Institutional Preferred Plus Money Market Fund (e) (Cost $11,996,372) 3.73% 11,996,372 $ 11,996,372
------------
TOTAL INVESTMENTS--103.0% (Cost $268,876,920) 317,193,979
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(3.0%) (9,208,720)
------------
NET ASSETS--100% $307,985,259
============
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at 9/30/05.
(b) Non-income producing security
(c) Denotes all or part of security segregated as collateral for futures
transactions.
(d) Rate noted is yield to maturity.
(e) Affiliated institutional money market fund.
At September 30, 2005 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (50 Contracts) Long 12/19/2005 $1,224,450 $(3,560)
Topix Futures (3 Contracts) Long 12/9/2005 373,442 22
-------
$(3,538)
=======
Percentage of
Economic Sector Allocation Net Assets
------------------------------------------------------------------
Energy 10.6%
Communications 8.9
Financial 25.3
Consumer Cyclical 13.5
Basic Materials 6.8
Industrial 10.2
Utilities 4.7
Technology 3.1
Consumer Noncyclical 15.0
Diversified 0.7
Short-term and Other Assets 1.2
-----
100.0%
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Assets and Liabilities--September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)(including securities on loan, valued at $47,482 (Note 6))
Unaffiliated issuers, at value (cost $256,880,548) $305,197,607
Affiliated issuers, at value (Note 1H) (cost $11,996,372) 11,996,372
Foreign currency, at value (cost, $20,337,373) 20,109,837
Receivable for investments sold 1,357,445
Interest and dividends receivable 578,315
Prepaid expenses 11,099
------------
Total assets 339,250,675
Liabilities
Payable for investments purchased $31,039,469
Collateral for securities on loan (Note 6) 49,856
Accrued accounting, administration and custody fees (Note 2) 23,856
Payable for variation margin on open futures contracts (Note 5) 120,886
Accrued professional fees 23,642
Accrued trustees' fees and expenses (Note 2) 7,707
-----------
Total liabilities 31,265,416
------------
Net Assets (applicable to investors' beneficial interest) $307,985,259
============
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $463,697) $ 4,778,214
Investment income (Note 1 H):
Unaffiliated issuers 15,563
Affiliated issuers 56,774
Securitiy lending income (Note 6) 53,011
-----------
Total investment Income 4,903,562
Expenses
Investment advisory fee (Note 2) $ 1,495,312
Accounting, administration and custody fees (Note 2) 208,132
Professional fees 37,308
Trustees' fees and expenses (Note 2) 31,156
Insurance expense 7,100
Miscellaneous 9,338
-----------
Total expenses 1,788,346
-----------
Net investment income 3,115,216
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Investment securities 16,625,836
Futures contracts 1,536,684
Foreign currency transactions and forward foreign currency exchange contracts (604,557)
-----------
Net realized gain 17,557,963
Change in unrealized appreciation (depreciation) on:
Investment securities 30,398,801
Futures contracts 38,951
Foreign currency transactions and forward foreign currency exchange contracts (251,671)
-----------
Change in net unrealized appreciation (depreciation) 30,186,081
-----------
Net realized and unrealized gain (loss) 47,744,044
-----------
Net Increase in Net Assets from Operations $50,859,260
===========
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income (loss) $ 3,115,216 $ 1,265,862
Net realized gain (loss) 17,557,963 15,649,120
Change in net unrealized appreciation (depreciation) 30,186,081 5,266,928
------------ ------------
Net increase (decrease) in net assets from operations 50,859,260 22,181,910
------------ ------------
Capital Transactions
Contributions 147,880,626 50,826,021
Withdrawals (17,050,877) (24,372,009)
------------ ------------
Net increase (decrease) in net assets from capital transactions 130,829,749 26,454,012
------------ ------------
Total Increase (Decrease) in Net Assets 181,689,009 48,635,922
Net Assets
At beginning of period 126,296,250 77,660,328
------------ ------------
At end of period $307,985,259 $126,296,250
============ ============
The accompanying notes are an integral part of the financial statements.
22
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the period
January 28, 2003
Year Ended September 30, (commencement of
------------------------------- operations) to
2005 2004 September 30, 2003
-------- -------- -------
Total Return (a) 31.12% 27.12% 22.46%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.95% 1.04% 1.17%(c)
Net Investment Income (to average daily net assets)* 1.66% 1.30% 1.81%(c)
Portfolio Turnover 58% 80% 63%(b)
Net Assets, End of Year (000's omitted) $307,985 $126,296 $77,660
- -------------
* For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory
fee and/ or reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the
investment income per share and the ratios would have been:
Ratios (to average daily net assets):
Expenses N/A N/A 1.20%(c)
Net investment income N/A N/A 1.78%(c)
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
(b) Not annualized.
(c) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 (EAFE) and Canada.
At September 30, 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 September 30, 2005, The Boston Company
International Core Equity Fund and the Dreyfus Premier International Equity
Fund held approximately 93% and 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 is then 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 earned, 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.
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 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
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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.
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 among
Funds of the Trust 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 are 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 September 30, 2005, the Portfolio was charged $1,495,312
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 was charged $208,132 during the period ended September 30,
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.
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. Pursuant to this
agreement, Mellon Bank received $21,530, for the period ended September 30,
2005. See Note 6 for further details.
25
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. No other 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 September 30, 2005 were $244,189,007 and
$106,046,221, respectively. For the period ended September 30, 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 September 30, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $268,987,609
============
Unrealized appreciation $49,241,317
Unrealized depreciation (1,034,947)
------------
Net unrealized appreciation (depreciation) $ 48,206,370
============
(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 counter party 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.
At September 30, 2005, the Portfolio did not hold any options.
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
26
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counter parties 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 September 30, 2005, the Portfolio did not hold any open foreign currency
exchange contracts.
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 counter party 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 September 30, 2005, the Portfolio held open financial futures contracts
as disclosed in the schedule of investments.
(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 September 30, 2005
and earned interest on the invested collateral of $232,005 of which,
$178,994 was rebated to borrowers or paid in fees. At September 30, 2005,
the Portfolio had securities valued at $47,482 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 September 30, 2005, the expense allocated to the Portfolio was
$2,581.
During the period ended September 30, 2005, the Portfolio had average
borrowings outstanding of $508,400 on a total of five days and incurred
$265 of interest expense.
27
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Master Portfolio and Investors
of The Boston Company International Core Equity Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company International
Core Equity Portfolio (the "Portfolio") at September 30, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the two years in the period then ended and the period from January 28, 2003
to September 30, 2003, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
28
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, Decision 33 None $299
c/o Decision Resources, Inc. since Resources, Inc. ("DRI")
260 Charles Street 11/3/1986 (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street Associates since Associates (family
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph Maier, 33 None $299
c/o Harvard University since Professor of Political
Littaver Center 127 9/13/1989 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, Mertens 33 None $299
P.O. Box 2333 since House, Inc. (hospice)
New London, NH 03257 11/3/1986
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon Institutional President and Operating Officer of The
Asset Management Chief Executive Boston Company Asset
One Boston Place Officer Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Institutional Asset
Management ("MIAM") and
Vice President and Chief
Financial Officer, MIAM
29
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 and Since 2003 Senior Vice President and Head of
Mellon Institutional Secretary Operations, Mellon Institutional Asset
Asset Management Management; formerly First Vice President,
One Boston Place Mellon Institutional Asset Management and
Boston, MA 02108 Mellon Global Investments
2/20/61
Steven M. Anderson Vice President Vice President since Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer 1999; Treasurer Mellon Institutional Asset Management
Asset Management since 2002
One Boston Place
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, Mellon Institutional Asset
Asset Management Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Compliance
Mellon Institutional President Manager, Mellon Institutional Asset
Asset Management Management ("MIAM"); formerly Shareholder
One Boston Place Services, MIAM and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset
1/19/71 Management Company LLC
Mary T. Lomasney Chief Compliance Since 2005 First Vice President, Mellon Institutional
Mellon Institutional Officer Asset Management and Chief Compliance
Asset Management Officer, Mellon Funds Distributor; formerly
One Boston Place Director, Blackrock, Inc., Senior Vice
Boston, MA 02108 President, State Street Research &
4/8/57 Management Company ("SSRM"), Vice President, SSRM
30
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6924AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Standish Mellon Massachusetts
Annual Report Intermediate Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place * Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
A steady stream of tax exempt coupon income was the primary source of municipal
bond returns this year. For the year ended September 30, 2005, the Standish
Mellon Massachusetts Intermediate Tax Exempt Bond Fund produced a total return
after all expenses of 1.72%. This result trailed the benchmark performance index
(Lehman Brothers 3,5,7 and 10 Year Municipal Bond Index) return of 1.77% for
that period. Please note that the Massachusetts Fund invests only in bonds where
interest is exempt from Massachusetts and federal income taxes, while the
benchmark index is national in scope.
The Federal Reserve fought relentlessly throughout the year against an outbreak
of inflation, pushing short-term interest rates higher in each of the past 11
meetings. Ordinarily a tightening regime causes yields on most short-term
securities to climb in concert with the Fed's actions, while longer yields also
increase, but by a smaller margin. Indeed, over the past 12 months, two-year
municipal rates rose by more than a point. Longer municipal yields, however,
barely budged: ten-year rates increased by a quarter of a point and twenty-year
rates actually decreased. A new Federal Reserve study suggests foreign capital
flowing into U.S. bonds has been a major contributor to the curiously low level
of long-term domestic interest rates.
Growing investor demand for excess tax-free income drove up valuations among
income-oriented municipal bond sectors. Consequently, the Fund's holdings in
hospital bonds, which typically carry a significant yield premium, outperformed.
In addition, the Fund's underweighting in lower-yielding government-backed
municipal securities proved a fruitful strategy.
The Fund continued to benefit from strengthening municipal bond credit quality.
State tax revenues grew dramatically, leading to a ratings upgrade for the
Commonwealth's general obligation bonds in the spring of 2005. Furthermore, the
Massachusetts economy continues to grow, albeit at a moderate rate. Employment
has increased on a year-over-year basis each month since July 2004, although the
rate of growth lags both the nation and New England. About three-quarters of the
Fund's holdings on September 30, 2005 were rated double-A or higher, with
one-third of the bonds insured by triple-A rated financial guarantors.
With inflation expectations building, we believe the Fed will stay vigilant and
continue in their series of measured interest rate hikes until signs of economic
softness appear. The gap between short-term and longer term interest rates
remains narrow, and we do not believe it is likely to decline much more. We are
maintaining the Fund's interest rate sensitivity at a neutral level, and we will
invest strategically across the broad spectrum of intermediate maturities to
capture the best balance of excess yield and risk.
The Fund's Board of Trustees has voted to recommend to the Fund's shareholders
that the Fund be liquidated. For more information concerning the liquidation
proposal, see "Subsequent Event: Fund Liquidation Proposal" in the notes to the
financial statements. It has been our privilege to manage the Fund.
Sincerely,
/s/ Steven W. Harvey /s/ Christine L. Todd
Steven W. Harvey Christine L. Todd
2
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Comparison of Change in Value of $100,000 Investment in
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund and
the Lehman Brothers 3-5-7-10 Year Muni Bond Index
- --------------------------------------------------------------------------------
[THE DATA IN THE LINE CHART IS A REPRESENTATION OF THE PRINTED MATERIAL.]
Standish Mellon Lehman Brothers
PERIOD MA Intermediate Tax Exempt 3-5-7-10 Year Muni Bond Index*
Bond Fund
9/30/95 100,000 100,000
12/31/95 102,536 102,312
3/31/96 101,893 102,197
6/30/96 102,675 102,731
9/30/96 104,280 104,466
12/31/96 106,690 106,806
3/31/97 106,472 106,872
6/30/97 109,406 109,632
9/30/97 112,139 112,269
12/31/97 114,579 114,481
3/31/98 115,794 115,732
6/30/98 117,224 117,156
9/30/98 120,489 120,433
12/31/98 121,200 121,360
3/31/99 121,952 122,442
6/30/99 119,804 120,708
9/30/99 120,269 121,733
12/31/99 120,013 121,753
3/31/00 121,832 123,617
6/30/00 123,266 125,528
9/30/00 125,952 128,141
12/31/00 129,939 132,026
3/31/01 132,972 135,452
6/30/01 133,759 136,591
9/30/01 137,665 140,288
12/31/01 136,147 139,486
3/31/02 136,777 140,626
6/30/02 141,981 146,042
9/30/02 147,429 151,624
12/31/02 147,374 152,216
3/31/03 148,729 153,874
6/30/03 152,035 157,139
9/30/03 152,177 158,145
12/31/03 153,262 159,065
3/31/04 155,184 161,100
6/30/04 151,725 157,856
9/30/04 156,237 162,689
12/31/04 157,277 163,763
3/31/05 155,990 162,302
6/30/05 159,477 165,946
9/30/05 158,922 165,562
Average Annual Total Returns
(for period ended 9/30/2005)
================================================================================
Since
Inception
1 Year 3 Years 5 Years 10 Years 11/2/1992
- --------------------------------------------------------------------------------
Fund 1.72% 2.53% 4.76% 4.74% 5.07%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- --------------------------------------------------------------------------------------------
Actual $1,000.00 $1,018.80 $3.29
Hypothetical (5% return
per year before expenses) $1,000.00 $1,021.81 $3.29
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied
by the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
4
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Rate Maturity Investments
- ---------------------------------------------------------------------------------------
Commonwealth of Massachusetts NCL 5.500 12/1/2011 7.2%
Commonwealth of Massachusetts NCL 6.000 11/1/2011 4.4
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 3.6
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 3.4
Foxborough MA Stadium 5.750 6/1/2011 3.4
Mass Special Obligation NCL 5.500 6/1/2013 3.2
Mass Port Authority 6.000 7/1/2011 3.2
Springfield Mass MBIA NCL 5.250 8/1/2015 3.2
State of Massachusetts 5.250 1/1/2018 3.2
Mass State School Building Auth Dedicated
Sales Tax Revenue FSA 5.000 8/15/2014 3.2
-----
38.0%
* Excluding short-term investments.
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------
General Obligations 25.3%
Government Backed 9.7
Industrial Development 3.6
Insured Bond 29.1
Lease Revenue 2.2
Letter of Credit 1.2
Revenue Bonds 15.3
Special Revenues 11.9
Short Term and Net Other Assets 1.7
------
100.0%
Summary of Combined Ratings +
- -------------------------------------------------------------
Quality Breakdown Value (%)
- -------------------------------------------------------------
AAA 40.6
AA 36.0
A 2.5
BBB 20.9
-----
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 higher
rating category.
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
BONDS--98.3%
General Obligations--25.3%
Commonwealth of Massachusetts NCL 6.000% 11/1/2011 $1,350,000 $1,527,633
Commonwealth of Massachusetts NCL 5.500 12/1/2011 2,250,000 2,486,655
Mass College Building Authority 7.500 5/1/2007 450,000 480,285
Mass College Building Authority 7.500 5/1/2008 250,000 275,748
Massachusetts State NCL 5.500 10/1/2016 500,000 566,160
Puerto Rico Commonwealth Fuel Sales Tax Revenue (a) 5.000 7/1/2018 750,000 779,693
Puerto Rico Commonwealth NCL 6.500 7/1/2013 500,000 581,370
Puerto Rico Public Building Authority Revenue 5.000 7/1/2028 250,000 264,473
Puerto Rico Public Financial Corp. LOC: Government
Development Bank for Puerto Rico 5.750 8/1/2027 250,000 273,190
State of Massachusetts 5.250 1/1/2018 1,000,000 1,094,930
University of Massachusetts Building Authority State Guarantee 6.625 5/1/2007 500,000 527,225
----------
8,857,362
----------
Government Backed--9.7%
Commonwealth of Massachusetts--Series C 5.250 8/1/2009 835,000 888,440
Commonwealth of Massachusetts NCL--Series B 6.500 8/1/2008 550,000 596,123
Commonwealth of Massachusetts Prerefunded 6.000 6/1/2014 565,000 625,681
Commonwealth of Massachusetts Prerefunded 5.625 6/1/2018 500,000 549,085
Mass DFA Massachusetts College of Pharmacy 5.750 7/1/2006 280,000 284,292
Mass Revenue Rail Connections, Inc. (b) 0.000 7/1/2022 500,000 194,515
Massachusetts State Water Pollution Abatement Trust Prerefunded 5.250 8/1/2013 245,000 268,162
----------
3,406,298
----------
Industrial Development--3.6%
Boston MA Industrial Development Financing Authority AMT 7.375 5/15/2015 690,000 693,767
Mass DFA Waste Management Resource Recovery AMT 6.900 12/1/2029 500,000 558,190
----------
1,251,957
----------
Insured Bond--29.1%
Commonwealth of Massachusetts MBIA NCL 5.500 11/1/2012 685,000 763,796
Mass Bay Transportation Authority FGIC 7.000 3/1/2014 900,000 1,084,644
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 1,000,000 1,168,290
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 1,055,000 1,235,373
Mass Port Authority MBIA NCL AMT 5.750 7/1/2007 500,000 519,045
Mass Special Obligation NCL 5.000 12/15/2013 500,000 539,690
Massachusetts State Health & Educational Facility Authority Revenue FGIC 5.000 8/15/2015 1,000,000 1,086,730
Mass State School Building Auth Dedicated Sales Tax Revenue FSA 5.000 8/15/2014 1,000,000 1,093,460
Puerto Rico Commonwealth Highway & Transportation Authority MBIA 5.500 7/1/2013 640,000 721,920
Puerto Rico Electric Power Authority Revenue 5.500 7/1/2016 250,000 284,570
Springfield Mass MBIA NCL 5.250 8/1/2015 1,000,000 1,110,090
State of Massachusetts 5.250 8/1/2020 500,000 562,180
----------
10,169,788
----------
Lease Revenue--2.2%
Puerto Rico Housing Bank Appropriation 5.125 12/1/2005 750,000 752,228
----------
LOC--1.2%
Boston MA Industrial Development Financing
Authority LOC: Bank of New York AMT 5.875 4/1/2030 430,000 435,022
----------
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Revenue Bonds--15.3%
Mass DFA Biomedical Research 6.000% 8/1/2011 $ 550,000 $ 600,798
Mass DFA Deerfield Academy 5.000 10/1/2013 400,000 433,740
Mass DFA Hampshire College 5.150 10/1/2014 450,000 466,376
Mass DFA Massachusetts College of Pharmacy
and Allied Health Sciences NCL 5.000 7/1/2009 425,000 439,599
Mass DFA Williston School 6.000 10/1/2013 380,000 404,879
Mass HEFA Baystate Medical Center NCL 5.000 7/1/2010 250,000 260,900
Mass HEFA Milford Hospital NCL 5.250 7/15/2007 600,000 609,510
Mass HEFA No. Adams Regional Hospital 6.750 7/1/2009 75,000 77,457
Mass IFA Wentworth Institute 5.050 10/1/2005 290,000 290,000
Mass Port Authority 6.000 7/1/2011 1,000,000 1,115,060
Massachusetts State Water Pollution Abatement Trust 5.250 8/1/2013 5,000 5,460
Puerto Rico Industrial Tour Ed Anamendez University 5.000 2/1/2006 650,000 652,854
-----------
5,356,633
-----------
Special Revenues--11.9%
Foxborough MA Stadium 5.750 6/1/2011 1,050,000 1,161,951
Mass Bay Transportation Authority Sales Tax Revenue 5.250 7/1/2021 750,000 850,193
Mass Special Obligation NCL 5.500 6/1/2013 1,000,000 1,121,830
Virgin Islands Public Finance Authority 5.625 10/1/2010 1,000,000 1,042,977
-----------
4,176,951
-----------
TOTAL BONDS (Cost $33,446,211) 34,406,239
-----------
SHORT-TERM INVESTMENTS--0.4%
Short-Term Bonds--0.3%
Mass DFA Boston University (c) 2.900 10/1/2042 100,000 100,000
-----------
Investment Companies--0.1% Shares
-------
Federated Massachusetts Municipal Cash Trust Fund 2.120 52,490 52,490
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $152,490) 152,490
-----------
TOTAL INVESTMENTS--98.7% (Cost $33,598,701) 34,558,729
-----------
OTHER ASSETS, LESS LIABILITIES--1.3% 452,110
-----------
NET ASSETS--100% $35,010,839
===========
Notes to Schedule of Investments:
AMT--Alternative Minimum Tax
DFA--Development Finance Agency
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance
HEFA--Health & Educational Facilities 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 9/30/05.
(b) Zero coupon security.
(c) Variable rate securities that reset monthly or more frequently and have put
features that can be exercised within 7 days.
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (cost $33,598,701) $34,558,729
Interest receivable 506,081
Receivable for Fund shares sold 40
Prepaid expenses 10,692
-----------
Total assets 35,075,542
Liabilities
Distributions payable $31,762
Accrued professional fees 18,203
Accrued accounting, custody, administration and transfer agent fees (Note 2) 7,448
Accrued trustees' fees (Note 2) 2,286
Other accrued expenses and liabilities 5,004
-------
Total liabilities 64,703
-----------
Net Assets $35,010,839
===========
Net Assets consist of:
Paid-in capital $33,752,574
Accumulated net realized gain 278,473
Undistributed net investment income 19,764
Net unrealized appreciation 960,028
-----------
Total Net Assets $35,010,839
===========
Shares of beneficial interest outstanding 1,665,068
===========
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.
8
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $1,764,694
Expenses
Investment advisory fee (Note 2) $161,656
Accounting, custody, administration and transfer agent fees (Note 2) 92,203
Registration fees 7,295
Professional fees 35,493
Trustees' fees and expenses (Note 2) 8,127
Insurance expense 4,779
Miscellaneous expenses 14,854
----------
Total expenses 324,407
Deduct:
Waiver of invesment advisory fee (Note 2) (61,716)
----------
Net Expenses 262,691
----------
Net investment income 1,502,003
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Investment securities 293,874
----------
Net realized gain 293,874
Change in unrealized appreciation (depreciation) on
Investment securities (1,097,446)
----------
Net change in net unrealized appreciation (depreciation) (1,097,446)
----------
Net realized and unrealized gain (loss) on investments (803,572)
----------
Net Increase in Net Assets from Operations $698,431
==========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 1,502,003 $ 1,677,542
Net realized gains 293,874 270,520
Change in net unrealized appreciation (depreciation) (1,097,446) (706,976)
------------ ------------
Net increase in net assets from investment operations 698,431 1,241,086
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (1,496,987) (1,670,668)
From net realized gains on investments (248,671) (1,266,678)
------------ ------------
Total distributions to shareholders (1,745,658) (2,937,346)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 2,429,041 2,234,159
Value of shares issued to shareholders in reinvestment of distributions 1,228,760 2,294,786
Cost of shares redeemed (11,679,296) (10,485,190)
------------ ------------
Net increase in net assets from Fund share transactions (8,021,495) (5,956,245)
------------ ------------
Total Decrease in Net Assets (9,068,722) (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 $19,764 and $19,764) $ 35,010,839 $ 44,079,561
============ ============
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------
2005 2004 2003 2002 2001
---------- ---------- ---------- ---------- ----------
Net Asset Value, Beginning of Period $ 21.58 $ 22.36 $ 22.52 $ 21.89 $ 20.89
From Operations:
Net investment income* (a) 0.79 0.79 0.82 0.88 0.91
Net realized and unrealized gains (loss) on investments (0.43) (0.21) (0.12) 0.63 1.00
---------- ---------- ---------- ---------- ----------
Total from operations 0.36 0.58 0.70 1.51 1.91
---------- ---------- ---------- ---------- ----------
Less Distributions to Shareholders:
From net investment income (0.79) (0.79) (0.82) (0.88) (0.91)
From net realized gains on investments (0.12) (0.57) (0.04) -- --
---------- ---------- ---------- ---------- ----------
Total distributions to shareholders (0.91) (1.36) (0.86) (0.88) (0.91)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 21.03 $ 21.58 $ 22.36 $ 22.52 $ 21.89
========== ========== ========== ========== ==========
Total Return (b) 1.72% 2.64% 3.20% 7.09% 9.32%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 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%
Portfolio Turnover 17% 16% 25% 13% 22%
Net Assets, End of Period (000's omitted) $ 35,011 $ 44,080 $ 51,732 $ 65,726 $ 64,246
- ----------
* 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 (a) $0.75 $0.77 $0.81 $0.87 $0.91
Ratios (to average daily net assets):
Expenses 0.80% 0.75% 0.70% 0.68% 0.65%
Net investment income 3.56% 3.52% 3.63% 3.98% 4.23%
(a) Calculated using the average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 market 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 on the trade date. Interest income is
determined on the basis of coupon interest earned, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method.
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,
are 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. Book-tax differences
are primarily due to futures transactions, swap agreements, prior period
premium and discount on debt securities, market discount, capital loss
carryforwards and losses deferred due to wash sales and excise tax
regulations.
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 among Funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size
of the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
12
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 monthly 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
September 30, 2005. Pursuant to this agreement, for the period ended
September 30, 2005, Standish Mellon voluntarily waived a portion of its
advisory fee in the amount of $61,716. This agreement is voluntary and
temporary and may be discontinued or revised by Standish Mellon 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 Standish Mellon, 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 was charged $12,033 during the period ended September 30, 2005.
The Fund has contracted with 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 was charged $80,170 during
the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of Standish Mellon or its
affiliates received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such
Plan Administrator. The Fund's adviser or its affiliates may pay
additional compensation from their own resources to Plan Administrators
and other entities for administrative services, as well as in
consideration of marketing or other distribution-related services. These
payments may provide an incentive for these entities to actively promote
the Fund or cooperate with the distributor's promotional efforts.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
investments, for the period ended September 30, 2005 were $6,759,009 and
$14,693,431, respectively. For the period ended September 30, 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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Shares sold 115,025 103,349
Shares issued to shareholders in
reinvestment of distributions 57,675 106,046
Shares redeemed (550,224) (480,604)
-------- --------
Net decrease (377,524) (271,209)
======== ========
At September 30, 2005, the Fund had two shareholders of record owning
approximately 37% of the Fund's outstanding shares. 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
7 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 September 30, 20005, the Fund received
no redemption fees.
13
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 tax basis components of distributable earnings and the federal tax
cost as of September 30, 2005, was as follows:
Unrealized appreciation $ 1,082,247
Unrealized depreciation (122,270)
------------
Net unrealized appreciation/depreciation 959,977
Undistributed ordinary income 127,086
Undistributed capital gains 278,524
------------
Total distributable earnings $ 1,365,587
============
Cost for federal income tax purposes $ 33,598,752
Tax character of distributions paid during the fiscal years ended
September 30, 2005 and September 30, 2004 were as follows:
Distributions paid from: 2005 2004
---------- ----------
Tax-exempt income $1,496,987 $1,670,668
Capital gains-long term 248,671 1,266,678
(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 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 September 30, 2005, the Fund did not hold any outstanding futures
contracts. (7)
14
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
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 September 30, 2005, the Fund did not hold any delayed delivery
securities.
(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 September 30, 2005, the
expense related to the facility fee was $1,266 for the Fund.
During the period ended September 30, 2005, the Fund had average
borrowings outstanding of $72,450 on a total of twenty eight days and
incurred $145 of interest expense.
(9) Subsequent Event:
On October 18, 2005, the Board of Trustees of Mellon Institutional Funds
Investment Trust considered and approved a proposal to liquidate and
dissolve the Fund. Shareholders were notified of this proposal pursuant to
a supplement to the Fund's prospectus dated November 1, 2005. Definitive
proxy materials relating to this proposal were mailed on or around
November 9, 2005 to the shareholders of record of the Fund as of the close
of business on November 1, 2005. If the Fund's shareholders approve this
proposal at a meeting to be held on December 20, 2005, the Fund will be
liquidated and dissolved as soon as practicable thereafter.
Prior to the Fund's liquidation and dissolution, shareholders will be
entitled to exchange out of the Fund or redeem their shares in the manner
set forth in the Fund's current prospectus.
In connection with winding up the Fund's affairs and liquidating all of
its assets, the Fund may depart from its stated investment objective and
policies and may hold a significant portion of its total assets in cash,
U.S. Government securities and other short-term debt instruments
15
Mellon Institutional Funds Investment Trust
Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of Standish Mellon Massachusetts Intermediate Tax Exempt Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Standish Mellon Massachusetts
Intermediate Tax Exempt Bond Fund (the "Fund") at September 30, 2005, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
As described in Note 9, the trustees have approved, and placed before the
shareholders for their approval, a proposal to liquidate the Fund.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
16
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming c/o Trustee Trustee Chairman Emeritus, 33 None $299
Decision Resources, Inc. since Decision Resources, Inc.
260 Charles Street 11/3/1986 ("DRI") (biotechnology
Waltham, MA 02453 9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street Associates since Associates (family
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman c/o Trustee Trustee William Joseph Maier, 33 None $299
Harvard University since Professor of Political
Littaver Center 127 9/13/1989 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, Mertens 33 None $299
P.O. Box 2333 since House, Inc. (hospice)
New London, NH 03257 11/3/1986
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon Institutional President Operating Officer of The
Asset Management and Chief Boston Company Asset
One Boston Place Executive Management, LLC; formerly
Boston, MA 02108 Officer Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Institutional
Asset Management ("MIAM")
and Vice President and
Chief Financial Officer,
MIAM
17
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 First
Asset Management Vice President, Mellon Institutional Asset Management
One Boston Place 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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, 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
Asset Management Management; formerly Shareholder Representative,
One Boston Place Standish Mellon Asset Management Company LLC
Boston, MA 02108
1/19/71
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional Asset
Mellon Institutional Compliance Management and Chief Compliance Officer,
Asset Management Officer Mellon Funds Distributor; formerly Director,
One Boston Place Blackrock, Inc., Senior Vice President, State Street
Boston, MA 02108 Research & Management Company ("SSRM"),
4/8/57 Vice President, SSRM
18
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6932AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report Standish Mellon
Intermediate Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
A steady stream of tax exempt coupon income was the primary source of municipal
bond returns this year. For the year ended September 30, 2005, the Standish
Mellon Intermediate Tax Exempt Bond Fund produced a total return after all
expenses of 2.18%. This result exceeded the benchmark performance index (Lehman
Brothers 3,5,7 and 10 Year Municipal Bond Index) return of 1.77% for that
period.
The Federal Reserve fought relentlessly throughout the year against an outbreak
of inflation, pushing short- term interest rates higher in each of the past 11
meetings. Ordinarily a tightening regime causes yields on most short-term
securities to climb in concert with the Fed's actions, while longer yields also
increase, but by a smaller margin. Indeed, over the past 12 months, two-year
municipal rates rose by more than a point. Longer municipal yields, however,
barely budged: ten-year rates increased by a quarter of a point and twenty-year
rates actually decreased. A new Federal Reserve study suggests foreign capital
flowing into U.S. bonds has been a major contributor to the curiously low level
of long-term domestic interest rates.
Growing investor demand for excess tax-free income drove up valuations among
income-oriented municipal bond sectors. Consequently, the Fund's holdings in
hospital and tobacco securitization bonds, which typically carry a significant
yield premium, outperformed. In addition, the Fund's underweighting in
lower-yielding government-backed municipal securities proved a fruitful
strategy. Security selection in the housing sector emphasized shorter, defensive
bonds, which was a favorable strategy in an environment of rising short rates.
Municipal bond credit quality strengthened further, and was largely unimpaired
by the devastation from hurricanes Katrina and Rita. Gulf Cost areas affected by
the storms are the source of only a small portion of the tax-free market's total
supply. Also, our research indicates that the triple-A rated bond insurers,
which guarantee almost half of all municipal debt outstanding, can make any
storm-related payments with their claims-paying abilities and ratings intact. We
continue to use proprietary research to not only avoid potential problems, but
more importantly, to identify undervalued sectors and securities that add value
by providing excess income as well as the potential for capital appreciation.
With inflation expectations building, we believe the Fed will stay vigilant and
continue in their series of measured interest rate hikes until signs of economic
softness appear. The gap between short-term and longer term interest rates
remains narrow, and we do not believe it is likely to decline much more. We are
maintaining the Fund's interest rate sensitivity at a neutral level, and we will
invest strategically across the broad spectrum of intermediate maturities to
capture the best balance of excess yield and risk.
It has been our privilege to manage the Fund, and we thank you for your
continued support.
Sincerely,
/s/ Steven W. Harvey /s/ Christine L. Todd
Steven W. Harvey Christine L. Todd
2
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Comparison of Change in Value of $100,000 Investment in
Standish Mellon Intermediate Tax Exempt Bond Fund and
the Lehman Brothers 3-5-7-10 Year Muni Bond Index
- --------------------------------------------------------------------------------
[THE FOLLOWING IS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Standish Mellon Lehman Brothers
PERIOD Intermediate Tax Exempt 3-5-7-10 Year Muni Bond Index*
Bond Fund
9/30/95 100,000 100,000
12/31/95 102,772 102,312
3/31/96 102,339 102,197
6/30/96 103,271 102,731
9/30/96 105,268 104,466
12/31/96 107,654 106,806
3/31/97 107,639 106,872
6/30/97 110,822 109,632
9/30/97 113,945 112,269
12/31/97 116,312 114,481
3/31/98 117,408 115,732
6/30/98 118,916 117,156
9/30/98 122,181 120,433
12/31/98 122,587 121,360
3/31/99 123,419 122,442
6/30/99 121,301 120,708
9/30/99 121,761 121,733
12/31/99 121,531 121,753
3/31/00 123,757 123,617
6/30/00 125,258 125,528
9/30/00 127,759 128,141
12/31/00 131,809 132,026
3/31/01 134,723 135,452
6/30/01 135,663 136,591
9/30/01 139,239 140,288
12/31/01 138,273 139,486
3/31/02 139,289 140,626
6/30/02 144,110 146,042
9/30/02 149,903 151,624
12/31/02 150,291 152,216
3/31/03 151,875 153,874
6/30/03 155,223 157,139
9/30/03 155,749 158,145
12/31/03 156,808 159,065
3/31/04 158,539 161,100
6/30/04 155,302 157,856
9/30/04 160,078 162,689
12/31/04 161,418 163,763
3/31/05 160,086 162,302
6/30/05 163,831 165,946
9/30/05 163,568 165,562
Average Annual Total Returns
(for period ended 9/30/2005)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 11/2/1992
- --------------------------------------------------------------------------------
Fund 2.18% 2.95% 5.06% 5.04% 5.46%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,021.70 $2.28
Hypothetical (5% return
per year before expenses) $1,000.00 $1,022.81 $2.28
- -------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.45%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings Rate Maturity Investments
- ------------------------------------------------------------------------------------------------------
New York Dormitory Authority Revenue 5.250% 11/15/2023 3.0%
Northeast TX Independent School District NCL 5.000 8/1/2010 3.0
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 2.3
New York Dormitory Authority State
University Educational Facilities MBIA IBC 5.250 5/15/2015 2.0
Lubbock TX Health Facilities Development
St. Joseph Healthcare System 5.000 7/1/2008 1.9
Farmington New Mexico Pollution Control Revenue FGIC 3.550 4/1/2029 1.9
Cook County IL School District FSA NCL 6.750 5/1/2010 1.8
Colorado HFA Single Family Project AMT 6.800 2/1/2031 1.8
Seattle WA Water System Revenue MBIA NCL 5.000 9/1/2014 1.7
----
22.3%
Percentage of
Economic Sector Allocation Net Assets
- ----------------------------------------------------------------------
General Obligations 23.7%
Government Backed 1.4
Housing Revenue 4.9
Industrial Development 8.9
Insured Bond 34.4
Lease Revenue 4.4
Revenue Bonds 16.5
Special Revenues 3.9
Short-term and Net Other Assets 1.9
-----
100.0%
Summary of Combined Ratings+
- --------------------------------------------------------------------
Quality Breakdown Value (%)
- --------------------------------------------------------------------
AAA 46.9
AA 25.4
A 14.7
BBB 13.0
-----
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 higher
rating category.
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
BONDS--98.2%
General Obligations--23.7%
ABAG CA Odd Fellows Homes 5.700% 8/15/2014 $1,000,000 $ 1,056,630
California State 5.000 10/1/2011 230,000 248,619
California State 5.000 10/1/2011 70,000 74,801
California State 5.000 6/1/2014 1,435,000 1,555,425
California State NCL 6.600 2/1/2009 1,000,000 1,101,650
California State NCL 5.750 11/1/2011 300,000 336,804
Commonwealth of Massachusetts NCL 6.000 11/1/2010 1,350,000 1,508,895
Commonwealth of Massachusetts NCL 5.250 8/1/2014 1,000,000 1,103,830
Goose Creek TX Independent School District 7.000 8/15/2009 370,000 418,370
Lake County IL First Preserve District (a) 0.000 12/1/2007 1,250,000 1,167,575
New York NY 5.000 9/1/2017 1,000,000 1,064,240
New York NY NCL 5.000 6/1/2011 1,000,000 1,067,850
New York NY NCL 5.000 8/1/2011 770,000 823,623
New York NY NCL 5.000 8/1/2011 1,700,000 1,818,388
New York NY NCL 5.000 8/1/2013 1,500,000 1,609,185
Northeast TX Independent School District NCL 7.000 2/1/2009 1,000,000 1,114,460
Northeast TX Independent School District NCL 5.000 8/1/2010 3,000,000 3,210,300
Puerto Rico Commonwealth Fuel Sales Tax Revenue (b) 5.000 7/1/2018 3,000,000 3,118,770
Puerto Rico Public Building Authority Revenue 5.000 7/1/2028 1,000,000 1,057,890
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 2,250,000 2,458,710
------------
25,916,015
------------
Government Backed--1.4%
Alpine UT School District 5.000 3/15/2011 25,000 26,363
District of Columbia Prerefunded MBIA NCL 5.750 6/1/2010 10,000 11,058
Goose Creek TX Independent School District 7.000 8/15/2009 230,000 261,945
Met Govt Nashville & Davidson TN
Industrial Development Board Revenue Prerefunded 7.500 11/15/2010 1,000,000 1,174,030
Palm Beach County FL Solid Waste AMBAC 6.000 10/1/2009 60,000 66,362
Texas Municipal Power Agency MBIA (a) 0.000 9/1/2016 10,000 6,295
------------
1,546,053
------------
Housing Revenue--4.9%
California Housing SFM 5.050 2/1/2017 35,000 35,149
Colorado HFA Single Family Project AMT (b) 6.800 2/1/2031 1,865,000 1,924,885
Colorado HFA Single Family Project AMT (b) 6.600 8/1/2032 1,480,000 1,543,699
Florida Housing Finance Corp. FSA 5.750 1/1/2017 60,000 60,413
Nebraska Investment Finance Authority SFM FHA VA AMT 6.700 9/1/2026 60,000 60,609
Ohio HFA Mortgage Revenue AMT GNMA 5.350 9/1/2018 360,000 369,090
Pennsylvania HFA SFM 5.350 10/1/2008 45,000 45,000
Rhode Island Housing & Mortgage Finance Corp. 4.950 10/1/2016 150,000 151,245
Tennessee Housing Development Agency Homeownership Project AMT NCL 5.750 7/1/2007 840,000 865,822
Utah HFA AMT SFM 5.400 7/1/2020 265,000 269,895
------------
5,325,807
------------
Industrial Development--8.9%
Connecticut Gaming Authority Mohegan Tribe 5.375 1/1/2011 1,000,000 1,050,730
Gloucester NJ Resource Recovery 6.850 12/1/2029 500,000 560,305
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
Industrial Development (continued)
Golden State Tobacco Securitization Corp. 5.000% 6/1/2020 $ 500,000 $ 524,270
Golden State Tobacco Securitization Corp. 5.000 6/1/2021 1,370,000 1,391,865
Golden State Tobacco Securitization Corp. (c ) 0.000 6/1/2023 750,000 600,435
Hendersonville TN Kroger 5.950 12/15/2008 220,000 226,409
Mass DFA Waste Management Resource Recovery AMT 6.900 12/1/2029 500,000 558,190
Michigan State Strategic Funding AMT NCL (b) 3.750 8/1/2027 500,000 500,330
Northern TOB Securitization Corp. Alaska 4.750 6/1/2015 665,000 673,253
San Manuel Entertainment Series 2004-C 4.500 12/1/2016 1,000,000 995,710
Tobacco Settlement Authority Washington 6.500 6/1/2026 980,000 1,087,692
Tobacco Settlement Funding Corp. NJ 5.000 6/1/2010 500,000 520,395
Tobacco Settlement Funding Corp. NY 5.250 6/1/2013 1,000,000 1,048,110
------------
9,737,694
------------
Insured Bond--34.4%
California State 6.000 4/1/2016 1,000,000 1,178,420
Charleston SC COP MBIA 6.000 12/1/2008 1,000,000 1,084,610
Cleveland Ohio Waterworks Revenue MBIA 5.500 1/1/2013 1,500,000 1,642,500
Cook County IL High School FGIC NCL 7.875 12/1/2014 750,000 981,690
Cook County IL School District FSA NCL 6.750 5/1/2010 1,750,000 1,998,640
Corpus Christi TX Business & Job Development Corp.
Sales Tax Revenue AMBAC NCL 5.000 9/1/2011 1,215,000 1,312,783
District of Columbia FSA NCL 5.500 6/1/2011 1,500,000 1,648,605
District of Columbia MBIA NCL 5.750 6/1/2010 15,000 16,492
Douglas County CO School District MBIA 7.000 12/15/2012 625,000 758,150
Fairfax County VA EDA Residential Recovery AMT 6.100 2/1/2011 1,000,000 1,113,390
Farmington New Mexico Pollution Control Revenue FGIC 3.550 4/1/2029 2,000,000 2,000,820
Georgia Municipal Electric Authority Power FGIC NCL 6.250 1/1/2012 1,150,000 1,318,855
Harris County Texas Health Facility Development Corp. MBIA 6.000 6/1/2013 1,000,000 1,141,330
Harris County TX Toll Revenue FGIC NCL 6.000 8/1/2012 1,000,000 1,140,730
Intermountain Power Agency UT NCL 6.500 7/1/2010 1,000,000 1,139,730
Jefferson County OH Asset Guaranty 6.625 12/1/2005 50,000 50,278
King County Washington School District No. 414 Lake Washington FSA 5.000 6/1/2011 1,000,000 1,077,380
Mass State School Building Auth. Dedicated Sales Tax Revenue FSA 5.000 8/15/2013 1,000,000 1,090,780
Massachusetts State NCL 5.500 12/1/2017 1,000,000 1,143,230
Mesa AZ Utility System Revenue NCL 6.000 7/1/2020 1,250,000 1,515,338
Metropolitan Washington DC Apartment Authority System AMT MBIA 5.000 10/1/2012 1,000,000 1,062,950
Nassau County NY FGIC 6.000 7/1/2010 25,000 27,856
New Jersey Health Care Facilities Financing Authority Revenue AMBAC 4.800 8/1/2021 730,000 745,556
New York Dormitory Authority Presbyterian Hospital AMBAC 4.400 8/1/2013 60,000 60,778
New York Dormitory Authority State University
Educational Facilities MBIA 6.000 5/15/2015 1,000,000 1,114,080
New York Dormitory Authority State University
Educational Facilities MBIA IBC 5.250 5/15/2015 2,000,000 2,209,640
New York NY NCL CIFG 5.000 8/1/2014 1,000,000 1,086,060
Orange County CA COP MBIA 5.800 7/1/2016 400,000 416,712
Pasco County FL Solid Waste AMBAC AMT NCL 6.000 4/1/2010 1,000,000 1,087,850
Pennsylvania Economic DFA Resource Recovery Revenue;
Colver Project AMT AMBAC 5.000 12/1/2012 1,000,000 1,064,840
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
Insured Bond (continued)
Puerto Rico Electric Power Authority Revenue 5.500% 7/1/2016 $ 500,000 $ 569,140
Seattle WA Water System Revenue MBIA NCL 5.000 9/1/2014 1,670,000 1,820,150
South Carolina Transit Infrastructure Bank Revenue AMBAC NCL 5.250 10/1/2015 1,000,000 1,122,240
Stafford TX Economic Development FGIC 6.000 9/1/2015 525,000 613,909
Texas Municipal Power Agency MBIA (a) 0.000 9/1/2016 1,990,000 1,252,606
------------
37,608,118
------------
Lease Revenue--4.5%
New Jersey Economic Development Authority Revenue
School Facilities Construction NCL 5.000 9/1/2012 1,000,000 1,075,400
New York Dormitory Authority Revenue 5.250 11/15/2023 3,000,000 3,242,970
New York Urban Development Corp.
Correctional and Youth Facilities Service 5.250 1/1/2021 500,000 527,800
------------
4,846,170
------------
Revenue Bonds--16.5%
Arizona State Transit Highway Revenue NCL 5.000 7/1/2014 1,500,000 1,642,050
Broward County FL Resource Recovery 5.000 12/1/2007 1,000,000 1,035,260
California State Department of Water Resources Power Supply NCL 5.500 5/1/2010 250,000 271,610
California Statewide Communities DFA--Kaiser Permanente 2.300 4/1/2033 1,250,000 1,234,375
Camden NJ Cooper Hospitals NCL 5.600 2/15/2007 175,000 176,698
Illinois DFA Depaul University NCL 5.500 10/1/2011 1,000,000 1,083,610
Illinois Financial Authority Student Housing Revenue NCL 5.000 6/1/2012 1,160,000 1,212,652
Illinois HEFA Condell Medical Center 6.000 5/15/2010 425,000 448,902
Illinois HEFA Northwestern University 5.050 11/1/2032 725,000 773,321
Indiana Health Facility Financing Authority Revenue 5.000 11/1/2011 500,000 537,015
Lubbock TX Health Facilities Development St. Joseph Healthcare System 5.000 7/1/2008 2,000,000 2,084,500
Mass DFA Williston School 6.000 10/1/2013 225,000 239,731
Mass HEFA Lahey Clinic Medical Center FGIC 5.000 8/15/2014 1,000,000 1,085,600
Mass HEFA Partners NCL 5.000 7/1/2012 1,250,000 1,345,300
Michigan State Hospital Finance Authority 5.250 11/15/2010 1,000,000 1,069,140
New Hampshire HEFA Monadnock Hospital 5.250 10/1/2007 280,000 284,511
New Mexico State Hospital Equipment Loan Revenue
Presbyterian Healthcare Services 5.750 8/1/2012 1,000,000 1,132,480
New York Medical Center St. Luke's FHA 5.600 8/15/2013 200,000 205,450
Oregon State Department Transit Highway User Tax Revenue NCL 5.000 11/15/2013 1,000,000 1,095,480
University of Massachusetts Building Authority Revenue AMBAC 5.000 11/1/2013 1,000,000 1,089,250
Wisconsin State Transportation 5.500 7/1/2010 15,000 16,340
------------
18,063,275
------------
Special Revenues--3.9%
California State Economic Recovery 5.250 7/1/2012 1,500,000 1,653,450
California State Economic Recovery 3.500 7/1/2023 1,000,000 1,011,440
California State Economic Recovery NCL 5.250 7/1/2014 1,000,000 1,109,260
Jicarilla NM Apache Nation Revenue 5.000 9/1/2013 500,000 526,990
------------
4,301,140
------------
TOTAL BONDS (Cost $106,224,348) 107,344,272
------------
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.7%
Short-Term Bonds--0.7%
Illinois DFA Revenue (d) 2.810% 9/1/2032 $100,000 $ 100,000
Indiana Health Facility Financing Authority (d) 2.980 3/1/2030 700,000 700,000
------------
800,000
------------
Shares
------
Investment Companies--0.0%
Wells Fargo National Tax-Free Money Market Fund (Cost $1,916) 2.49% 1,916 1,916
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $801,916) 801,916
------------
TOTAL INVESTMENTS--98.9% (Cost $107,026,264) 108,146,188
------------
OTHER ASSETS, LESS LIABILITIES--1.1% 1,167,774
------------
NET ASSETS--100% $109,313,962
============
Notes to Schedule of Investments:
AMBAC--American Municipal Bond Assurance Corp.
AMT--Alternative Minimum Tax
CIFG--CDC IXIS Financial Guaranty
COP--Certification of Participation
DFA--Development Finance Authority
EDA--Economic Development Authority
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Authority
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
TOB--Tobacco
VA--Veterans Administration
(a) Zero coupon security.
(b) Variable Rate Security; rate indicated is as of 9/30/2005.
(c) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(d) Variable rate securities that reset monthly or more frequently and have put
features that can be exercised within 7 days.
At September 30, 2005, the Fund held the following open swap agreement:
Interest Rate Swaps Floating Pay/Receive Expiration Notional Unrealized
Counterparty Rate Index Floating rate Fixed rate Date Amount Appreciation
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan USD-Floating-TBMA-Muni Swap Index Receive 3.709% 2/22/2016 $4,100,000 $ 13,782
=========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (cost $107,026,264) $108,146,188
Interest receivable 1,365,407
Swap contracts, at value (Note 6) 13,782
Prepaid expenses 21,507
------------
Total assets 109,546,884
Liabilities
Payable for Fund shares redeemed $ 123,284
Distributions Payable 74,352
Accrued accounting, custody, administration and transfer agent fees (Note 2) 10,138
Accrued trustees' fees and expenses (Note 2) 5,150
Accrued professional fees 17,989
Other accrued expenses and liabilities 2,009
----------
Total liabilities 232,922
------------
Net Assets $109,313,962
============
Net Assets consist of:
Paid-in capital $108,289,010
Accumulated net realized (loss) (126,863)
Undistributed net investment income 18,109
Net unrealized appreciation 1,133,706
------------
Total Net Assets $109,313,962
============
Shares of beneficial interest outstanding 5,034,577
------------
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $21.71
============
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $ 4,365,869
Expenses
Investment advisory fee (Note 2) $ 441,705
Accounting, custody, administration and transfer agent fees (Note 2) 134,789
Registration fees 22,992
Professional fees 39,239
Trustees' fees and expenses (Note 2) 23,578
Insurance expense 6,921
Miscellaneous expenses 14,798
-----------
Total expenses 684,022
Deduct:
Waiver of investment advisory fee (Note 2) (187,055)
-----------
Net expenses 496,967
-----------
Net investment income 3,868,902
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities (72,673)
Swap contracts (54,200)
-----------
Net realized gain (loss) (126,873)
Change in unrealized appreciation (depreciation) on:
Investment securities (1,397,075)
Swap contracts 33,466
-----------
Net change in net unrealized appreciation (depreciation) (1,363,609)
-----------
Net realized and unrealized gain (loss) on investments (1,490,482)
-----------
Net Increase in Net Assets from Operations $ 2,378,420
===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, September 30,
2005 2004
-------------- --------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 3,868,902 $ 3,099,510
Net realized gain (loss) (126,873) 340,187
Change in net unrealized appreciation (depreciation) (1,363,609) (1,182,126)
-------------- --------------
Net increase (decrease) in net assets from investment operations 2,378,420 2,257,571
-------------- --------------
Distributions to Shareholders (Note 1C)
From net investment income (3,868,902) (3,101,811)
From net realized gains on investments (224,030) (1,895,222)
-------------- --------------
Total distributions to shareholders (4,092,932) (4,997,033)
-------------- --------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 23,387,266 69,591,991
Value of shares isued to shareholders in reinvestment of distributions 3,132,979 3,848,008
Cost of shares redeemed (27,378,355) (29,319,017)
-------------- --------------
Net increase (decrease) in net assets from Fund share transactions (858,110) 44,120,982
-------------- --------------
Total Increase (Decrease) in Net Assets (2,572,622) 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 $18,109 and $18,107) $ 109,313,962 $ 111,886,584
============== ==============
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
--------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period $ 22.05 $ 22.78 $ 22.78 $ 22.04 $ 21.11
-------- -------- -------- -------- --------
From Investment Operations:
Net investment income*(a) 0.77 0.69 0.81 0.90 0.93
Net realized and unrealized gains (loss) on investments (0.29) (0.08) 0.07 0.74 0.93
-------- -------- -------- -------- --------
Total from operations 0.48 0.61 0.88 1.64 1.86
-------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.77) (0.71) (0.81) (0.90) (0.93)
From net realized gains on investments (0.05) (0.63) (0.07) -- --
-------- -------- -------- -------- --------
Total distributions to shareholders (0.82) (1.34) (0.88) (0.90) (0.93)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 21.71 $ 22.05 $ 22.78 $ 22.78 $ 22.04
======== ======== ======== ======== ========
Total Return (b) 2.18% 2.76% 3.88% 7.65% 9.00%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.45% 0.50% 0.65% 0.65% 0.62%
Net Investment Income (to average daily net assets)* 3.50% 3.16% 3.58% 4.09% 4.30%
Portfolio Turnover 35% 72% 42% 17% 43%
Net Assets, End of Year (000's omitted) $109,314 $111,887 $ 70,505 $ 82,162 $ 82,358
- -------------
* 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 (a) $ 0.73 $ 0.65 $ 0.80 $ 0.90 N/A
Ratios (to average daily net assets):
Expenses * 0.62% 0.68% 0.68% 0.66% N/A
Net investment income * 3.33% 2.97% 3.55% 4.08% N/A
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 market 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 on the trade date. Interest income is
determined on the basis of coupon interest earned, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method.
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,
are 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. Book-tax differences
are primarily due to futures transactions, swap agreements, prior period
premium and discount on debt securities, market discount, capital loss
carryforwards and losses deferred due to wash sales and excise tax
regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (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 among Funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
14
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 monthly 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 September
30, 2005. Pursuant to this agreement, for the period ended September 30,
2005, Standish Mellon voluntarily waived a portion of its advisory fee in
the amount of $187,055. This agreement is voluntary and temporary and may
be discontinued or revised by Standish Mellon 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
Mellon Financial Corporation and, an affiliate of Standish Mellon, to
provide personnel and facilities to perform transfer agency services for
the Fund. For these services, the Fund pays Dreyfus Transfer, Inc. a fixed
fee plus asset and transaction based fees, as well as, out-of-pocket
expenses. Pursuant to this agreement the Fund was charged $16,332 during
the period ended September 30, 2005.
The Fund has contracted with 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 was charged $118,457 during the period
ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of Standish Mellon or its
affiliates received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
investments, for the period ended September 30, 2005 were $41,373,294 and
$37,842,512, respectively. For the period ended September 30, 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
Year Ended Year Ended
September 30, September 30,
2005 2004
---------- ----------
Shares sold 1,068,583 3,137,202
Shares issued to shareholders in reinvestment of distributions 143,147 174,989
Shares redeemed (1,251,493) (1,332,957)
---------- ----------
Net increase (decrease) (39,763) 1,979,234
========== ==========
At September 30, 2005, the Fund had one shareholder of record owning
approximately 63% of the Fund's outstanding shares. 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
7 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 September 30, 2005, the Fund received
no redemption fees.
15
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 tax basis components of distributable earnings and the federal tax cost
as of September 30, 2005, was as follows:
Unrealized appreciation $ 1,846,821
Unrealized depreciation (726,897)
-------------
Net unrealized appreciation/depreciation 1,119,924
Undistributed tax exempt income 336,005
-------------
Total distributable earnings $ 1,455,929
=============
Cost for federal income tax purposes $ 107,026,264
Tax character of distributions paid during the fiscal years ended September
30, 2005 and September 30, 2004 were as follows:
Distributions paid from: 2005 2004
----------- -----------
Tax-exempt income $ 3,866,264 $ 3,098,871
Ordinary income 2,638 139,388
Capital gains-long term 224,030 1,758,774
At September 30, 2005, the Fund, for federal income tax purposes, has
capital loss carryovers which will reduce the Fund's taxable income arising
from net realized gain on investments, if any, to the extent permitted by
the Internal Revenue Code and thus will reduce the amount of distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal income tax. Such capital loss carryovers are as
follows:
Capital Loss
Carry Over Expiration Date
---------- ---------------
$25,970 9/30/2013
The Fund elected to defer to its fiscal year ending September 30, 2006
$100,903 of losses recognized during the period November 1, 2004 to
September 30, 2005.
(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 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 September 30, 2005, the Fund did not hold any outstanding futures
contracts.
16
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 payment in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a
particular corporate or sovereign issuer's default. In connection with
these agreements, cash or securities may be set aside as collateral in
accordance with the terms of the swap agreement. The Fund earns interest on
cash set aside as collateral. Swaps are marked to market daily based upon
quotations from market makers and change in value, if any, is recorded as
unrealized gain or loss in the Statement of Operations. These financial
instruments are not actively traded on financial markets. The values
assigned to these instruments are based upon the best available information
and because of the uncertainty of the valuation, these values may differ
significantly from the values that would have been realized had a ready
market for these instruments existed, and differences could be material.
Payments received or made from credit default swaps at the end of the
measurement period are recorded as realized gain or loss in the Statement
of Operations. Net payments of interest on interest rate swap agreements
are included as part of realized gain in the Statement of Operations.
Entering into these agreements involves, to varying degrees, elements of
credit, market, and documentation risk in excess of the amounts recognized
on the Statement of Assets and Liabilities. Such risks involve the
possibility that there will be no liquid market for these agreements, that
the counterparty to the agreements may default on its obligation to perform
or disagree as to the meaning of contractual terms in the agreements, and
that there may be unfavorable changes in interest rates.
At September 30, 2005, the Fund had an interest rate swap agreement
outstanding. See Schedule of Investments for further 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 September 30, 2005, the Fund did not hold 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 0.060 of 1% on the committed amount, is
allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended September 30, 2005, the expense related
to the facility fee was $2,108 for the Fund.
During the period ended September 30, 2005, the Fund had average borrowings
outstanding of $186,714 on a total of 14 days and incurred $200 of interest
expense.
17
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of Standish Mellon Intermediate Tax Exempt Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Standish Mellon Intermediate Tax
Exempt Bond Fund (the "Fund") at September 30, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
18
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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 September 30, 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
Term Portfolios Remuneration
of Office Principal in Fund Other (period
Name Position(s) and Occupation(s) Complex Directorships ended
Address, and Held Length of During Past Overseen by Held by September 30,
Date of Birth with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, Decision 33 None $299
c/o Decision Resources, Inc. since Resources, Inc. ("DRI")
260 Charles Street 11/3/1986 (biotechnology research and
Waltham, MA 02453 9/30/40 consulting firm); formerly
Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street Associates since Associates (family
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph Maier, 33 None $299
c/o Harvard University since Professor of Political
Littaver Center 127 9/13/1989 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, Mertens 33 None $299
P.O. Box 2333 since House, Inc. (hospice)
New London, NH 03257 11/3/1986
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon Institutional President Operating Officer of The
Asset Management and Chief Boston Company Asset
One Boston Place Executive Management, LLC; formerly
Boston, MA 02108 Officer Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Institutional Asset
Management ("MIAM") and Vice
President and Chief
Financial Officer, MIAM
19
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
Mellon Institutional and Secretary Operations, Mellon Institutional Asset
Asset Management Management; formerly First Asset
One Boston Place Management Vice President, Mellon
Boston, MA 02108 Institutional and Mellon Global
2/20/61 Investments
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds
Mellon Institutional and Treasurer since 1999; Controller, Mellon Institutional Asset
Asset Management Treasurer Management
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual
Mellon Institutional President Funds Operations, 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
Asset Management Institutional Asset Management;
One Boston Place formerly Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon
Mellon Institutional Compliance Institutional Asset Management and
Asset Management Officer Chief Compliance Officer, Mellon Funds
One Boston Place Distributor; formerly Director,
Boston, MA 02108 Blackrock, Inc., Senior Vice
4/8/57 President, State Street Research &
Management Company ("SSRM"),
Vice President, SSRM
20
THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6933AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
International Small Cap Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
The Boston Company International Small Cap Fund's return for the twelve months
ending September 30, 2005, after all expenses, was 40% compared to a return of
33% for the S&P Citigroup EMI ex. U.S. index. The Fund's return exceeds the
benchmark by solid margins for all measurement periods since inception.
All markets in the index were up more than 19% for the year (measured in U.S.
dollars). South Korea was the best market with a 92% return due to strength in
shipping and ship building - both benefiting from the trade flows to and from
China. Three other markets were up more than 60% - Austria, Norway, and Denmark.
Belgium was the relative laggard despite posting a return of 19%.
From an economic sector perspective, it was another excellent year for energy
stocks (+72%), with all other sectors far behind. Utilities and Health Care both
rose 41% to end in a virtual tie for second place. Everysector rose at least 20%
with Consumer Discretionary coming in `last' despite gaining nearly 22%.
The Fund outperformed the index during the period due to our process of
disciplined stock selection. Contribution to the positive relative performance
was broad based. The Fund had positive stock selection versus the benchmark in
17 of 23 countries. More impressively, the Fund outperformed the benchmark in
all10 economic sectors. The best relative results came from the Materials sector
where the Fund's holdings rose53% compared to the index's 29% gain.
The global economy continues to grow, but investors are beginning to worry about
inflationary pressures (primarily from oil, other commodities, health care and
housing). Central banks have stopped the easing cycle that began after the
recession and terror attacks early in the decade, and in some cases have begun
to raise rates (the U.S. Federal Reserve has been doing so for some time).
International markets have seen several years of strong returns with very little
volatility. We remain cautiously optimistic over the longer term, but will not
be surprised if volatility returns in the short term. Regardless of the
environment, we continue to manage the Fund as we always have: investing in
stocks of companies that are attractively valued and exhibit improving business
momentum.
/s/ Daniel LeVan /s/ John Evers
Daniel LeVan John Evers
2
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
International Small Cap Fund and the S&P/CitiGroup EMI ex-US Index
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
TBC
PERIOD International Small Cap Fund* S&P/CitiGroup EMI ex-US Index**
1/2/96 100,000 100,000
3/31/96 109,123 105,749
6/30/96 117,983 110,430
9/30/96 118,543 107,926
12/31/96 125,933 107,252
3/31/97 129,050 105,282
6/30/97 144,933 112,854
9/30/97 147,408 108,293
12/31/97 127,767 97,169
3/31/98 155,480 113,889
6/30/98 158,609 113,482
9/30/98 125,511 96,294
12/31/98 140,652 108,974
3/31/99 153,742 110,537
6/30/99 175,694 117,335
9/30/99 193,860 123,317
12/31/99 198,510 134,589
3/31/00 209,392 137,313
6/30/00 216,061 134,909
9/30/00 209,758 127,805
12/31/00 206,590 120,693
3/31/01 187,102 107,833
6/30/01 200,450 111,111
9/30/01 173,819 93,990
12/31/01 186,603 101,743
3/31/02 200,107 107,859
6/30/02 214,854 110,023
9/30/02 183,192 90,638
12/31/02 188,962 94,331
3/31/03 184,006 89,984
6/30/03 220,557 110,871
9/30/03 250,227 125,461
12/31/03 290,189 145,012
3/31/04 323,359 158,667
6/30/04 328,584 160,049
9/30/04 333,397 160,156
12/31/04 386,554 186,692
3/31/05 405,759 193,677
6/30/05 409,551 192,548
9/30/05 467,418 213,755
Average Annual Total Returns
(for period ended 9/30/2005)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 1/2/1996*
- --------------------------------------------------------------------------------
Fund 40.20% 36.65% 17.38% 17.15%
* Combined LP & MF Performance
** Source: Bloomberg Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- ---------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,152.00 $6.26(1)
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.25 $5.87(1)
- ---------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.16%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
(1) The example reflects the expenses of the Fund and the master portfolio in
which the Fund invests all of its assets.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- ----------------------------------------------------------------------------------------------
Trican Well Service Ltd. Canada Energy 1.3%
Elekta AB Sweden Consumer Noncyclical 1.0
Nippon Shokubai Ltd. Japan Basic Materials 1.0
Erg Spa Italy Energy 1.0
Home Capital Group, Inc. Canada Financial 0.9
Mitsubishi Gas Chemical Co., Inc. Japan Basic Materials 0.9
Immobiliaria Urbis SA Spain Financial 0.9
Hyundai Mipo Dockyard South Korea Industrial 0.9
IPSCO, Inc. Canada Basic Materials 0.9
Koninklijke BAM Groep NV Netherlands Industrial 0.9
----
9.7%
* Excluding short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------------------------
Europe ex U.K. 43.0%
U.K. 19.1
Asia ex Japan 11.0
Japan 20.1
Americas ex U.S. 6.8
-----
100.0%
* Excluding short-term securities and investment of cash collateral.
The Boston Company International 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.
5
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International Small Cap Portfolio
("Portfolio"), at value (Note 1A) $517,329,189
Receivable for Fund shares sold 8,116,521
Prepaid expenses 17,590
------------
Total assets 525,463,300
Liabilities
Payable for Fund shares redeemed $500,785
Accrued transfer agent fees (Note 2) 573
Accrued professional fees 28,893
Accrued trustees' fees (Note 2) 500
Accrued expenses and other liabilities 22,694
--------
Total liabilities 553,445
------------
Net Assets $524,909,855
============
Net Assets consist of:
Paid-in capital $375,225,748
Accumulated net realized gain 29,495,041
Undistributed net investment income 1,355,309
Net unrealized appreciation 118,833,757
------------
Total Net Assets $524,909,855
============
Shares of beneficial interest outstanding 25,190,425
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.84
============
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net foreign witholding taxes $909,722) $ 8,139,809
Interest income allocated from Portfolio 490,933
Expenses allocated from Portfolio (3,987,407)
------------
Net investment income (loss) allocated from Portfolio 4,643,335
Expenses
Transfer agent fees (Note 2) $29,467
Registration fees 53,113
Professional fees 53,835
Shareholder reports 13,000
Insurance expense 975
Trustees' fees (Note 2) 2,482
Miscellaneous expenses 5,647
-------
Total expenses 158,519
------------
Net investment income 4,484,816
------------
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 27,275,211
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments securities, futures contracts, foreign currency
exchange contracts and foreign currency transactions 86,395,650
------------
Net realized and unrealized gain (loss) on investments 113,670,861
------------
Net Increase in Net Assets from Operations $118,155,677
============
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 4,484,816 $ 1,371,273
Net realized gain (loss) 27,275,211 18,477,139
Change in net unrealized appreciation (depreciation) 86,395,650 15,364,375
------------ ------------
Net increase (decrease) in net assets from investment operations 118,155,677 35,212,787
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (3,076,387) (1,083,002)
From net realized gains on investments (15,292,137) --
------------ ------------
Total distributions to shareholders (18,368,524) (1,083,002)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 220,193,096 102,193,352
Value of shares issued in reinvestment of distributions 16,901,362 859,847
Redemption fees credited to capital 6,450 1,605
Cost of shares redeemed (24,010,618) (14,722,174)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 213,090,290 88,332,630
------------ ------------
Total Increase (Decrease) in Net Assets 312,877,443 122,462,415
Net Assets
At beginning of period 212,032,412 89,569,997
------------ ------------
At end of period (including undistributed net
investment income of $1,355,309 and $949,027) $524,909,855 $212,032,412
============ ============
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 15.93 $ 12.05 $ 8.91 $ 8.55 $ 10.65
From Operations:
Net investment income (loss)* (a) 0.23 0.14 0.10 0.09 0.11
Net realized and unrealized gains (loss) on investments 5.86 3.86 3.13 0.38 (1.89)
-------- -------- -------- ------- -------
Total from operations 6.09 4.00 3.23 0.47 (1.78)
-------- -------- -------- ------- -------
Less Distributions to Shareholders:
From investment income (0.17) (0.12) (0.09) (0.11) (0.08)
From net realized gains on investments (1.01) -- -- -- (0.24)
-------- -------- -------- ------- -------
Total distributions to shareholders (1.18) (0.12) (0.09) (0.11) (0.32)
-------- -------- -------- ------- -------
Net Asset Value, End of Year $ 20.84 $ 15.93 $ 12.05 $ 8.91 $ 8.55
======== ======== ======== ======= =======
Total Return 40.20% 33.35% 36.47%(b) 5.39%(b) (17.13)%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)*(c) 1.16% 1.27% 1.39% 1.25% 1.25%
Net Investment Income (to average daily net assets)* 1.26% 0.99% 1.01% 0.96% 1.10%
Portfolio Turnover N/A N/A 15%(d) 69%(d) 89%(d)
Net Assets, End of Period (000's omitted) $524,910 $212,032 $89,570 $33,770 $22,386
- -------------------
* 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 (a) N/A N/A $ 0.08 $ 0.04 $ 0.04
Ratios (to average daily net assets):
Expenses (c) N/A N/A 1.65% 1.82% 1.98%
Net investment income N/A N/A 0.75% 0.39% 0.37%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 23, 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.
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 (79% at September
30, 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 Portfolio
values its securities at value as 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 among Funds of
the Trust 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.
10
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 was charged
$29,467 during the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of TBCAM or its affiliates
received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended September 30, 2005, aggregated $229,210,646 and $42,025,011,
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.
(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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Shares sold 12,160,695 6,808,462
Shares issued to shareholders in
reinvestment of distributions 1,026,030 60,513
Shares redeemed (1,306,673) (989,803)
---------- --------
Net increase 11,880,052 5,879,172
========== =========
At September 30, 2005, two shareholders of record held approximately 34% 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
30 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 September 30, 2005, the Fund received
$6,450 in redemption fees.
11
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
As of September 30, 2005, the components of distributable earnings on a
tax basis were as follows:
Undistributed ordinary income $ 9,109,740
Undistributed capital gains $21,723,519
Tax character of distributions paid during the fiscal years ended
September 30, 2005 and September 30, 2004, were as follows:
Distributions paid from: 2005 2004
----------- ----------
Ordinary income $ 7,466,103 $1,083,002
Capital gains-long term $10,902,421 --
See the Portfolio's financial statements included elsewhere in this report
for tax basis unrealized appreciation/(depreciation) information.
12
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company International Small Cap Fund:
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Boston Company International Small Cap Fund ( the "Fund") at September 30,
2005, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
13
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.8%
EQUITIES--96.8%
Australia--3.5%
APN News & Media Ltd. 453,760 $ 1,729,960
Caltex Australia Ltd. 287,070 4,491,641
Cochlear Ltd. 99,710 2,981,092
Downer EDI Ltd. 426,600 1,964,706
Oil Search Ltd. 1,288,350 3,801,760
Oxiana Ltd. (b) 2,482,600 2,536,597
Perpetual Trustees Australia Ltd. 60,730 3,137,274
Sims Group Ltd. 146,530 2,134,026
-----------
22,777,056
-----------
Austria--0.8%
Boehler-Uddeholm 29,410 4,946,291
-----------
Belgium--0.7%
Colruyt SA 13,754 1,787,903
NV Union Miniere SA 27,460 2,993,883
-----------
4,781,786
-----------
Canada--6.6%
Astral Media, Inc. 99,600 2,930,219
Ensign Resource Service Group, Inc. 134,200 4,576,523
Gildan Activewear, Inc. (b) 98,900 3,771,956
Home Capital Group, Inc. 185,300 5,981,021
Inmet Mining Corp. (b) 281,700 5,055,470
IPSCO, Inc. 77,800 5,535,331
Kingsway Financial Services Inc. 122,300 2,194,831
Northbridge Financial 180,100 4,937,326
Trican Well Service Ltd. (b) 237,600 8,652,828
-----------
43,635,505
-----------
Denmark--1.6%
Bang & Olufsen A/S 23,900 2,059,416
GN Store Nord A/S 244,800 3,233,089
Jyske Bank A/S (b) 107,100 5,407,784
-----------
10,700,289
-----------
Finland--2.6%
Nokian Renkaat OYJ 127,000 3,007,308
OKO Bank (OKO Osuuspankkien Keskuspankki Oyi) 109,200 1,797,342
Rautaruukki Oyj 205,200 4,607,595
Wartsila Oyj B Shares 115,050 3,662,858
YIT-Yhtyma Oyj 88,300 3,744,752
-----------
16,819,855
-----------
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--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------- -------------
France--9.1%
Alten (b) 116,920 $ 3,775,771
April Group 55,460 1,965,575
Ciments Francais (a) 22,750 2,637,524
Clarins SA 44,686 2,923,190
CNP Assurances 34,340 2,302,089
Eiffage (a) 46,313 4,331,608
Elior (a) 266,300 3,695,224
Euler Hermes SA (a) 55,860 4,972,866
Generale de Sante 93,460 3,378,591
Iliad SA 69,900 3,871,379
Imerys SA 32,960 2,445,185
Lagardere SCA 26,740 1,897,007
Natexis Banques Populaires 24,600 3,709,082
Nexans SA 46,430 2,144,780
Publicis Groupe 58,700 1,867,427
SR Teleperformance 80,250 2,522,147
Vallourec 10,650 5,188,336
Vinci SA (a) 46,340 3,988,962
Zodiac SA 37,200 2,194,381
-----------
59,811,124
-----------
Germany--4.4%
Continental AG 59,140 4,852,769
Deutsche Boerse AG 37,170 3,550,155
Deutsche Postbank AG 81,290 4,444,589
Hypo Real Estate Holding 46,890 2,369,393
Leoni AG 86,390 2,771,165
Mobilcom AG 68,430 1,574,356
MPC Capital AG 24,600 2,018,568
Software AG 60,460 2,818,302
Stada Arzneimittel AG 64,460 2,307,779
Wincor Nixdorf AG 21,320 2,049,108
-----------
28,756,184
-----------
Greece--0.4%
Folli-Follie 90,000 2,694,500
-----------
Hong Kong--3.4%
China Overseas Land & Investment Ltd. 9,168,000 2,747,776
Hengan International Group Co., Ltd. 3,999,400 3,815,139
Kerry Properties Ltd. 950,700 2,408,185
Orient Overseas International Ltd. 642,700 2,402,648
Skyworth Digital Holdings Ltd. (c) 2,962,000 381,829
Solomon Systech (Intl) 9,488,900 3,424,977
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------
Hong Kong (continued)
Television Broadcasts Ltd. 315,000 $ 1,926,773
Wing Hang Bank Ltd. 304,400 2,240,601
Xinao Gas Holdings Ltd. 4,024,000 3,164,256
-----------
22,512,184
-----------
Ireland--0.8%
Fyffes PLC 1,048,800 3,200,472
Grafton Group PLC (b) 237,570 2,397,499
-----------
5,597,971
-----------
Italy--4.1%
Banca Popolare di Milano Scarl (BPM) 188,500 1,930,605
Banco Popolare di Verona e Novara 195,060 3,676,874
Davide Campari-Milano Spa 366,050 2,744,180
Erg Spa 226,080 6,247,088
Fondaria-Sai Spa 95,040 2,883,072
Milano Assicurazioni Spa 559,650 3,953,497
Pirelli & C Real Estate 63,420 3,779,162
Recordati Spa 256,340 1,952,510
-----------
27,166,988
-----------
Japan--19.8%
CMK Corp. (a) 107,500 1,784,248
Cosmo Oil Co., Ltd. 628,000 3,402,520
Dainippon Screen Manufacturing Co., Ltd. 379,900 2,480,010
Fancl Corp. (b) 41,800 2,069,562
Futaba Industrial Co., Ltd. 90,800 1,987,824
Hamamatsu Photonics KK 92,400 2,132,746
Hisamitsu Pharamaceutical 81,300 2,170,196
Hitachi Construction Machinery Co., Ltd. 155,900 2,980,381
Hitachi High-Technologies Corp. 146,500 2,607,082
Izumi Co. Ltdronics, Inc. (a) 88,900 2,373,068
Kawasaki Kisen Kaisha Ltd. 332,200 2,396,897
Keihin Corp. 272,000 5,463,483
Kenedix, Inc. 937 3,120,307
Koito Manufacturing Co. 330,000 4,070,126
Koyo Seiko Co., Ltd. 181,000 2,729,909
Kyowa Exeo Corp. 380,000 3,642,322
Makita Corp. 157,000 3,181,218
Mitsubishi Gas Chemical Co., Inc. 881,800 5,888,507
Nippon Shokubai Ltd. 640,000 6,771,562
Nisshin Seifun Group, Inc. 247,600 2,405,980
Nisshin Steel Co., Ltd. 1,579,900 5,456,090
NTN Corp. 331,000 1,979,993
OSG Corp. 207,600 3,125,614
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------
Japan (continued)
Otsuka Corp. 46,300 $ 4,507,224
Plenus Co., Ltd. 92,600 3,181,570
Ricoh Leasing Co., Ltd. 160,800 4,476,504
Ryohin Keikaku 39,000 2,511,585
Santen Pharmaceutical Co., Ltd. 153,700 3,980,953
Sanwa Shutter Corp. 423,000 2,541,503
Sanyo Shinpan Finance Co., Ltd. 55,600 4,516,184
Sodick Co., Ltd. 281,400 3,889,671
Sumisho Lease Co., Ltd. 109,600 4,576,725
Sumitomo Forestry Co., Ltd. 307,000 3,113,003
Sumitomo Rubber Industries, Inc. 325,000 3,862,435
Sysmex Corp. 140,800 4,874,848
Toshiba Machine Co., Ltd. 441,000 3,244,075
Tsuruha Co., Ltd. 80,900 3,171,571
Urban Corp. 65,400 3,232,262
------------
129,899,758
------------
Netherlands--4.3%
Aalberts Industries NV 67,420 3,567,979
ASM International NV (b) 97,780 1,374,433
Axalto Holding NV (b) 73,690 2,702,857
Buhrmann NV 272,150 3,285,958
DSM NV 57,900 2,273,951
Koninklijke BAM Groep NV 60,050 5,511,807
SBM Offshore NV 34,740 2,896,523
Stork NV 99,400 4,920,069
Wolters Kluwer NV 81,270 1,511,433
------------
28,045,010
------------
Norway--0.7%
Tandberg Television ASA (b) 364,100 4,738,569
------------
Portugal--0.8%
Banco BPI SA 532,850 2,368,614
Jeronimo Martins SGPS, SA 183,160 2,640,581
------------
5,009,195
------------
Singapore--1.2%
First Engineering Ltd. 2,080,800 1,611,021
Jurong Technologies Industrial 3,396,300 4,134,975
MobileOne Ltd. 1,791,600 2,096,553
------------
7,842,549
------------
South Korea--2.8%
Dongbu Insurance Co., Ltd. 235,300 3,416,518
Hanjin Shipping Corp. 96,300 2,251,984
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------
South Korea (continued)
Honam Petrochemical Corp. 45,400 $ 2,262,603
Hyundai Mipo Dockyard 77,200 5,549,166
Intops Co., Ltd. 88,800 1,893,617
Pusan Bank 252,200 2,743,406
-----------
18,117,294
-----------
Spain--4.1%
ACS Actividades 139,870 4,074,966
Bancon de Sabadell SA 139,960 3,578,188
Ebro Puleva SA 103,920 1,860,257
Enagas 160,090 2,875,365
Fadesa Immobiliaria SA 114,260 4,104,432
Immobiliaria Urbis SA 258,910 5,832,271
Indra Sistemas SA 126,790 2,779,940
Red Electrica de Espana 64,690 1,845,816
-----------
26,951,235
-----------
Sweden--2.4%
Elekta AB 148,259 6,793,059
Eniro AB 166,300 1,942,481
Lindex AB 39,900 2,067,638
Nobia AB 168,000 2,829,670
WM-Data AB 800,000 2,158,004
-----------
15,790,852
-----------
Switzerland--4.0%
Banque Cantonale Vaudoise (BCV) 9,800 2,774,799
Charles Voegele Holding AG 32,900 2,681,513
Hiestand Holding AG 2,530 1,954,574
Logitech International SA (b) 80,890 3,271,471
Micronas Semiconductor Holdings (b) 67,440 2,881,205
Rieter Holding AG 5,960 1,743,935
Sika AG (b) 5,000 3,808,714
Sulzer AG 5,000 2,533,993
Syngenta AG (b) 28,750 3,009,599
The Swatch Group AG, Shares B 14,500 1,997,335
-----------
26,657,138
-----------
United Kingdom--18.7%
Admiral Group PLC 264,100 1,978,162
Alliance Unichem PLC 192,600 2,941,232
Barratt Developments PLC 161,920 2,155,954
British Airways PLC (b) 499,900 2,579,197
BSS Group PLC 382,600 1,908,253
Carillion PLC 561,560 2,622,687
Charter PLC (b) 345,010 2,462,585
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------
United Kingdom (continued)
Close Brothers Group PLC 236,860 $ 3,471,031
CSR PLC (b) 270,300 3,182,196
Daily Mail and General Trust 136,150 1,583,675
Eircom Group PLC 1,552,550 3,655,858
EMAP PLC 208,200 3,019,848
Enterprise Inns PLC 253,600 3,765,509
First Choice Holidays PLC 442,514 1,651,410
FirstGroup PLC 456,720 2,656,247
Friends Provident PLC 548,430 1,807,454
Greene King PLC 223,700 2,521,222
Greggs PLC 23,750 2,004,950
Hays PLC 907,560 1,963,366
iSOFT Group PLC 259,956 1,979,191
Inchcape PLC 93,300 3,599,415
International Power PLC 530,000 2,321,169
Kelda Group PLC 161,290 1,996,909
Kier Group PLC 190,410 3,573,912
Laird Group PLC 297,180 1,931,328
McCarthy & Stone PLC 180,630 1,967,355
Morgan Sindall PLC 153,200 2,308,497
Northgate Information Solutions PLC (b) 1,283,330 1,826,356
Northgate PLC 168,646 3,358,605
Peacock Group PLC 374,840 2,104,068
Persimmon PLC 138,510 2,094,464
Premier Foods PLC 353,300 1,909,997
Restaurant Group PLC 1,055,280 2,361,978
Rexam PLC 324,780 2,944,958
Schroders PLC 135,850 2,212,260
Shire Pharmaceuticals Group PLC 224,160 2,723,936
SIG PLC 296,630 3,837,210
Speedy Hire PLC 316,030 4,244,121
Sportingbet PLC (b) 292,650 1,625,489
Stagecoach Group PLC 1,246,100 2,454,172
The Carphone Warehouse PLC 1,083,430 3,799,780
Tullow Oil PLC 1,045,970 4,792,886
Ultra Electronics Holdings 161,720 2,667,743
United Business Media PLC 170,743 1,665,578
Victrex PLC 250,190 2,638,995
Viridian Group PLC (b) 165,565 2,316,827
WH Smith PLC 343,190 2,041,328
Yell Group PLC 197,280 1,662,810
------------
122,892,173
------------
Total Equities (Cost $505,600,302) 636,143,506
------------
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------
PREFERRED STOCKS--1.4%
Fresenius AG 22,100 $ 3,063,978
Henkel KGaA 36,000 3,272,758
Rheinmetall AG NPV 38,840 2,566,431
-----------
TOTAL PREFERRED STOCKS (Cost $7,396,180) 8,903,167
-----------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.1%
U.S. Treasury Bill (d) (e)
(Cost $710,054) 3.32% 12/15/05 $ 715,000 710,305
-------
INVESTMENT OF CASH COLLATERAL--1.5% Shares
---------
BlackRock Cash Strategies
L.L.C (Cost $9,868,886) 3.93% 9,868,886 9,868,886
------------
TOTAL UNAFFILIATED
INVESTMENTS--(Cost $523,575,422) 655,625,864
------------
AFFILIATED INVESTMENTS--4.1%
Dreyfus Institutional Preferred
Plus Money Market Fund (f)
(Cost $26,906,094) 3.73% 26,906,094 26,906,094
------------
TOTAL INVESTMENTS--103.9% (Cost $550,481,516) 682,531,958
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(3.9%) (25,301,386)
------------
NET ASSETS--100% $657,230,572
============
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at 9/30/05.
(b) Non-income producing security
(c) Security valued at fair value using methods determined in good faith by or
under the direction of the Board of Trustees.
(d) Denotes all or part of security segregated as collateral.
(e) Rate noted is yield to maturity.
(f) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
At September 30, 2005 the Portfolio held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date September 30, 2005 to Deliver Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------
Canadian Dollar 2,000,000 10/3/05 $ 1,721,467 $ 1,708,672 $ 12,795
Danish Krone 2,365,000 10/4/05 380,911 382,006 (1,095)
Euro 6,800,000 10/3/05 8,169,520 8,201,440 (31,920)
British Pound 1,400,000 10/4/05 2,467,360 2,478,700 (11,340)
Japanese Yen 605,000,000 10/4/05 5,329,927 5,344,523 (14,596)
Norwegian Krone 1,215,000 10/4/05 185,485 186,016 (531)
South Korean Won 675,200,680 10/4/05 644,890 646,806 (1,916)
Swedish Krona 1,000,000 10/3/05 129,067 128,758 309
Swedish Krona 3,050,000 10/4/05 393,655 394,567 (912)
Singapore Dollar 465,000 10/4/05 274,823 275,132 (309)
----------- ----------- --------
$19,697,105 $19,746,620 $(49,515)
=========== =========== ========
At September 30, 2005 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain/(Loss)
- -----------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (90 contracts) Long 12/19/05 $2,195,390 $34,205
Topix Futures (6 contracts) Long 12/9/05 744,516 23,467
-------
$57,672
=======
Percentage of
Economic Sector Allocation Net Assets
----------------------------------------------------------------------------------------
Basic Materials 8.7%
Communications 6.9
Consumer Cyclical 15.7
Consumer Noncyclical 12.4
Energy 5.9
Financial 19.3
Industrial 21.2
Technology 5.9
Utilities 2.2
Short-term and Net Other Assets 1.8
-----
100.0%
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)(including securities on loan, valued at
$9,392,321 (Note 6))
Unaffiliated issuers, at value (cost $523,575,422) $655,625,864
Affiliated issuers, at value (Note 1G) (cost $26,906,094) 26,906,094
Foreign currency, at value (identified cost, $11,330,529) 11,154,389
Receivable for investments sold 3,619,671
Interest and dividends receivable 953,819
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 13,104
Prepaid expenses 16,774
------------
Total assets 698,289,715
Liabilities
Payable for investments purchased $ 31,050,888
Collateral for securities on loan (Note 6) 9,868,886
Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 62,619
Payable for variation margin on open financial futures contracts (Note 5) 4,934
Accrued accounting, administration and custody fees (Note 2) 38,646
Accrued professional fees 24,318
Accrued trustees' fees and expenses (Note 2) 8,852
------------
Total liabilities 41,059,143
------------
Net Assets (applicable to investors' beneficial interest) $657,230,572
============
The accompanying notes are an integral part of the financial statements.
22
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $1,039,049) $ 9,384,309
Interest income (Note 1 G)
Unaffiliated issuers 281,909
Affiliated issuers 16,696
Securitiy lending income (Note 6) 256,224
-----------
Total investment income 9,939,138
Expenses
Investment advisory fee (Note 2) $ 4,069,597
Accounting, administration and custody fees (Note 2) 369,431
Professional fees 44,116
Trustees' fees and expenses (Note 2) 47,567
Insurance expense 8,800
Miscellaneous 10,769
-----------
Total expenses 4,550,280
-----------
Net investment income 5,388,858
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 30,214,639
Futures contracts 2,243,934
Foreign currency transactions and forward foreign currency exchange contracts (1,101,483)
-----------
Net realized gain 31,357,090
Change in unrealized appreciation (depreciation) on:
Investment securities 99,620,092
Futures contracts 120,684
Foreign currency transactions and forward foreign currency exchange contracts (285,634)
-----------
Change in net unrealized appreciation (depreciation) 99,455,142
------------
Net realized and unrealized gain (loss) 130,812,232
------------
Net Increase in Net Assets from Operations $136,201,090
============
The accompanying notes are an integral part of the financial statements.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income $ 5,388,858 $ 1,503,725
Net realized gain (loss) 31,357,090 18,879,636
Change in net unrealized appreciation (depreciation) 99,455,142 15,368,956
------------ ------------
Net increase (decrease) in net assets from operations 136,201,090 35,752,317
------------ ------------
Capital Transactions
Contributions 353,355,799 112,536,550
Withdrawals (51,694,287) (18,465,788)
------------ ------------
Net increase (decrease) in net assets from capital transactions 301,661,512 94,070,762
------------ ------------
Total Increase in Net Assets 437,862,602 129,823,079
Net Assets
At beginning of period
At end of period 219,367,970 89,544,891
------------ ------------
$657,230,572 $219,367,970
============ ============
The accompanying notes are an integral part of the financial statements.
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the period
January 28, 2003
Year Ended September 30, (commencement of
--------------------------------- operations) to
2005 2004 September 30, 2003
---------- ---------- ------------------
Total Return (a) 40.24% 33.42% 36.44%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 1.12% 1.20% 1.46%(c)
Net Investment Income (to average daily net assets)* 1.32% 1.06% 1.29%(c)
Portfolio Turnover 50% 72% 46%(b)
Net Assets, End of Year (000's omitted) $657,231 $219,368 $89,545
- ----------------
* For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory
fee and/ or reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the
ratios would have been:
Ratios (to average daily net assets):
Expenses N/A N/A 1.49%(c)
Net investment income N/A N/A 1.26%(c)
(a) Total return for the Portfolio has been calculated based on the total return for the invested Fund, assuming all distributions
were reinvested, and adjusted for the difference in expenses as set out in the notes to the financial statements. Total return
would have been lower in the absence of expense waivers.
(b) Not annualized.
(c) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
25
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 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 September 30, 2005, The Boston Company
International Small Cap Fund and the Dreyfus Premier International Small
Cap Fund held 79% and 21% 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 is then 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 earned, 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
26
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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.
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 are 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 September 30, 2005, the Portfolio paid $4,069,597 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 $369,431 during the period ended September 30, 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.
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. Pursuant to this
agreement Mellon Bank received $110,796, for the period ended September 30,
2005. See Note 6 for further details.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. No other director, officer or employee of TBCAM or its affiliates
received 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.
27
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended September 30, 2005 were $505,201,249 and
$196,573,251, respectively. For the period ended September 30, 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 September 30, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate cost $550,481,517
------------
Gross unrealized appreciation $134,878,292
Gross unrealized depreciation (2,827,851)
------------
Net unrealized appreciation $132,050,441
============
(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.
At September 30, 2005, the Portfolio did not enter into option
transactions.
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.
28
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 September 30, 2005, the Portfolio held forward currency exchange
contracts. See Schedule of Investments for further details.
Futures contracts
The Portfolio may enter into financial futures contracts for the 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 September 30, 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 September 30, 2005
and earned interest on the invested collateral of $675,586 of which,
$419,362 was rebated to borrowers or paid in fees. At September 30, 2005,
the Portfolio had securities valued at $9,392,321 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 September 30, 2005, the expense allocated to the Portfolio was
$4,752.
During the period ended September 30, 2005, the Portfolio did not use the
line of credit.
29
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Master Portfolio and Investors
of The Boston Company International Small Cap Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company International
Small Cap Portfolio ( the "Portfolio") at September 30, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the two years in the period then ended and the period from January 28, 2003 to
September 30, 2003, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, 33 None $299
c/o Decision Resources, since Decision Resources,
Inc. 11/3/1986 Inc. ("DRI")
260 Charles Street (biotechnology
Waltham, MA 02453 research and
9/30/40 consulting firm);
formerly Chairman of
the Board and Chief
Executive Officer,
DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street since Associates (family
Associates 11/3/1986 investment trust
P.O. Box 5600 office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph 33 None $299
c/o Harvard University since Maier, Professor of
Littaver Center 127 9/13/1989 Political Economy,
Cambridge, MA 02138 Harvard University
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, 33 None $299
P.O. Box 2333 since Mertens House, Inc.
New London, NH 03257 11/3/1986 (hospice)
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 33 None $0
Mellon Institutional and Chief Operating Officer of
Asset Management Executive Officer The Boston Company
One Boston Place Asset Management,
Boston, MA 02108 LLC; formerly Senior
7/24/65 Vice President and
Chief Operating
Officer, Mellon
Institutional Asset
Management ("MIAM")
and Vice President
and Chief Financial
Officer, MIAM
31
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 First
Asset Management Vice President, Mellon Institutional Asset Management
One Boston PLace 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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hulgren Assistant Vice Since 2001 Assistant Vice President and Compliance Manager,
Mellon Institutional President Mellon Institutional Asset Management ("MIAM");
Asset Management formerly Shareholder Services, MIAM and Shareholder
One Boston Place Representative, Standish Mellon Asset Management
Boston, MA 02108 Company LLC
1/19/71
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional Asset
Mellon Institutional Compliance Management and Chief Compliance Officer,
Asset Management Officer Mellon Funds Distributor; formerly Director,
One Boston PLace Blackrock, Inc. Senior Vice President, State Street
Boston, MA 02108 Research & Management Company ("SSRM"),
4/8/57 Vice President, SSRM
32
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6939AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
Small Cap Tax-Sensitive Equity Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
- --------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
In our commentary last year, terrorism and the upcoming elections were the focus
of our discussion. Now, energy prices, inflation fears, and interest rates are
at the forefront of investor concerns. However, despite these economic fears,
the equity markets continued to post healthy returns. Small-cap stocks continued
to perform well and outpaced their large-cap counterparts, buoyed by strong
profit growth and relatively low interest rates. Overall, the equity markets
sustained their strong positive momentum despite the devastation of the two gulf
coast hurricanes. While we don't see these events derailing the recent U.S.
economic strength, they could lead to slightly lower growth.
For the 12 months ended September 30, 2005, The Boston Company Small Cap
Tax-Sensitive Equity Fund had a total return of 22.01% versus 17.97% for the
Russell 2000 Growth Index. The Fund has maintained strong relative performance
during the past year as portfolio holdings have participated in much of the
market's gains, while maintaining an overall risk averse profile. This is
evidenced by the Fund's lower relative decline during the only negative quarter
over the last 12 months. During the first quarter decline, the Fund declined
approximately half as much as the -6.83% for the Russell 2000 Growth Index.
Broad sector performance within the Russell 2000 Growth Index was solid during
the year. For the first time since the fourth quarter of 2003, growth issues
within the Russell 2000 marginally outperformed value issues on a trailing
12-month basis, gaining 17.97% versus value's gain of 17.75%. In addition, this
is the tightest 12-month performance margin between the two small-cap styles
since the first quarter of 1987.
We continue to believe the longer-term trend within small-cap equities is
movement away from the lower quality companies. However, factors that have
supported the broader small-cap market have not weakened as expected, as the
sector continues to generate profit growth that has outpaced large-caps for most
of the past five years. We believe small-caps will continued to outperform
large-caps through the end of 2005.
Relative to the index, the Fund benefited from its exposure to the energy,
industrials, and consumer staples sectors. In the financial services sector, the
Fund remained underweighedt relative to its benchmark, reflecting our concern
that the rising interest rate environment would impact the sector's strongest
sources of growth over the past few years: mortgages and re-financings. Within
consumer discretionary, we maintained our underweight because we believe that
consumer spending that had been largely fueled by the meteoric rise in property
values with historically low interest rates is past. Our technology investments
remain exposed to areas such as semiconductors, electronic equipment, and
software & services.
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
In healthcare, we are underweight the biotechnology sector and remain focused on
companies whose earnings stand best positioned to benefit from a variety of
opportunities. The energy sector has now become the focal point of inflation
fears. Oil and gas prices hit new highs during the quarter before settling down
slightly, once again driving fears of profit erosion and inflation. We continue
to marginally overweighted the energy sector, but remain sensitive to shifts in
the energy markets. Even if shifts within the tight supply-demand relationship
occur, we feel that given the current high commodity prices, companies within
the energy sector should continue to show strong earnings and cash flows through
2005.
/s/ B. Randall Watts /s/ Todd Wakefield
B. Randall Watts Todd Wakefield
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Tax-Sensitive Equity Fund and Russell 2000 Growth Index
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
TBC
PERIOD Small Cap Tax-Sensitive Equity Fund Russell 2000 Growth Index*
1/2/96 100,000 100,000
3/31/96 107,550 105,744
6/30/96 120,750 111,924
9/30/96 117,948 110,969
12/31/96 121,231 111,263
3/31/97 108,557 99,593
6/30/97 135,058 117,076
9/30/97 163,362 136,885
12/31/97 149,858 125,666
3/31/98 168,288 140,596
6/30/98 163,756 132,522
9/30/98 130,421 102,890
12/31/98 165,821 127,211
3/31/99 186,769 125,074
6/30/99 206,861 143,517
9/30/99 204,796 136,460
12/31/99 332,765 182,029
3/31/00 409,302 198,926
6/30/00 377,054 184,261
9/30/00 381,323 176,941
12/31/00 286,899 141,201
3/31/01 217,874 119,734
6/30/01 252,751 141,255
9/30/01 191,388 101,590
12/31/01 224,660 128,171
3/31/02 223,200 125,659
6/30/02 197,444 105,937
9/30/02 164,463 83,140
12/31/02 170,738 89,384
3/31/03 163,734 85,918
6/30/03 196,641 106,665
9/30/03 215,904 117,830
12/31/03 248,154 132,774
3/31/04 266,469 140,185
6/30/04 264,499 140,315
9/30/04 253,262 131,881
12/31/04 286,899 151,769
3/31/05 275,662 141,411
6/30/05 287,410 146,330
9/30/05 309,007 155,574
Average Annual Total Returns
(for period ended 9/30/2005)
==============================================================================================================
Since
Inception
1 Years 3 Years 5 Years 1/2/1996
- --------------------------------------------------------------------------------------------------------------
Fund 22.01% 23.40% (4.12)% 12.28%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- -----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,121.00 $5.26
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.10 $5.01
+ Expenses are equal to the Fund's annualized expense ratio of 0.99%, multiplied
by the average account value over the period, multiplied by 183/365 (to
reflect the one-half year period).
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ------------------------------------------------------------------------------------------------------
Fisher Scientific International Health Care 2.2%
Matria Healthcare, Inc. Health Care 1.8
Covance, Inc. Health Care 1.8
Respironics, Inc. Health Care 1.8
Consol Energy, Inc. Energy 1.6
Crescent Real Estate Equities Co. REIT Financial 1.6
Lions Gate Entertainment Corp. Consumer Discretionary 1.5
Penn Virginia Corp. Energy 1.5
LECG Corp. Industrial 1.4
Performance Food Group Co. Consumer Staples 1.4
-----
16.6%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------------------------------
Basic Materials 2.0%
Consumer Discretionary 13.7
Consumer Staples 4.2
Energy 9.2
Financials 7.3
Health Care 20.2
Industrials 15.9
Technology 18.5
Utilities 2.2
Short-term and Other Assets 6.8
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--105.0%
EQUITIES--93.2%
Basic Materials--2.0%
Airgas, Inc. 41,240 $ 1,221,941
Cambrex Corp. 33,400 633,264
Cleveland-Cliffs, Inc. (a) 16,100 1,402,471
-----------
3,257,676
-----------
Consumer Discretionary--13.7%
Blue Nile, Inc. (a)(b) 36,600 1,158,024
California Pizza Kitchen, Inc. (b) 20,130 588,601
Casual Male Retail Group, Inc. (b) 112,100 771,248
Central Garden & Pet Co. (b) 10,780 487,795
DreamWorks Animation SKG (b) 29,600 818,736
Eddie Bauer Holdings, Inc. (b) 57,600 1,396,800
Educate, Inc. (b) 85,010 1,275,150
Education Management Corp. (b) 33,000 1,063,920
Emmis Communications Corp. (a)(b) 83,600 1,846,724
Jarden Corp. (b) 19,540 802,508
Jos A Bank Clothiers, Inc. (a)(b) 17,550 758,511
Lions Gate Entertainment Corp. (a)(b) 234,900 2,240,946
Marvel Entertainment, Inc. (b) 74,000 1,322,380
Outdoor Channel Holdings, Inc. (b) 46,300 683,388
Papa John's International, Inc. (b) 27,710 1,388,825
Playboy Enterprises, Inc., Class B (b) 55,420 781,422
Rare Hospitality International, Inc. (b) 8,270 212,539
Speedway Motorsports, Inc. 31,590 1,147,665
The Sportsman's Guide Inc. (b) 18,900 515,970
Thor Industries, Inc. 23,440 796,960
Tractor Supply Co. (b) 23,840 1,088,296
Wabtec Corp. 29,950 817,036
-----------
21,963,444
-----------
Consumer Staples--4.2%
Church & Dwight Co., Inc. 42,300 1,562,562
Herbalife Ltd. 41,600 1,253,824
Nu Skin Enterprises, Inc. 37,100 706,755
Peet's Coffee & Tea, Inc. (b) 26,390 808,062
Performance Food Group Co. (b) 65,900 2,079,804
Playtex Products, Inc. (b) 27,800 305,800
-----------
6,716,807
-----------
Energy--9.2%
Consol Energy, Inc. 31,990 2,439,877
Dril-Quip, Inc. (b) 20,620 989,760
FMC Technologies, Inc. (b) 48,640 2,048,230
Global Industries, Ltd. (b) 56,900 838,706
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Energy (continued)
Hydril Co. (b) 11,900 $ 816,816
Oceaneering International, Inc. (b) 15,730 840,139
Oil States International, Inc. (b) 47,090 1,709,838
Penn Virginia Corp. 38,640 2,229,914
Tidewater, Inc. 38,200 1,859,194
W-H Energy Services, Inc. (b) 29,200 946,664
-----------
14,719,138
-----------
Financial--7.3%
Affiliated Managers Group (a)(b) 13,550 981,291
Cathay General Bancorp 17,700 627,642
Center Financial Corp. 34,660 814,510
City National Corp., Class A 16,830 1,179,615
Crescent Real Estate Equities Co. REIT 117,100 2,401,721
Cullen/Frost Bankers, Inc. 18,900 932,526
CVB Financial Corp. 1 26
First Community Bancorp, Inc., Class A 16,200 774,846
First Midwest Bancorp, Inc. 34,950 1,301,538
Mercantile Bankshares Corp. 16,732 715,962
National Financial Partners Corp. 17,300 780,922
New York Community Bancorp Inc. (a) 4 69
The Colonial BancGroup, Inc. 50,100 1,122,240
-----------
11,632,908
-----------
Health Care--20.2%
American Medical Systems Holdings, Inc. (b) 41,300 832,195
Animas Corp. (b) 44,800 703,360
Applera Corp.-Celera Genomics Group (b) 52,800 640,464
ArQule, Inc. (b) 59,100 462,753
Array BioPharma, Inc. (b) 87,000 624,660
Community Health Systems, Inc. (b) 24,200 939,202
Conceptus, Inc. (a)(b) 73,400 851,440
Cooper Cos, Inc. 21,160 1,621,068
Covance, Inc. (b) 55,600 2,668,244
Coventry Health Care, Inc. (b) 9,250 795,685
Cytyc Corp. (b) 47,100 1,264,635
Fisher Scientific International (a) 52,600 3,263,830
Human Genome Sciences, Inc. (b) 51,300 697,167
Immunogen, Inc. (b) 89,500 656,930
InterMune, Inc. (b) 45,200 748,060
IRIS International, Inc. (b) 25,200 464,688
Lifepoint Hospitals, Inc. (a)(b) 20,100 878,973
Matria Healthcare, Inc. (b) 71,950 2,716,113
Medarex, Inc. (b) 70,500 671,160
MWI Veterinary Supply, Inc. (b) 3,720 74,214
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Health Care (continued)
Neurocrine Biosciences Inc. (b) 14,500 $ 713,255
PerkinElmer, Inc. 75,500 1,537,935
Protein Design Labs, Inc. (a)(b) 40,900 1,145,200
Respironics, Inc. (b) 62,200 2,623,596
Sybron Dental Specialties, Inc. (b) 23,800 989,604
Triad Hospitals (b) 17,050 771,854
VCA Antech, Inc. (b) 57,900 1,477,608
Vertex Pharmaceuticals, Inc. (a)(b) 37,100 829,185
WebMD Health Corp., Class A Shares (b) 3,430 84,546
ZymoGenetics, Inc. (b) 32,100 529,650
-----------
32,277,274
-----------
Industrial--15.9%
Bucyrus International, Inc., Class A 29,600 1,454,248
Evergreen Solar, Inc. (b) 86,100 803,313
FTI Consulting Inc. (b) 74,400 1,879,344
Global Cash Access, Inc. (a)(b) 32,070 452,187
Huron Consulting Group Inc. (b) 53,700 1,440,234
Interline Brands Inc. (b) 59,300 1,245,893
Jack Henry & Associates, Inc. 38,700 750,780
Kennametal, Inc. 33,770 1,656,081
Landstar System 23,510 941,105
LECG Corp. (b) 91,900 2,113,700
Mercury Computer Systems, Inc. (b) 28,900 758,625
MSC Industrial Direct Co., Inc. (a) 47,050 1,560,649
Navigant Consulting, Inc. (b) 39,100 749,156
Pacer International, Inc. 61,400 1,618,504
Stericycle Inc. (b) 20,900 1,194,435
Stewart & Stevenson Services, Inc. 31,800 758,430
UTI Worldwide, Inc. 21,750 1,689,975
Valmont Industries, Inc. 30,600 898,416
Washington Group International, Inc. (b) 15,100 813,739
Waste Connections Inc. (a)(b) 43,600 1,529,488
Watson Wyatt & Co Holdings 42,600 1,148,070
-----------
25,456,372
-----------
Information Technology--18.5%
Akamai Technologies, Inc. (b) 104,700 1,669,965
Anteon International Corp. (b) 18,430 788,067
BEA Systems, Inc. (b) 137,200 1,232,056
Cymer, Inc. (a)(b) 35,670 1,117,184
Cypress Semiconductor Corp. (a)(b) 101,600 1,529,080
Eclipsys Corp. (b) 22,600 403,184
Exar Corp. (b) 84,000 1,177,680
F5 Networks Inc. (b) 26,240 1,140,653
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Information Technology (continued)
Filenet Corp. (b) 55,300 $ 1,542,870
Informatica Corp. (b) 67,400 810,148
Ingram Micro Inc., Class A (b) 107,250 1,988,415
Internet Security Systems (b) 34,300 823,543
Jamdat Mobile, Inc. (a)(b) 45,000 945,000
Lam Research Corp. (a)(b) 26,351 802,915
ManTech International Corp., Class A (b) 29,190 770,908
Marchex, Inc. (a)(b) 47,800 791,568
Mcafee, Inc. (b) 37,940 1,192,075
Online Resources Corp. (b) 119,300 1,262,194
Packeteer, Inc. (b) 66,600 835,830
Power Integrations, Inc. (b) 35,490 771,908
Progress Software Corp. (b) 36,600 1,162,782
SafeNet, Inc. (b) 23,700 860,547
Secure Computing Corp. (b) 76,000 862,600
SS&C Technologies, Inc. 45,400 1,663,456
Unica Corp. (b) 22,930 251,771
Varian Semiconductor Equipment Associates, Inc. (b) 26,100 1,105,857
Verisign, Inc. (b) 50,850 1,086,665
WebEx Communications, Inc. (b) 39,200 960,792
-----------
29,549,713
-----------
Utilities--2.2%
AGL Resources, Inc. 31,680 1,175,645
Atmos Energy Corp. 54,200 1,531,150
ITC Holdings Corp. 28,730 832,593
-----------
3,539,388
-----------
TOTAL EQUITIES (Cost $115,516,399) 149,112,720
-----------
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.2%
U.S. Government--0.2%
U.S. Treasury Bill (c) (d) (Cost $382,337) 3.15% 12/15/05 $385,000 $ 382,472
-----------
INVESTMENT OF CASH COLLATERAL--11.6% Shares
----------
BlackRock Cash Strategies L.L.C. (Cost Shares $18,537,441) 3.93% 18,537,441 18,537,441
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $134,436,177) 168,032,633
-----------
AFFILIATED INVESTMENTS--6.0%
Dreyfus Institutional Preferred Plus Money Market Fund (e) 3.73% 9,623,233 9,623,233
(Cost $9,623,233) -----------
TOTAL INVESTMENTS--111.0% (Cost $144,059,410) 177,655,866
LIABILITIES IN EXCESS OF OTHER ASSETS--(11.0%) (17,620,998)
-----------
NET ASSETS--100% $160,034,868
============
Notes to Schedule of Investments:
REIT--Real Estate Investment Trust.
(a) Security, or a portion of thereof, was on loan at 9/30/05.
(b) Non-income producing security.
(c) Denotes all or part of security segregated as collateral for futures
transactions.
(d) Rate noted is yield to maturity.
(e) Affiliated institutional money market fund.
At September 30, 2005 the Fund held the following futures contracts:
Underlying Unrealized
Contract Position Expiration Date Face Amount Gain
- -------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (18 Contracts) Long 12/16/05 $6,021,000 $27,819
=======
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A)
(including securities on loan, valued at $17,796,766 (Note 7)):
Unaffiliated investments (cost $134,436,177) $168,032,633
Affiliated investments (Note 1F) (cost $9,623,233) 9,623,233
Receivable for investments sold 2,324,638
Interest and dividends receivable 66,301
Receivable for Fund shares sold 128,256
Variation margin receivable (Note 6) 43,200
Prepaid expenses 27,085
------------
Total assets 180,245,346
Liabilities
Collateral for securities on loan (Note 7) $18,537,441
Payable for investments purchased 1,603,354
Payable for Fund shares redeemed 15,328
Accrued accounting, custody, administration and transfer agent fees (Note 2) 10,205
Accrued professional fees 26,589
Accrued trustees' fees and expenses (Note 2) 6,755
Other accrued expenses and liabilities 10,806
-----------
Total liabilities 20,210,478
------------
Net Assets $160,034,868
============
Net Assets consist of:
Paid-in capital $116,940,061
Accumulated net realized gain 9,470,450
Undistributed net investment income 82
Net unrealized appreciation 33,624,275
------------
Total Net Assets $160,034,868
============
Shares of beneficial interest outstanding 3,779,055
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $42.35
============
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign witholding taxes of $553) $ 700,675
Interest income (Note 1F):
Unaffiliated issuers 11,617
Affiliated issuers 192,834
Securities lending income (Note 7) 95,361
-----------
Total investment income 1,000,487
Expenses
Investment advisory fee (Note 2) $ 1,098,877
Accounting, custody, administration and transfer agent fees (Note 2) 129,191
Professional fees 48,895
Registration fees 21,200
Trustees' fees and expenses (Note 2) 27,718
Insurance expense 7,100
Miscellaneous expenses 27,416
-----------
Total Expenses 1,360,397
-----------
Net investment (loss) (359,910)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 11,432,570
Futures contracts 890,789
-----------
Net realized gain 12,323,359
Change in unrealized appreciation (depreciation) on:
Investments securities 15,654,783
Futures contracts 16,110
-----------
Change in net unrealized appreciation (depreciation) 15,670,893
-----------
Net realized and unrealized gain (loss) 27,994,252
-----------
Net Increase in Net Assets from Operations $27,634,342
===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (359,910) $ (841,402)
Net realized gain (loss) 12,323,359 15,242,461
Change in net unrealized appreciation (depreciation) 15,670,893 4,178,389
------------ ------------
Net increase (decrease) in net assets from investment operations 27,634,342 18,579,448
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 28,290,912 19,103,910
Redemption fees credited to capital 1,491 242
Cost of shares redeemed (16,263,827) (24,029,775)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 12,028,576 (4,925,623)
------------ ------------
Total Increase (Decrease) in Net Assets 39,662,918 13,653,825
Net Assets
At beginning of period 120,371,950 106,718,125
------------ ------------
At end of period (including undistributed net
investment income of $82 and $82) $160,034,868 $120,371,950
============ ============
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 34.71 $ 29.58 $ 22.53 $ 26.23 $ 63.32
-------- -------- -------- ------- -------
From Operations:
Net investment income (loss)* (a) (0.10) (0.24) (0.11) (0.13) (0.20)
Net realized and unrealized gains (loss) on investments
7.74 5.37(b) 7.16(b) (3.57)(b) (28.28)
-------- -------- -------- ------- -------
Total from operations 7.64 5.13 7.05 (3.70) (28.48)
-------- -------- -------- ------- -------
Less Distributions to Shareholders:
From net realized gains on investments
-- -- -- -- (8.61)
-------- -------- -------- ------- -------
Total distributions to shareholders -- -- -- -- (8.61)
-------- -------- -------- ------- -------
Net Asset Value, End of Period $ 42.35 $ 34.71 $ 29.58 $ 22.53 $ 26.23
======== ======== ======== ======= =======
Total Return 22.01% 17.34% 31.29%(c) (14.11)%(c) (49.81)%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.99% 1.03% 1.00% 1.00% 1.00%
Net Investment Income (Loss) (to average daily net assets)* (0.26)% (0.71)% (0.43)% (0.47)% (0.54)%
Portfolio Turnover 137% 150% 252% 241% 174%
Net Assets, End of Period (000's omitted) $160,035 $120,372 $106,718 $82,469 $81,711
- ------------------
* 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 net
investment income per share and the ratios would have been:
Net investment income (loss) per share (a) N/A N/A $ (0.13) $ (0.15) $ (0.21)
Ratios (to average daily net assets):
Expenses N/A N/A 1.07% 1.08% 1.04%
Net Investment Income (Loss) N/A N/A (0.50)% (0.55)% (0.58)%
(a) Calculated based on average shares outstanding.
(b) Amounts includes litigation proceeds received by the Portfolio of $0.03 for
the year ended September 30, 2004, $0.01 for the year ended September 30,
2003 and $0.02 for the year ended September 30, 2002.
(c) Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 is available, 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 is then valued at amortized cost
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 coupon interest earned, 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 among Funds of the Trust taking into
consideration, among other things, the nature and type of expense and
the relative size of the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the Fund
under these arrangements is unknown, as this would involve future claims
that may be made against the Fund that have not yet occurred. However,
based on experience, the Fund expects the risks of loss to be remote.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
F. Affiliated issuers
Affiliated issuers are 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 was charged $18,624 during the period ended September
30, 2005.
The Fund has contracted with 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 was
charged $110,567 during the period ended September 30, 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.
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.
Pursuant to this agreement, Mellon Bank received $41,257, for the period
ended September 30, 2005. See Note 7 for further details.
Effective July 1, 2005, the Trust reimburses Mellon Institutional
Asset Management for a portion of the salary of the Trust's Chief
Compliance Officer. For the period ended September 30, 2005, the Fund
was charged $1,134. No other director, officer or employee of TBCAM or
its affiliates received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and
platform administrators and other entities ("Plan Administrators")
that provide record keeping and/or other administrative support
services to retirement plans and their participants. As compensation
for such services, the Fund may pay each Plan Administrator a service
fee in an amount of up to 0.15% (on an annualized basis) of the Fund's
average daily net assets attributable to fund shares that are held in
accounts serviced by such Plan Administrator. The Fund's adviser or
its affiliates may pay additional compensation from their own
resources to Plan Administrators and other entities for administrative
services, as well as in consideration of marketing or other
distribution-related services. These payments may provide an incentive
for these entities to actively promote the Fund or cooperate with the
distributor's promotional efforts.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than
short-term obligations for the period ended September 30, 2005, were
$186,737,020 and $178,524,760, respectively. For the period ended
September 30, 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
Year Ended Year Ended
September 30, 2005 September 30, 2004
Shares sold 734,506 553,482
Shares redeemed (423,368) (692,914)
-------- --------
Net increase (decrease) 311,138 (139,432)
======== ========
At September 30, 2005, two shareholders of record held approximately 64% of the
total outstanding shares of the Fund. Investment activity of these shareholders
could have a material impact on the Fund.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 30 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 September 30, 2005, the Fund
received $1,491 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 September 30, 2005, were as follows:
Unrealized appreciation $ 34,680,912
Unrealized depreciation (1,356,889)
------------
Net unrealized appreciation/depreciation 33,324,023
============
Undistributed ordinary income 2,311,713
Undistributed capital gains 7,459,071
Cost for federal income tax purposes $144,331,843
------------
(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:
Options
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date
at a specified price. The Fund may use options to seek to hedge against
risks of market exposure and changes in securities prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Fund's
exposure to the underlying instrument, or hedge other Fund investments.
Options, both held and written by the Fund, are reflected in the
accompanying Statement of Assets and Liabilities at market value. The
underlying face amount at value of any open purchased options is shown
in the Schedule of Investments. This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contract or if the counterparty does
not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are
exercised or are closed are added to or offset against the proceeds or
amount paid on the transaction to determine the realized gain or loss.
Realized gains and losses on purchased options are included in realized
gains and losses on investment securities, except purchased options on
foreign currency which are included in realized gains and losses on
foreign currency transactions. If a put option written by the Fund is
exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund, as writer of an option, has no control
over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in
the price of the security underlying the written option.
Exchange traded options are valued at the last sale price, or if no
sales are reported, the last bid price for purchased options and the
last ask price for written options. Options traded over-the-counter are
valued using prices supplied by the dealers.
At September 30, 2005, the Fund had no option transactions.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
Futures contracts
The Fund may enter into financial futures contracts for the 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 September 30, 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 September 30, 2005
and earned interest on the invested collateral of $321,276 of which,
$225,915 was rebated to borrowers or paid in fees. At September 30,
2005, the Fund had securities valued at $17,796,766 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
September 30, 2005, a facility fee of $2,674 was allocated to the Fund.
During the period ended September 30, 2005, the Fund did not use the
line of credit.
19
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of The Boston Company Small Cap Tax-Sensitive Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Small Cap
Tax-Sensitive Equity Fund (the "Fund") at September 30, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, NY
November 18, 2005
20
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, 33 None $299
c/o Decision Resources, since Decision Resources,
Inc. 11/3/1986 Inc. ("DRI")
260 Charles Street (biotechnology
Waltham, MA 02453 research and
9/30/40 consulting firm);
formerly Chairman of
the Board and Chief
Executive Officer,
DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street since Associates (family
Associates 11/3/1986 investment trust
P.O. Box 5600 office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph 33 None $299
c/o Harvard University since Maier, Professor of
Littaver Center 127 9/13/1989 Political Economy,
Cambridge, MA 02138 Harvard University
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, 33 None $299
P.O. Box 2333 since Mertens House, Inc.
New London, NH 03257 11/3/1986 (hospice)
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 33 None $0
Mellon Institutional and Chief Operating Officer of
Asset Management Executive Officer The Boston Company
One Boston Place Asset Management,
Boston, MA 02108 LLC; formerly Senior
7/24/65 Vice President and
Chief Operating
Officer, Mellon
Institutional Asset
Management ("MIAM")
and Vice President
and Chief Financial
Officer, MIAM
21
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 First
Asset Management Vice President, Mellon Institutional Asset Management
One Boston PLace 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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hulgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional Asset
Asset Management Management; formerly Shareholder Representative,
One Boston Place Standish Mellon Asset Management Company LLC
Boston, MA 02108
1/19/71
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional Asset
Mellon Institutional Compliance Management and Chief Compliance Officer,
Asset Management Officer Mellon Funds Distributor; formerly Director,
One Boston PLace Blackrock, Inc. Senior Vice President, State Street
Boston, MA 02108 Research & Management Company ("SSRM"),
4/8/57 Vice President, SSRM
22
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6938AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
Small Cap Growth Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005. Financial markets mostly treaded water over the past 12
months, as investors grappled with the economic impact of soaring energy costs
and the prospect of higher inflation. Despite the potential drag to the U.S.
economy due to damage inflicted by Hurricanes Katrina and Rita, the Federal
Reserve gave every indication that it intended to continue its steady tightening
of short term rates. This signals the Fed's belief that inflation is a greater
threat than that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
In our commentary last year, terrorism and the upcoming elections
were the focus of our discussion. Now, energy prices, inflation fears, and
interest rates are at the forefront of investor concerns. However, despite these
economic fears, the equity markets continued to post healthy returns. Small-cap
stocks continued to perform well and outpaced their large-cap counterparts,
buoyed by strong profit growth and relatively low interest rates. Overall, the
equity markets sustained their strong positive momentum despite the devastation
of the two gulf coast hurricanes. While we don't see these events derailing the
recent U.S. economic strength, they could lead to slightly lower growth.
For the 12 months ended September 30, 2005, The Boston Company Small Cap Growth
Fund had a total return of 22.00% versus 17.97% for the Russell 2000 Growth
Index. The Fund has maintained strong relative performance during the past year
as portfolio holdings have participated in much of the market's gains, while
maintaining an overall risk averse profile. This is evidenced by our lower
relative decline during the only negative quarter over the last 12 months.
During the first quarter decline, the Fund declined approximately half as much
as the -6.83% for the Russell 2000 Growth Index.
Broad sector performance within the Russell 2000 Growth Index was solid during
the year. For the first time since the fourth quarter of 2003, growth issues
within the Russell 2000 marginally outperformed value issues on a trailing
12-month basis, gaining 17.97% versus value's gain of 17.75%. In addition, this
is the tightest 12-month performance margin between the two small-cap styles
since the first quarter of 1987.
We continue to believe the longer-term trend within small-cap equities is
movement away from the lower quality companies. However, factors that have
supported the broader small-cap market have not weakened as expected, as the
sector continues to generate profit growth that has outpaced large-caps for most
of the past five years. We believe small-caps will continue to outperform large
caps through the end of 2005.
Relative to the indices, the portfolio benefited from its exposure to the
energy, endustrials, and consumer staples sectors. In the financial services
sector, the Fund remains underweighted relative to its benchmark, reflecting our
concern that the rising interest rate environment would impact the sector's
strongest sources of growth over the past few years: mortgages and
re-financings. Within consumer discretionary, we maintained our underweight
because we believe that consumer spending that had been largely fueled by the
meteoric rise in property values with historically low interest rates is past.
Our technology investments remain exposed to areas such as semiconductors,
electronic equipment, and software and services.
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
In healthcare, we are underweight the biotechnology sector and remain focused on
companies whose earnings stand best positioned to benefit from a variety of
opportunities. The energy sector has now become the focal point of inflation
fears. Oil and gas prices hit new highs during the quarter before settling down
slightly, once again driving fears of profit erosion and inflation. We continue
to be marginally overweighted in the energy sector, but remain sensitive to
shifts in the energy markets. Even if shifts within the tight supply-demand
relationship occur, we feel that given the current high commodity prices,
companies within the energy sector should continue to show strong earnings and
cash flows through 2005.
/s/ B. Randall Watts /s/ Todd Wakefield
B. Randall Watts Todd Wakefield
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Growth Fund and the Russell 2000 Growth Index
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
TBC
PERIOD Small Cap Growth Fund Russell 2000 Growth Index *
12/23/96 100,000 100,000
12/31/96 101,900 100,000
3/31/97 93,000 89,512
6/30/97 118,850 105,225
9/30/97 145,651 123,028
12/31/97 133,355 112,945
3/31/98 154,791 126,364
6/30/98 147,250 119,107
9/30/98 119,675 92,475
12/31/98 152,421 114,334
3/31/99 178,758 112,413
6/30/99 203,802 128,989
9/30/99 206,010 122,646
12/31/99 347,013 163,603
3/31/00 405,788 178,790
6/30/00 376,923 165,609
9/30/00 353,518 159,030
12/31/00 275,314 126,908
3/31/01 220,752 107,613
6/30/01 256,181 126,956
9/30/01 193,175 91,306
12/31/01 226,426 115,197
3/31/02 224,249 112,939
6/30/02 197,265 95,213
9/30/02 163,552 74,724
12/31/02 169,160 80,336
3/31/03 162,233 77,221
6/30/03 194,692 95,868
9/30/03 213,891 105,903
12/31/03 245,691 119,334
3/31/04 263,504 125,995
6/30/04 261,723 126,112
9/30/04 250,375 118,531
12/31/04 283,693 136,406
3/31/05 272,675 127,096
6/30/05 284,418 131,517
9/30/05 305,464 139,826
Average Annual Total Returns
(for period ended 9/30/2005)
Since Inception
1 Year 3 Years 5 Years 12/23/1996
- --------------------------------------------------------------------------------
Fund 22.00% 23.15% (2.88)% 13.58%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Shareholder Expense Example
- --------------------------------------------------------------------------------
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2004 September 30, 2005 September 30, 2005
- ---------------------------------------------------------------------------------------------
Actual $1,000.00 $1,120.20 $6.22(1)
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.20 $5.92(1)
- --------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.17%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
(1) The example reflects the expenses of the Fund and the master portfolio in
which the Fund invests all of its assets.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ---------------------------------------------------------------------------------
Martria Healthcare, Inc. Health Care 1.8%
Fisher Scientific International Health Care 1.8
Covance, Inc. Health Care 1.8
Crescent Real Estate Equities Co. REIT Financials 1.7
Respironics, Inc. Health Care 1.7
Consol Energy, Inc. Energy 1.7
Lions Gate Entertainment Corp. Consumer Discretionary 1.5
Penn Virginia Corp. Energy 1.5
Performance Food Group Co. Consumer Staples 1.4
LECG Corp. Industrials 1.4
----
16.3%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------
Basic Materials 2.0%
Consumer Discretionary 13.7
Consumer Staples 4.3
Energy 9.3
Financials 7.3
Health Care 19.8
Industrials 15.9
Information Technology 18.7
Utilities 2.3
Short-term and Other Assets 6.7
-----
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.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap
Growth Portfolio ("Portfolio"), at value (Note 1A) $ 36,331,162
Receivable for Fund shares sold 29,236
Receivable due from investment advisor 1,328
Prepaid expenses 10,125
------------
Total assets 36,371,851
Liabilities
Accrued service fees--Service Class (Note 3) $ 6,785
Accrued professional fees 25,385
Accrued transfer agent fees (Note 2) 1,199
Accrued trustees' fees (Note 2) 2,052
Other accrued expenses and liabilities 13,079
-------
Total liabilities 48,500
------------
Net Assets $ 36,323,351
============
Net Assets consist of:
Paid-in capital $ 45,922,613
Accumulated net realized loss (16,166,252)
Undistributed net investment income 5,968
Net unrealized appreciation 6,561,022
------------
Total Net Assets $ 36,323,351
============
Shares of beneficial interest outstanding 784,518
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 46.30
============
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Operations
For the Year Ended September 30, 2005
- -------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $146) $ 181,026
Interest income allocated from Portfolio (including security lending income of $23,413) 65,046
Expenses allocated from Portfolio (392,353)
Net investment loss allocated from Portfolio ----------
(146,281)
Expenses
Professional fees $ 35,325
Registration fees 30,750
Service fees--Service Class (Note 3) 34,542
Transfer agent fees--(Note 2) 13,450
Trustees' fees (Note 2) 1,997
Insurance expense 475
Miscellaneous expenses 16,779
---------
Total expenses 133,318
Deduct:
Reimbursement of Fund operating expenses--Institutional Class (Note 2) (50,648)
Reimbursement of Fund operating expenses--Service Class (Note 2) (30,241)
---------
Total expense deductions (80,889)
---------
Net expenses 52,429
---------
Net investment loss (198,710)
---------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities 4,178,769
Future contracts 140,646
---------
Net realized gain (loss) 4,319,415
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities 2,744,899
Future contracts 5,141
---------
Change in net unrealized appreciation (depreciation) 2,750,040
Net realized and unrealized gain (loss) on investments 7,069,455
----------
Net Increase in Net Assets from Operations 6,870,745
==========
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (198,710) $ (333,479)
Net realized gain (loss) 4,319,415 4,987,476
Change in net unrealized appreciation (depreciation) 2,750,040 378,758
------------ -----------
Net increase (depreciation) in net assets from investment operations 6,870,745 5,032,755
------------ -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares
Institutional Class 18,873,206 1,679,964
Service Class 2,808,281 7,576,844
Redemption fees credited to capital
Institutional Class 199 51
Cost of shares redeemed
Institutional Class (4,859,146) (8,131,829)
Service Class (20,103,492) (3,512,445)
------------ -----------
Net increase (decrease) in net assets from Fund share transactions (3,280,952) (2,387,415)
------------ -----------
Total Increase (Decrease) in Net Assets 3,589,793 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 $5,968 and $0) $ 36,323,351 $32,733,558
============ ===========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Financial Highlights
- -------------------------------------------------------------------------------
Year Ended September 30,
----------------------------------------------------------
2005 2004(e) 2003(e) 2002(e) 2001(e)
------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 37.95 $ 32.41 $ 24.78 $ 29.28 $ 60.87
------- ------- ------- ------- -------
From Investment Operations:
Net investment income (loss) * (a) (0.20) (0.33) (0.11) (0.16) (0.19)
Net realized and unrealized gains (loss) on investments 8.55 5.87(b) 7.74(b) (4.34)(b) (25.66)
------- ------- ------- ------- -------
Total from operations 8.35 5.54 7.63 (4.50) (25.85)
Less Distributions to Shareholders: ------- ------- ------- ------- --------
From net realized gains on investments -- -- -- -- (5.74)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 46.30 $ 37.95 $ 32.41 $ 24.78 $ 29.28
======= ======= ======= ======= =======
Total Return (c) 22.00% 17.09% 30.79% (15.37)% (45.36)%
Ratios/Supplemental data:
Expenses (to average daily net assets) * (d) 1.17% 1.18% 1.00% 1.00% 1.00%
Net Investment Income (Loss) (to average daily net (0.48)% (0.87)% (0.42)% (0.52)% (0.48)%
assets)*
Net Assets, End of Period (000's omitted) $36,323 $18,274 $21,168 $18,780 $31,365
- ------------
* 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 (loss) per share (a) $(0.31) $ (0.40) $ (0.30) $ (0.25) $ (0.28)
Ratios (to average daily net assets):
Expenses (d) 1.41% 1.37% 1.66% 1.29% 1.20%
Net investment income (loss) (0.72)% (1.06)% (1.08)% (0.81)% (0.68)%
(a) Calculated based on average shares outstanding.
(b) 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.
(c) Total return would have been lower in the absence of expense waivers.
(d) Includes the Fund's share of the Portfolio's allocated expenses.
(e) Prior to August 31, 2005, the Fund offered two classes of shares:
Institutional Class and Service Class. The financial highlights for periods
prior to the year ended September 30, 2005, represent those of the
Institutional Class.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
During the year ended September 30, 2005, the Fund had offered two classes
of shares: Institutional Class and Service Class. On August 31, 2005, the
Service Class was liquidated and closed. Expenses of the Fund, until the
time when the Service Class was closed, were borne pro-rata by the holders
of each class of shares, except for transfer agent fees and an account
service fee of up to 0.25% of the average daily net assets of the Service
Class of shares. Each class voted separately as a class only with respect
to its own service plan (Service Class only) or matters that relate only to
that class. Shareholders of the Service Class received their pro-rata share
of the net assets of the Fund (after satisfaction of any class-specific
expenses) when the Service Class was liquidated.
The objective of the Fund is to 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 September 30, 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 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 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.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 among Funds of the Trust 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 were directly attributable to the Service
Class shares, were 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%, (effective July 1,
2005, 1.10%), 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 September 30, 2005, TBCAM reimbursed the
Institutional Class $50,648 and the Service Class $30,241 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 was charged
$13,450 during the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund was charged
$1,134. No other director, officer or employee of TBCAM or its affiliates
received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(3) Service Fee:
Prior to August 31, 2005, pursuant to a service plan, the Service Class
paid 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 September 30, 2005 aggregated $21,655,858 and $25,017,269,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on
applicable tax allocations rules. Book/tax differences arise when changes
in proportionate interest for funds investing in the Portfolio occur.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Institutional Class:
Shares sold 415,461 43,938
Shares redeemed (112,485) (215,460)
-------- --------
Net increase (decrease) 302,976 (171,522)
======== ========
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Service Class:
Shares sold 67,826 202,065
Shares redeemed (452,872) (94,424)
-------- -------
Net increase (decrease) (385,046) 107,641
======== =======
At September 30, 2005, one shareholder of record held approximately 44% of
the total outstanding shares of the Institutional 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
30 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 September 30, 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.
As of September 30, 2005, the components of distributable earnings on a tax
basis were as follows:
Capital loss carry-forward (16,085,157)
-----------
At September 30, 2005, the Fund, for federal income tax purposes, has
capital loss carryovers which will reduce the Fund's taxable income arising
from net realized gain on investments, if any, to the extent permitted by
the Internal Revenue Code and thus will reduce the amount of distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal income tax. Such capital loss carryovers are as
follows:
Capital Loss
Carry Over Expiration Date
------------- ---------------
$13,788,831 9/30/2010
$ 2,296,326 9/30/2011
See corresponding master portfolio for tax basis unrealized appreciation
(depreciation) information.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company Small Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Boston Company Small Cap Growth Fund (the "Fund") at September 30, 2005, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
14
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments - September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--103.1%
EQUITIES--93.3%
Basic Materials--2.0%
Airgas, Inc. 9,280 $ 274,966
Cambrex Corp. 7,600 144,096
Cleveland-Cliffs, Inc. (a) 3,700 322,307
---------
741,369
---------
Consumer Discretionary--13.7%
Blue Nile, Inc. (a)(b) 8,300 262,612
California Pizza Kitchen, Inc. (b) 4,560 133,334
Casual Male Retail Group, Inc. (b) 26,870 184,866
Central Garden & Pet Co. (b) 2,470 111,768
DreamWorks Animation SKG (b) 6,500 179,790
Eddie Bauer Holdings, Inc. (b) 13,100 317,675
Educate, Inc. (b) 19,390 290,850
Education Management Corp. (b) 7,600 245,024
Emmis Communications Corp. (b) 19,200 424,128
Jarden Corp. (b) 4,525 185,842
Jos A Bank Clothiers, Inc. (a)(b) 4,010 173,312
Lions Gate Entertainment Corp. (a)(b) 53,700 512,298
Marvel Entertainment, Inc. (b) 16,700 298,429
Outdoor Channel Holdings, Inc. (b) 10,500 154,980
Papa John's International, Inc. (b) 6,280 314,754
Playboy Enterprises, Inc., Class B (b) 12,640 178,224
Rare Hospitality International, Inc. (b) 1,850 47,545
Speedway Motorsports, Inc. 6,850 248,861
The Sportsman's Guide, Inc. (b) 4,300 117,390
Thor Industries, Inc. 5,130 174,420
Tractor Supply Co. (b) 5,440 248,336
Wabtec Corp. 6,860 187,141
-----------
4,991,579
-----------
Consumer Staples--4.3%
Church & Dwight Co., Inc. 9,700 358,318
Herbalife Ltd 9,500 286,330
Nu Skin Enterprises, Inc. 8,500 161,925
Peet's Coffee & Tea, Inc. (b) 6,350 194,437
Performance Food Group Co. (b) 15,040 474,662
Playtex Products, Inc. (b) 6,100 67,100
-----------
1,542,772
-----------
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments - September 30, 2005
- -------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Energy--9.3%
Consol Energy, Inc. 7,350 $ 560,585
Dril-Quip, Inc. (b) 4,660 223,680
FMC Technologies, Inc. (b) 10,790 454,367
Global Industries, Ltd. (b) 12,900 190,146
Hydril Co. (b) 2,700 185,328
Oceaneering International, Inc. (b) 3,770 201,356
Oil States International, Inc. (b) 10,730 389,606
Penn Virginia Corp. 8,770 506,117
Tidewater, Inc. 8,700 423,429
W-H Energy Services, Inc. (b) 7,000 226,940
-----------
3,361,554
-----------
Financials--7.3%
Affiliated Managers Group (a)(b) 3,050 220,881
Cathay General BanCorp 3,900 138,294
Center Financial Corp. 8,042 188,987
City National Corp., Class A 3,840 269,146
Crescent Real Estate Equities Co. REIT 28,000 574,280
Cullen/Frost Bankers, Inc. 4,500 222,030
First Community Bancorp, Inc., Class A 3,700 176,971
First Midwest Bancorp, Inc. 7,700 286,748
Mercantile Bankshares Corp. 3,867 165,458
National Financial Partners Corp. 4,000 180,560
The Colonial BancGroup, Inc. 10,800 241,920
-----------
2,665,275
-----------
Health Care--19.8%
American Medical Systems Holdings, Inc. (b) 9,900 199,485
Animas Corp. (b) 10,200 160,140
Applera Corp.-Celera Genomics Group (b) 11,400 138,282
ArQule, Inc. (b) 14,200 111,186
Array BioPharma, Inc. (b) 18,900 135,702
Community Health Systems, Inc. (b) 5,600 217,336
Conceptus, Inc. (b) 16,800 194,880
Cooper Cos, Inc. 4,830 370,026
Covance, Inc.(b) 12,700 609,473
Coventry Health Care, Inc. (b) 2,150 184,943
Cytyc Corp. (b) 10,800 289,980
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments - September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------
Health Care (continued)
Fisher Scientific International (a) 9,900 $ 614,295
Human Genome Sciences, Inc. (b) 11,100 150,849
Immunogen, Inc. (b) 19,400 142,396
InterMune, Inc. (b) 9,800 162,190
IRIS International, Inc. (b) 5,500 101,420
Lifepoint Hospitals, Inc. (b) 4,900 214,277
Matria Healthcare, Inc. (b) 16,410 619,478
Medarex, Inc. (b) 15,300 145,656
MWI Veterinary Supply, Inc. (b) 800 15,960
Neurocrine Biosciences, Inc. (b) 3,200 157,408
PerkinElmer, Inc. 16,900 344,253
Protein Design Labs, Inc. (b) 9,400 263,200
Respironics, Inc. (b) 13,500 569,430
Sybron Dental Specialties, Inc. (b) 5,400 224,532
Triad Hospitals (b) 3,950 178,817
VCA Antech, Inc. (b) 14,400 367,488
Vertex Pharmaceuticals, Inc. (a)(b) 8,100 181,035
WebMD Health Corp., Class A Shares (b) 780 19,226
ZymoGenetics, Inc. (b) 7,000 115,500
-----------
7,198,843
-----------
Industrials--15.9%
Bucyrus International, Inc., Class A 6,700 329,171
Evergreen Solar, Inc. (b) 20,700 193,131
FTI Consulting, Inc. (b) 16,300 411,738
Global Cash Access, Inc. (b) 7,300 102,930
Huron Consulting Group, Inc. (b) 12,000 321,840
Interline Brands, Inc. (b) 13,200 277,332
Jack Henry & Associates, Inc. 8,800 170,720
Kennametal, Inc. 7,360 360,934
Landstar System 5,360 214,561
LECG Corp. (b) 20,200 464,600
Mercury Computer Systems, Inc. (b) 6,700 175,875
MSC Industrial Direct Co., Inc. (a) 10,310 341,983
Navigant Consulting, Inc. (b) 8,600 164,776
Pacer International, Inc. 14,100 371,676
Stericycle, Inc. (b) 4,800 274,320
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments - September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------
Industrials (continued)
Stewart & Stevenson Services, Inc. 7,600 $ 181,260
UTI Worldwide, Inc. 5,210 404,817
Valmont Industries, Inc. 7,000 205,520
Washington Group International, Inc. (b) 3,600 194,004
Waste Connections, Inc. (a)(b) 9,950 349,046
Watson Wyatt & Co. Holdings 9,700 261,415
-----------
5,771,649
-----------
Information Technology--18.7%
Akamai Technologies, Inc. (b) 24,100 384,395
Anteon International Corp. (b) 4,210 180,020
BEA Systems, Inc. (b) 31,600 283,768
Cymer, Inc. (b) 8,190 256,511
Cypress Semiconductor Corp. (a)(b) 23,200 349,160
Eclipsys Corp. (b) 4,900 87,416
Exar Corp. (b) 18,300 256,566
F5 Networks, Inc. (b) 5,990 260,385
Filenet Corp. (b) 12,700 354,330
Informatica Corp. (b) 15,300 183,906
Ingram Micro Inc., Class A (b) 23,900 443,106
Internet Security Systems (b) 7,800 187,278
Jamdat Mobile, Inc. (a)(b) 12,100 254,100
Lam Research Corp. (b) 6,200 188,914
ManTech International Corp., Class A (b) 6,660 175,891
Marchex, Inc. (a)(b) 11,500 190,440
Mcafee, Inc. (b) 8,640 271,469
Online Resources Corp. (b) 27,220 287,988
Packeteer, Inc. (b) 15,100 189,505
Power Integrations, Inc. (b) 8,160 177,480
Progress Software Corp. (b) 8,400 266,868
SafeNet, Inc. (b) 5,100 185,181
Secure Computing Corp. (b) 20,000 227,000
SS&C Technologies, Inc. 10,500 384,720
Unica Corp. (b) 5,300 58,194
Varian Semiconductor Equipment Associates, Inc. (b) 5,990 253,796
Verisign, Inc. (b) 11,200 239,344
WebEx Communications, Inc. (b) 8,900 218,139
-----------
6,795,870
-----------
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments - September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
Utilities--2.3%
AGL Resources, Inc. 7,610 $ 282,407
Atmos Energy Corp. 12,500 353,125
ITC Holdings Corp. 6,680 193,583
----------
829,115
----------
TOTAL EQUITIES (Cost $27,343,907) 33,898,026
----------
SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.2%
U.S. Treasury Bill(c)(d) (Cost $59,585) 3.32% 12/15/05 $ 60,000 59,606
---------
INVESTMENT OF CASH COLLATERAL--9.6% Shares
---------
BlackRock Cash Strategies L.L.C (Cost $3,506,987) 3.93% 3,506,987 3,506,987
---------
TOTAL UNAFFILIATED INVESTMENTS (Cost $30,910,479) 37,464,619
----------
AFFILIATED INVESTMENTS--6.1%
Dreyfus Institutional Preferred Plus Money Market Fund (e)
(Cost $2,207,444) 3.73% 2,207,444 2,207,444
TOTAL INVESTMENTS--109.2% (Cost $33,117,923) 39,672,063
----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(9.2%) (3,340,901)
----------
NET ASSETS--100% $36,331,162
===========
Notes to Schedule of Investments:
REIT--Real Estate Investment Trust.
(a) Security, or a portion thereof, was on loan at 9/30/05.
(b) Non-income producing security
(c) Denotes all or part of security segregated as collateral.
(d) Rate noted is yield to maturity.
(e) Affiliated institutional money market fund.
At September 30, 2005 the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (4 Contracts) Long 12/15/05 $1,337,200 $6,882
=======
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)(including securities on loan, valued at $3,371,891 (Note 6))
Unaffiliated issuers, at value (cost $30,910,479) $37,464,619
Affiliated issuers, at value (Note 1E) (cost $2,207,444) 2,207,444
Receivable for investments sold 513,715
Interest and dividends receivable 15,081
Receivable for variation margin on open futures contracts (Note 5) 9,600
Prepaid expenses 10,012
-----------
Total assets 40,220,471
Liabilities
Payable for investments purchased $ 363,643
Collateral for securities on loan (Note 6) 3,506,987
Accrued accounting, administration and custody fees (Note 2) 7,388
Accrued trustees' fees and expenses (Note 2) 1,386
Other accrued expenses and liabilities 9,905
----------
Total liabilities 3,889,309
-----------
Net Assets (applicable to investors' beneficial interest) $36,331,162
===========
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $146) $ 181,026
Interest income (Note 1E):
Unaffiliated issuers 3,370
Affiliated issuers 38,263
Security lending income (Note 6) 23,413
---------
Total investment income 246,072
Expenses
Investment advisory fee (Note 2) $ 280,477
Accounting, administration and custody fees (Note 2) 79,504
Professional fees 20,008
Trustees' fees and expenses (Note 2) 6,533
Insurance expense 4,200
Miscellaneous 1,631
----------
Total expenses 392,353
---------
Net investment income (loss) (146,281)
---------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 4,178,769
Futures contracts 140,646
----------
Net realized gain 4,319,415
Change in unrealized appreciation (depreciation) on:
Investment securities 2,744,899
Futures contracts 5,141
----------
Change in net unrealized appreciation (depreciation) 2,750,040
----------
Net realized and unrealized gain (loss) 7,069,455
----------
Net Increase in Net Assets from Operations $6,923,174
==========
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (146,281) $ (288,951)
Net realized gain (loss) 4,319,415 4,987,476
Change in net unrealized appreciation (depreciation) 2,750,040 378,655
------------ -----------
Net increase (decrease) in net assets from operations 6,923,174 5,077,180
------------ -----------
Capital Transactions
Contributions 21,655,858 9,465,370
Withdrawals (25,017,269) (11,682,896)
------------ ------------
Net increase (decrease) in net assets from capital transactions (3,361,411) (2,217,526)
------------ ------------
Total Increase (Decrease) in Net Assets 3,561,763 2,859,654
Net Assets
At beginning of period 32,769,399 29,909,745
------------ ------------
At end of period $ 36,331,162 $ 32,769,399
============ ============
The accompanying notes are an integral part of the financial statements.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2005 2004 2003 2002 2001
------ ------- -------- ---------- ----------
Total Return 22.05% 17.12%(a) 30.79%(a) (15.37)%(a) (45.36)%(a)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 1.12% 1.15% 1.00% 1.00% 1.00%
Net Investment Income (Loss) (to average daily net assets)* (0.42)% (0.83)% (0.42)% (0.51)% (0.49)%
Portfolio Turnover 135% 153% 261% 239% 191%
Net Assets, End of Period (000's omitted) $36,331 $32,769 $29,910 $24,500 $37,590
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/or reimbursed the
Portfolio for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would have
been:
Ratios (to average daily net assets):
Expenses N/A 1.18% 1.28% 1.18% 1.08%
Net Investment Income (Loss) N/A (0.86)% (0.70)% (0.69)% (0.57)%
(a) Total return for the Portfolio has been calculated based on the total return
for the invested Fund, assuming all distributions were reinvested, and
adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
The accompanying notes are an integral part of the financial statements.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 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
September 30, 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 coupon interest earned, 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.
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 are investment companies advised by The Boston Company
Asset Management, LLC (TBCAM), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 with 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 $79,504 during the period ended September 30, 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.
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. Pursuant to this
agreement, Mellon Bank received $10,036, for the period ended September 30,
2005. See Note 6 for further details.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. No other director, officer or employee of TBCAM or its affiliates
received 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 September 30, 2005, were $45,425,920 and
$49,624,904, respectively. For the period ended September 30, 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 September 30, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate cost $33,186,168
-----------
Gross unrealized appreciation $ 6,810,118
Gross unrealized depreciation (324,223)
-----------
Net unrealized appreciation $ 6,485,895
===========
(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.
25
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 September 30, 2005.
Futures contracts
The Portfolio may enter into financial futures contracts for the 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 September 30, 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 year ended September 30, 2005
and earned interest on the invested collateral of $72,518 of which, $49,105
was rebated to borrowers or paid in fees. At September 30, 2005, the
Portfolio had securities valued at $3,371,891 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 September 30, 2005, the facility fee was
$683 for the Portfolio.
During the period ended September 30, 2005, the Portfolio had average
borrowings outstanding of $226,700 on a total of ten days and incurred $148
of interest expense.
26
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Master Portfolio and Investors
of The Boston Company Small Cap Growth Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Small Cap Growth
Portfolio ( the "Portfolio") at September 30, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
27
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, 33 None $299
c/o Decision 11/3/1986 Decision Resources,
Resources, Inc. Inc. ("DRI")
260 Charles Street (biotechnology
Waltham, MA 02453 research and
9/30/40 consulting firm);
formerly Chairman of
the Board and Chief
Executive Officer,
DRI
Caleb Loring III Trustee Trustee since Trustee, Essex 33 None $311
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
P.O. Box 5600 trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 33 None $299
c/o Harvard 9/13/1989 Maier, Professor of
University Political Economy,
Littaver Center 127 Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since formerly Trustee, 33 None $299
P.O. Box 2333 11/3/1986 Mertens House, Inc.
New London, NH 03257 (hospice)
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 33 None $0
Mellon Institutional President Operating Officer
Asset Management and Chief of The Boston
One Boston Place Executive Company Asset
Boston, MA 02108 Officer Management, LLC;
7/24/65 formerly Senior Vice
President and Chief
Operating Officer,
Mellon Institutional
Asset Management
("MIAM") and Vice
President and Chief
Financial Officer,
MIAM
28
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
Mellon Institutional and Secretary Operations, Mellon Institutional Asset
Asset Management Management; formerly First Vice President,
One Boston Place Mellon Institutional Asset Management and
Boston, MA 02108 Mellon Global Investments
2/20/61
Steven M. Anderson Vice President Vice President since Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer 1999; Treasurer Mellon Institutional Asset Management
Asset Management since 2002
One Boston Place
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, Mellon Institutional Asset
Asset Management Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Compliance
Mellon Institutional President Manager, Mellon Institutional Asset
Asset Management Management ("MIAM"); formerly Shareholder
One Boston Place Services, MIAM and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset
1/19/71 Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional
Mellon Institutional Compliance Asset Management and Chief Compliance
Asset Management Officer Officer, Mellon Funds Distributor; formerly
One Boston Place Director, Blackrock, Inc., Senior Vice
Boston, MA 02108 President, State Street Research &
4/8/57 Management Company ("SSRM"), Vice President,
SSRM
29
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6941AR0905
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Annual Report The Boston Company
Small Cap Value Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2005
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. For a complete list of
the Fund's portfolio holdings, view the most recent quarterly holdings report,
semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://melloninstitutionalfunds.com or 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.
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
November 2005
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2005.
Financial markets mostly treaded water over the past 12 months, as investors
grappled with the economic impact of soaring energy costs and the prospect of
higher inflation. Despite the potential drag to the U.S. economy due to damage
inflicted by Hurricanes Katrina and Rita, the Federal Reserve gave every
indication that it intended to continue its steady tightening of short term
rates. This signals the Fed's belief that inflation is a greater threat than
that of recession.
While the stock market does not appear to be anticipating a recession, it showed
few signs of bullishness. The S&P 500 moved sideways over the year, mostly
within the 1150 - 1200 range, at a time when corporations are flush with cash
and profit margins and cash flows are generally healthy. The reasons for muted
enthusiasm aren't hard to find: consumer confidence is on the decline and the
energy supply shock is injecting new uncertainty. Demand is still strong around
the world but there are risks, particularly with inflationary expectations
creeping higher. The main risk is that tighter monetary policy will dampen
demand.
The bond market displayed a similar ambivalence. On the one hand, it was
difficult for bond investors to do more than "earn their coupon" as the yield
curve flattened. Yields on short term Treasury bills moved from just over 2% at
the start of the year to over 3.6% in October; yields on 20-year Treasury bonds
started and ended at 4.75% over the same period. On the other hand, despite
hurricanes and the downgrading of GM, the spread of high yield bonds over
Treasuries widened only minimally. This is a clear signal that bond investors
were still embracing risk - something they were not likely to do if an economic
downturn had been anticipated.
We believe that the current inflation pressures will be mitigated over time by
broader trends within the world economy, particularly the disinflationary
aspects of global trade. Profit growth is likely to slow in 2006, but from a
relatively strong position. The consensus U.S. forecast still calls for
reasonably solid real economic growth of about 3.3% and the return of the
world's second largest economy, Japan, to sustainable growth.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
/s/ Patrick J. Sheppard
Patrick J. Sheppard
President and CEO
Mellon Institutional Funds
One Boston Place o Boston, MA 02108-4402
A Mellon Asset Management Company
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
September 2005
In our commentary last year, terrorism and the upcoming elections were the focus
of our discussion. Now, energy prices, inflation fears, and interest rates are
at the forefront of investor concerns. However, despite these economic fears,
the equity markets continued to post healthy returns. Small-cap stocks continued
to perform well and outpaced their large-cap counterparts, buoyed by strong
profit growth and relatively low interest rates. Overall, the equity markets
sustained their strong positive momentum despite the devastation of the two gulf
coast hurricanes. While we don't see these events derailing the recent U.S.
economic strength, they could lead to slightly lower growth.
For the 12 months ended September 30, 2005 The Boston Company Small Cap Value
Fund had a total return of 21.34% versus 17.75% for the Russell 2000 Value
Index. The Fund has maintained strong relative performance during the past year
as portfolio holdings outperformed the benchmark in each of the three quarterly
periods that were positive. During the only negative quarter, the Fund declined
marginally less than the Index.
Broad sector performance within the Russell 2000 Value Index was solid during
the year. For the first time since the fourth quarter of 2003, growth issues
within the Russell 2000 marginally outperformed value issues on a trailing
12-month basis, gaining 17.97% versus value's gain of 17.75%. In addition, this
is the tightest 12-month performance margin between the two small-cap styles
since the first quarter of 1987.
We continue to believe the longer-term trend within small-cap equities is
movement away from the lower quality companies. However, factors that have
supported the broader small-cap market have not weakened as expected, as the
sector continues to generate profit growth that has outpaced large-caps for most
of the past five years. This is expected to continue through the end of 2005.
Relative to the index, the portfolio benefited from its exposure to the
Financials, Materials, and Technology sectors. In the Financial Services sector,
we remain underweight relative to the benchmark, reflecting our concern that the
rising interest rate environment will impact the sector's strongest sources of
growth over the past few years: mortgages and re-financings. Within Consumer
Discretionary, we have maintained our underweight. Consumer spending that had
been largely fueled by the meteoric rise in property values with historically
low interest rates is past. Our Technology investments are broadly diversified
among the technology segments, and are carrying overweights within areas such as
computers and peripherals, software, communications equipment, and IT services.
We continue to see attractive valuations and improving fundamentals in these
areas as we move into the seasonally strong fourth quarter.
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
In Healthcare, we lack exposure to the biotechnology and equipment/supplier
segments, and remain focused on companies whose earnings stand best positioned
to benefit from a variety of opportunities, such as healthcare providers and
facilities, as well as healthcare services. The Energy sector has now become the
focal point of inflation fears. Oil and gas prices hit new highs during the
quarter before settling down slightly, once again driving fears of profit
erosion and inflation. We continue to overweight the sector, but remain
sensitive to shifts in the energy markets. Even if shifts within the tight
supply-demand relationship occur, we feel that given the current high commodity
prices, companies within the Energy sector should continue to show strong
earnings and cash flows through 2005.
/s/ Stephanie Brandaleone /s/ Joseph Corrado
Stephanie Brandaleone Joseph Corrado
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Value Fund and the Russell 2000 Value Index
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED
DOCUMENT.]
TBC
PERIOD Small Cap Value Fund Russell 2000 Value Index*
2/1/00 100,000 100,000
3/31/00 117,919 106,610
6/30/00 118,912 108,690
9/30/00 126,979 116,667
12/31/00 131,836 126,124
3/31/01 128,448 127,350
6/30/01 149,446 142,170
9/30/01 130,942 123,211
12/31/01 158,998 143,811
3/31/02 175,988 157,587
6/30/02 170,003 154,246
9/30/02 137,952 121,406
12/31/02 141,694 127,381
3/31/03 132,789 120,910
6/30/03 162,696 148,385
9/30/03 178,859 159,848
12/31/03 207,037 186,010
3/31/04 223,910 198,881
6/30/04 231,020 200,567
9/30/04 232,506 200,867
12/31/04 264,849 227,389
3/31/05 253,715 218,344
6/30/05 268,978 229,427
9/30/05 282,114 236,523
Average Annual Total Returns
(for period ended 9/30/2005)
- --------------------------------------------------------------------------------
Since Inception
1 Year 3 Years 5 Years 2/1/2000
- --------------------------------------------------------------------------------
Fund 21.34% 26.93% 17.31% 20.11%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividends from income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
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 (April 1, 2005 to September 30, 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 April 1, 2005 to
April 1, 2005 September 30, 2005 September 30, 2005
- ------------------------------------------------------------------------------------------
Actual $1,000.00 $1,111.90 $5.56(1)
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.80 $5.32(1)
- -------
+ Expenses are equal to the Fund's annualized expense ratio of 1.05%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
(1) The example reflects the expenses of the Fund and the master portfolio in
which the Fund invests all of its assets.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Portfolio Information as of September 30, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -------------------------------------------------------------------------------
The Brink's Co. Industrial 2.0%
FMC Technologies, Inc. Energy 1.9
Laidlaw International, Inc. Industrial 1.7
Ralcorp Holdings, Inc. Consumer Staples 1.5
RTI International Metals, Inc. Basic Materials 1.5
Raymond James Financial, Inc. Financial 1.4
Shaw Group Inc. Industrial 1.4
Esterline Technologies Corp. Industrial 1.4
Amedisys, Inc. Health Care 1.4
Aspen Insurance Holdings Ltd. Financial 1.3
----
15.5%
* Excluding short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------------
Basic Materials 3.3%
Consumer Discretionary 12.8
Consumer Staples 4.3
Energy 7.0
Financial 18.1
Health Care 7.9
Industrial 22.2
Information Technology 16.5
Utilities 3.1
Short-term and Net Other Assets 4.8
-----
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 maybe different than those presented above.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap
Value Portfolio ("Portfolio"), at value (Note 1A) $189,251,192
Receivable for Fund shares sold 505,690
Prepaid expenses 8,217
------------
Total assets 189,765,099
Liabilities
Payable for Fund shares redeemed $65,470
Accrued professional fees 27,996
Accrued transfer agent fees (Note 2) 1,351
Accrued trustees' fees (Note 2) 500
Accrued expenses and other liabilities 22,600
-------
Total liabilities 117,917
------------
Net Assets $189,647,182
============
Net Assets consist of:
Paid-in capital $157,104,975
Accumulated net realized gain 13,297,731
Undistributed net investment income 78,874
Net unrealized appreciation 19,165,602
------------
Total Net Assets $189,647,182
============
Shares of beneficial interest outstanding 8,408,778
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 22.55
============
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio
(net of foreign withholding taxes of $1,293) $ 922,857
Interest and securities lending income allocated from Portfolio 251,717
Expenses allocated from Portfolio (977,473)
-----------
Net investment income allocated from Portfolio 197,101
Expenses
Transfer agent fees (Note 2) $19,714
Registration fees 31,500
Professional fees 40,453
Service fees 12,175
Insurance expense 550
Trustees' fees (Note 2) 1,937
Miscellaneous expenses 12,088
-------
Total expenses 118,417
-----------
Net investment income 78,684
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities 12,483,311
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities 8,515,565
-----------
Net realized and unrealized gain (loss) 20,998,876
-----------
Net Increase in Net Assets from Operations $21,077,560
===========
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 78,684 $ (127,820)
Net realized gain (loss) 12,483,311 9,973,051
Change in net unrealized appreciation (depreciation) 8,515,565 3,761,962
------------ -----------
Net increase (decrease) in net assets from investment operations 21,077,560 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 124,024,069 11,834,111
Value of shares issued in reinvestment of distributions 8,437,601 4,026,790
Cost of shares redeemed (15,210,189) (9,027,160)
------------ -----------
Net increase (decrease) in net assets from Fund share transactions 117,251,481 6,833,741
------------ -----------
Total Increase (Decrease) in Net Assets 128,465,445 15,876,686
Net Assets
At beginning of period 61,181,737 45,305,051
------------ -----------
At end of period (including undistributed net
investment income of $78,874 and $2,846) $189,647,182 $61,181,737
============ ===========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 21.91 $ 18.49 $ 14.30 $ 13.86 $ 14.01
-------- ------- ------- ------ -------
From Operations:
Net investment income (loss) * (a) 0.02 (0.05) (0.01) 0.05 0.10
Net realized and unrealized gains (loss) on investments 4.29 5.27 4.24 0.75 0.31
-------- ------- ------- ------ -------
Total from operations 4.31 5.22 4.23 0.41 0.80
-------- ------- ------- ------ -------
Less Distributions to Shareholders:
From net investment income -- -- (0.02) (0.04) (0.06)
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)
-------- ------- ------- ------ -------
Net Asset Value, End of Period $ 22.55 $ 21.91 $ 18.49 14.30 $ 13.86
======= ======= ======= ====== ========
Total Return 21.34% 29.92% 29.64%(b) 5.43%(b) 3.12%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (c) 1.05% 1.18% 1.15% 1.00% 1.00%
Net Investment Income (Loss) (to average daily net assets)* 0.08% (0.24)% (0.05)% 0.32% 0.68%
Portfolio Turnover N/A N/A 51%(d) 164%(d) 149%(d)
Net Assets, End of Period (000's omitted) $189,647 $61,182 $45,305 $35,934 $28,532
- -------------------
* 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
ratios would have been:
Net investment income (loss) per share (a) N/A N/A $ (0.03) $ 0.01 $ 0.05
Ratios (to average daily net assets):
Expenses (c) N/A N/A 1.28% 1.24% 1.37%
Net investment income (loss) N/A N/A (0.18)% 0.08% 0.31%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) 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.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 (86% at September 30, 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 Portfolio
values its securities at value as 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 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 realized and unrealized gains or
losses on REITS and wash sales.
Permanent book and tax basis differences 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.
(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
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 $19,714
during the period ended September 30, 2005.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. For the period ended September 30, 2005, the Fund paid $1,134. No
other director, officer or employee of TBCAM or its affiliates received 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator a service fee in an amount of up to 0.15%
(on an annualized basis) of the Fund's average daily net assets
attributable to fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended September 30, 2005 aggregated $132,015,480 and $25,101,917,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on
applicable tax allocations rules. Book/tax differences arise when changes
in proportionate interest for funds investing in the Portfolio occur.
(4) Shares of Beneficial Interest:s
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
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Shares sold 5,902,209 566,701
Shares issued to shareholders in
reinvestment of distributions 411,390 215,710
Shares redeemed (697,539) (440,530)
--------- --------
Net increase (decrease) 5,616,060 341,881
========= ========
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 30 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 September 30, 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.
As of September 30, 2005, the components of distributable earnings on a tax
basis were as follows:
Undistibuted capital gains $8,792,912
Undistributed ordinary income $4,740,166
Tax character of distributions paid during the fiscal years ended September
30, 2005 and September 30, 2004, were as follows:
2005 2004
---------- ----------
Distributions paid from:
Ordinary income $5,315,302 $2,331,714
Capital gains $4,548,294 $2,232,534
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of The Boston Company Small Cap Value Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Boston Company Small Cap Value Fund (the "Fund") at September 30, 2005, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
13
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--101.6%
EQUITIES--95.2%
Basic Materials--3.3%
Compass Minerals International, Inc. 45,700 $ 1,051,100
FMC Corp. (b) 31,500 1,802,430
Lesco, Inc. (b) 31,200 494,520
NN, Inc. 61,800 740,982
RTI International Metals, Inc. (b) 78,200 3,077,170
-------------
7,166,202
-------------
Consumer Discretionary--12.8%
Aztar Corp.(b) 65,700 2,024,217
Big 5 Sporting Goods Corp. 69,200 1,651,112
Charming Shoppes, Inc. (b) 144,100 1,537,547
Gemstar-TV Guide International, Inc. (b) 403,300 1,193,768
Gray Television, Inc. 88,800 940,392
Jos A Bank Clothiers, Inc. (a) (b) 41,100 1,776,342
Keystone Automotive Industries, Inc. (b) 27,400 789,394
Steven Madden Ltd. (b) 33,600 770,112
Matthews International Corp., Class A 23,900 903,181
Pacific Sunware of California (b) 45,700 979,808
Regis Corp. 44,800 1,694,336
Stanley Furniture Co., Inc. 28,100 735,939
Superior Industries International, Inc. (a) 41,300 888,776
The Reader's Digest Association 96,200 1,536,314
Too, Inc. (b) 60,600 1,662,258
Toro Co. 32,500 1,194,700
Tuesday Morning Corp. 31,500 814,905
Tupperware Corp. 71,600 1,631,048
Wabtec Corp. (a) 40,500 1,104,840
Winnebago Industries, Inc. 36,500 1,057,405
The Yankee Candle Co. 74,000 1,813,000
Zale Corp. (b) 53,800 1,462,284
-------------
28,161,678
-------------
Consumer Staples--4.3%
Del Monte Foods Company (b) 163,900 1,758,647
J & J Snack Food Corp. 12,300 710,940
Lance, Inc. 44,800 782,208
Performance Food Group Co. (a) (b) 68,600 2,165,016
Ralcorp Holdings, Inc. 77,000 3,227,840
The Boston Beer Co., Inc. (b) 34,500 862,500
-------------
9,507,151
-------------
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Energy--7.0%
Dril-Quip, Inc. (b) 22,000 $ 1,056,000
FMC Technologies, Inc. (b) 95,100 4,004,661
Oil States International, Inc. (b) 69,800 2,534,438
Tetra Technologies (b) 85,300 2,663,066
Unit Corp. (b) 30,900 1,708,152
Universal Compression Holdings, Inc. (b) 38,600 1,535,122
Veritas DGC, Inc. (b) 54,500 1,995,790
------------
15,497,229
------------
Financial--18.1%
Alabama National Bancorp/Del 15,700 1,003,858
Alexandria Real Estate Equities, Inc. 19,600 1,620,724
Aspen Insurance Holdings Ltd. 93,600 2,765,880
Assured Guaranty Ltd. 80,200 1,919,186
BankAtlantic Bancorp, Inc. 56,800 965,032
Capital Automotive REIT 48,600 1,881,306
Capital Trust, Inc., Class A REIT 40,000 1,286,400
Crescent Real Estate Equities Co. REIT 77,100 1,581,321
Financial Federal Corp. 40,600 1,615,880
First Potomac Realty Trust REIT 32,200 827,540
First Republic Bank 41,100 1,447,953
Horace Mann Educators Corp. 44,700 884,166
Innkeepers USA Trust REIT 100,100 1,546,545
Jones Lang Lasalle 40,800 1,879,248
Knight Capital Group, Inc. (a) (b) 310,700 2,581,917
Lasalle Hotel Properties 38,400 1,322,880
Metris Cos, Inc. (b) 91,400 1,337,182
Mission West Properties REIT 85,300 856,412
Phoenix Companies, Inc. (a) 94,800 1,156,560
Piper Jaffray Companies, Inc. (b) 34,500 1,030,170
Provident Bankshares Corp. 31,300 1,088,614
Provident New York Bancorp, Inc. 60,600 707,202
Raymond James Financial, Inc. 91,000 2,922,920
Redwood Trust, Inc. REIT (a) 15,000 729,150
Santander BanCorp. 24,900 613,287
Sterling Bancshares, Inc. 64,100 942,911
Sterling Financial Corp. 34,500 777,975
Strategic Hotel Capital, Inc. REIT 45,000 821,700
Scottish Annuity & Life Holding 65,200 1,554,368
------------
39,668,287
------------
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Health Care--7.9%
Amedisys, Inc. (a) (b) 74,300 $ 2,897,700
Andrx Corp. (b) 80,400 1,240,572
Apria Healthcare Group, Inc. (b) 22,900 730,739
Hooper Holmes, Inc. 182,900 718,797
Ista Pharmaceuticals, Inc. (b) 155,200 1,030,528
Kindred Healthcare, Inc. (b) 46,300 1,379,740
Magellan Health Services, Inc. (b) 28,700 1,008,805
Medicines Co. (b) 51,500 1,185,015
Omnicell, Inc. (a) (b) 82,500 802,725
Option Care, Inc. (a) 126,100 1,846,104
Pediatrix Medical Group, Inc. (b) 23,500 1,805,270
Res-Care, Inc. (b) 110,100 1,694,439
Sierra Health Services (b) 16,000 1,101,920
-----------
17,442,354
-----------
Industrial--22.2%
AGCO Corp. (b) 108,900 1,981,980
Bowne & Co., Inc. 123,900 1,770,531
Briggs & Stratton Corp. 28,900 999,651
Casella Waste Systems, Inc. (b) 83,400 1,095,042
Central Parking Corp. 67,100 1,003,145
CIRCOR International, Inc. 43,400 1,191,330
Comfort Systems USA, Inc. (b) 84,800 747,088
Consolidated Graphics, Inc. (b) 19,400 835,170
Courier Corp. 22,400 837,760
Duratek, Inc. (b) 66,400 1,213,792
Esterline Technologies Corp. (b) 76,800 2,909,952
GSI Group, Inc. (b) 157,400 1,644,830
Global Cash Access, Inc. (a) (b) 9,340 131,694
Granite Construction, Inc. 67,900 2,596,496
Herley Industries, Inc. (b) 86,900 1,618,947
Insituform Technologies, Inc. (b) 59,200 1,023,568
Labor Ready (b) 73,200 1,877,580
Laidlaw International, Inc. 146,200 3,533,654
LECG Corp.(b) 61,900 1,423,700
MSC Industrial Direct Co., Inc. (a) 32,800 1,087,976
McGrath Rentcorp 56,300 1,594,979
Pinnacle Airlines Corp. (a) (b) 107,800 700,700
Reliance Steel & Aluminum 36,100 1,910,773
SI International, Inc. (b) 30,200 935,294
Shaw Group, Inc. (b) 118,100 2,912,346
Source Interlink Cos., Inc. (b) 131,800 1,457,708
Tennant Co. 26,900 1,102,362
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Industrial (continued)
The Brink's Co. 101,800 $ 4,179,908
United Rentals, Inc. (a) (b) 106,100 2,091,231
Waste Connections (a) (b) 71,400 2,504,712
------------
48,913,899
------------
Information Technology--16.5%
Adaptec, Inc. (b) 194,600 745,318
Avid Technology (b) 36,700 1,519,380
CSG Systems International , Inc. (b) 80,100 1,738,971
Cabot Microelectronics (a) (b) 32,300 948,974
Carrier Access Corp. (b) 150,000 828,000
CyberOptics Corp. (b) 46,900 653,317
Digi International, Inc. (b) 110,400 1,184,592
EPIQ Systems, Inc. (b) 53,900 1,176,098
Electronics for Imaging, Inc. (b) 92,300 2,117,362
Epicor Software Corp. (b) 99,500 1,293,500
FEI Co. (b) 98,400 1,894,200
Foundry Networks, Inc. (b) 102,500 1,301,750
Integrated Device Technology, Inc. (b) 150,800 1,619,592
MKS Instruments, Inc. (b) 48,800 840,824
McData Corp. (a) (b) 208,000 1,089,920
Motive, Inc. (b) 87,300 553,482
NIC, Inc. (b) 205,700 1,347,335
Newport Corp. (b) 89,800 1,250,914
Perot Systems Corp., Class A (b) 139,300 1,971,095
Phase Forward, Inc. (b) 161,500 1,765,195
Photon Dynamics, Inc. (b) 41,300 790,895
PLATO Learning, Inc. (b) 125,400 954,294
Progress Software Corp. (b) 72,000 2,287,440
RSA Security, Inc. (b) 88,200 1,121,022
Rudolph Technologies, Inc. (b) 43,800 589,986
SafeNet, Inc. (b) 42,900 1,557,699
Sybase, Inc. (b) 70,800 1,658,136
Symmetricom, Inc. (b) 184,900 1,431,126
------------
36,230,417
------------
Utilities--3.1%
Cleco Corp. 88,600 2,089,188
PNM Resources, Inc. 93,200 2,672,044
UGI Corp. 71,700 2,018,355
------------
6,779,587
------------
TOTAL EQUITIES (Cost $189,574,571) 209,366,804
------------
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--September 30, 2005
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.2%
U.S. Government--0.2%
U.S. Treasury Bill (c) (d) (Cost $427,026) 3.32% 12/15/2005 $430,000 $ 427,177
------------
Shares
----------
INVESTMENT OF CASH COLLATERAL--6.2%
BlackRock Cash Strategies L.L.C. (Cost $13,704,689) 3.93% 13,704,689 13,704,689
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $203,706,286) 223,498,670
------------
AFFILIATED INVESTMENTS--6.6%
Dreyfus Institutional Preferred Plus Money Market Fund (e)
(Cost $14,670,520) 3.73% 14,670,520 14,670,520
------------
TOTAL INVESTMENTS--108.2% (Cost $218,376,806) 238,169,190
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(8.2%) (18,133,993)
------------
NET ASSETS--100% $220,035,197
============
Notes to Schedule of Investments:
REIT--Real Estate Investment Trust
(a) Security, or a portion of thereof, was on loan at 9/30/05.
(b) Non-income producing security
(c) Rate noted is yield to maturity.
(d) Denotes all or part of security segregated as collateral.
(e) Affiliated institutional money market fund.
Underlying Unrealized
Contract Position Expiration Date Face Amount at Value Gain
- -------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (21 Contracts) Long 12/15/2005 $7,028,125 $28,831
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statement of Assets and Liabilities
September 30, 2005
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A) (including securities on loan, valued at $13,108,246 (Note 6))
Unaffiliated issuers, at value (cost $203,706,286) $223,498,670
Affiliated issuers, at value (Note 1E) (cost $14,670,520) 14,670,520
Receivable for investments sold 417,275
Interest and dividends receivable 194,125
Receivable for variation margin on open futures contracts (Note 5) 50,400
Prepaid expenses 8,657
------------
Total assets 238,839,647
Liabilities
Payable for investments purchased $ 5,061,694
Collateral for securities on loan (Note 6) 13,704,689
Accrued accounting, administration and custody fees (Note 2) 11,688
Accrued professional fees 20,944
Accrued trustees' fees and expenses (Note 2) 4,913
Other accrued expenses and liabilities 522
-----------
Total liabilities 18,804,450
------------
Net Assets (applicable to investors' beneficial interest) $220,035,197
============
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statement of Operations
For the Year Ended September 30, 2005
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $1,366) $ 1,054,864
Interest income (Note 1E)
Unaffiliated issuers 8,538
Affiliated issuers 245,221
Security lending income (Note 6) 30,694
-----------
Total investment income 1,339,317
Expenses
Investment advisory fee (Note 2) $ 949,016
Accounting, administration and custody fees (Note 2) 108,304
Professional fees 32,949
Trustees' fees and expenses (Note 2) 15,437
Insurance expense 4,900
Miscellaneous 2,540
-----------
Total expenses 1,113,146
-----------
Net investment income 226,171
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 12,658,813
Futures contracts 1,586,090
-----------
Net realized gain (loss) 14,244,903
Change in unrealized appreciation (depreciation) on:
Investment securities 8,926,285
Futures contracts 28,831
-----------
Change in net unrealized appreciation (depreciation) 8,955,116
-----------
Net realized and unrealized gain (loss) 23,200,019
-----------
Net Increase in Net Assets from Operations $23,426,190
===========
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statements of Changes In Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income (loss) $ 226,171 $ (52,543)
Net realized gain (loss) 14,244,903 10,097,630
Change in net unrealized appreciation (depreciation) 8,955,116 3,979,928
------------ ------------
Net increase (decrease) in net assets from operations 23,426,190 14,025,015
------------ ------------
Capital Transactions
Contributions 158,240,730 21,855,319
Withdrawals (27,943,665) (14,941,264)
------------ ------------
Net increase (decrease) in net assets from capital transactions 130,297,065 6,914,055
------------ ------------
Total Increase (Decrease) in Net Assets 153,723,255 20,939,070
Net Assets
At beginning of period
At end of period 66,311,942 45,372,872
------------ ------------
$220,035,197 $ 66,311,942
============ ============
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the period
January 28, 2003
Year Ended September 30, (commencement of
----------------------------------- operations) to
2005 2004 September 30, 2003
-------------- -------------- --------------------
Total Return (a) 21.45% 30.07% 29.85%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.94% 1.03% 1.10%(c)
Net Investment Income (Loss) (to average daily net assets)* 0.19% (0.10)% (0.07)%(c)
Portfolio Turnover 70% 123% 102%(b)
Net Assets, End of Year (000's omitted) $220,035 $66,312 $45,373
- -----------
* For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory
fee and/ or reimbursed the Portfolio for a portion of its operating expenses. If this voluntary action had not been taken, the
ratios would have been:
Ratios (to average daily net assets):
Expenses N/A N/A 1.10%(c)
Net investment income (loss) N/A N/A (0.07)%(c)
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
(b) Not annualized.
(c) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 September 30, 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 September 30, 2005, The Boston Company Small Cap Value
Fund and the Dreyfus Premier Small Cap Equity Fund held 86% and 14%
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.
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.
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.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
E. Affiliated issuers:
Affiliated issuers are 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 with 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 was
charged $108,304 during the period ended September 30, 2005.
The Portfolio entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Portfolio lending agent.
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. Pursuant to this
agreement, Mellon Bank received $13,144 for the period ended September 30,
2005. See Note 6 for further details.
Effective July 1, 2005, the Trust reimburses Mellon Institutional Asset
Management for a portion of the salary of the Trust's Chief Compliance
Officer. No other 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 September 30, 2005 were $203,153,162 and
$80,909,210, respectively. For the period ended September 30, 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 September 30, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate cost $218,517,094
============
Gross unrealized appreciation $ 24,486,108
Gross unrealized depreciation (4,834,012)
------------
Net unrealized appreciation (depreciation) $ 19,652,096
============
(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
24
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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.
At September 30, 2005, the Portfolio did not enter into option
transactions.
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 September 30, 2005, the Portfolio held futures contracts. See the
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 September 30, 2005
and earned interest on the invested collateral of $220,533 of which
$189,839 was rebated to borrowers or paid in fees. At September 30, 2005,
the Portfolio had securities valued at $13,108,246 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 September 30, 2005, the facility fee was
$1,994 for the Portfolio.
During the period ended September 30, 2005, the Portfolio had average
borrowings outstanding of $66,714 on a total of seven days and incurred $32
of interest expense.
25
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of the Mellon Institutional Funds Master Portfolio and Investors
of The Boston Company Small Cap Value Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Small Cap Value
Portfolio ( the "Portfolio") at September 30, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 18, 2005
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 September 30, 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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, 33 None $299
c/o Decision Resources, since Decision Resources,
Inc. 11/3/1986 Inc. ("DRI")
260 Charles Street (biotechnology
Waltham, MA 02453 research and
9/30/40 consulting firm);
formerly Chairman of
the Board and Chief
Executive Officer,
DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 33 None $311
c/o Essex Street since Associates (family
Associates 11/3/1986 investment trust
P.O. Box 5600 office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph 33 None $299
c/o Harvard University since Maier, Professor of
Littaver Center 127 9/13/1989 Political Economy,
Cambridge, MA 02138 Harvard University
8/5/44
John H. Hewitt Trustee Trustee formerly Trustee, 33 None $299
P.O. Box 2333 since Mertens House, Inc.
New London, NH 03257 11/3/1986 (hospice)
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 33 None $0
Mellon Institutional and Chief Operating Officer of
Asset Management Executive Officer The Boston Company
One Boston Place Asset Management,
Boston, MA 02108 LLC; formerly Senior
7/24/65 Vice President and
Chief Operating
Officer, Mellon
Institutional Asset
Management ("MIAM")
and Vice President
and Chief Financial
Officer, MIAM
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 First
Asset Management Vice President, Mellon Institutional Asset Management
One Boston PLace 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
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Institutional President Operations, Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hulgren Assistant Vice Since 2001 Assistant Vice President and Compliance Manager,
Mellon Institutional President Mellon Institutional Asset Management ("MIAM");
Asset Management formerly Shareholder Services, MIAM and Shareholder
One Boston Place Representative, Standish Mellon Asset Management
Boston, MA 02108 Company LLC
1/19/71
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Institutional Asset
Mellon Institutional Compliance Management and Chief Compliance Officer,
Asset Management Officer Mellon Funds Distributor; formerly Director,
One Boston PLace Blackrock, Inc. Senior Vice President, State Street
Boston, MA 02108 Research & Management Company ("SSRM"),
4/8/57 Vice President, SSRM
28
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6944AR0905
Item 2. Code of Ethics.
The Registrant has adopted a Code of Ethics, as defined in Item 2(b) of
Form N-CSR, that applies to the Principal Executive Officer and
Principal Financial Officer. For the fiscal year ended September 30,
2005, there were no amendments to a provision of the Code of Ethics nor
were there any waivers granted from a provision of the Code of Ethics.
A copy of the Registrant's Code of Ethics that applies to the Principal
Executive Officer and Principal Financial Officer is filed as an
exhibit to this Form N-CSR under item 12(a)(1).
Item 3. Audit Committee Financial Expert.
The Registrant's Board of Trustees has determined that the Registrant
has more than one audit committee financial expert, as defined in Item
3 of Form N-CSR, serving on its audit committee. The audit committee
financial experts serving on the Registrant's audit committee are John
H. Hewitt and Caleb Loring III, both of whom are "independent" pursuant
to paragraph (a)(2) of Item 3 of Form N-CSR. Mr. Hewitt served at
Morgan Stanley as a securities analyst and also in a supervisory role
regarding analysis. He has held a chartered financial analyst
designation, as well as a master's degree in business administration
from Harvard University. He has been a member of the Registrant's audit
committee since its inception. Mr. Loring served as an executive in the
commercial lending division of the Bank of Boston, N.A., performing and
supervising credit analyses and reviewing financial statements of
potential and existing borrowers. Also, Mr. Loring has served as a
private trustee in the Ayer Family Office, where his duties involve
financial statement analysis. He has been a member of the Registrant's
audit committee since its inception, and has served on the audit
committees of several privately held companies.
Item 4. Principal Accountant Fees and Services.
(a) AUDIT FEES: The aggregate fees billed for professional services
rendered by the Registrant's principal accountant,
PricewaterhouseCoopers LLP, for the audit of the Registrant's
annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory
filings or engagements for the fiscal years ended September 30,
2005 and 2004 were $183,941 and $112,518, respectively.
(b) AUDIT-RELATED FEES: The aggregate fees billed for the fiscal years
ended September 30, 2005 and 2004 for assurance and related
services by PricewaterhouseCoopers LLP that are reasonably related
to the performance of the audit of the Registrant's financial
statements and are not reported under paragraph (a) of this Item
were $57,000 and $57,000, respectively. The nature of the services
comprising the fees disclosed under this Item for both years
consist of the examination of securities and similar investments
of the Registrant's investment series pursuant to the requirements
of Rule 17f-2 under the Investment Company Act of 1940.
(c) TAX FEES: The aggregate fees billed for the fiscal years ended
September 30, 2005 and 2004 for professional services rendered by
PricewaterhouseCoopers LLP for tax compliance, tax advice, and tax
planning were $45,840 and $85,985, respectively.
(d) ALL OTHER FEES: Other than the services reported in paragraphs (a)
through (c) of this Item, PricewaterhouseCoopers LLP billed no
other fees for products or services provided for the fiscal years
ended September 30, 2005 and 2004.
(e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY: The Registrant's audit
committee pre-approves all audit and non-audit services to be
performed by the Registrant's accountant before the accountant is
engaged by the Registrant to perform such services.
(e) (2) 100% of the services described in each of paragraphs (b)
through (d) of this Item 4 were pre-approved by the Registrant's
audit committee before the accountant was engaged by the
Registrant to perform such services.
(f) Not applicable.
(g) The aggregate non-audit fees billed by
PricewaterhouseCoopers LLP for services rendered to the
Registrant and the Registrant's investment advisers, and any
entity controlling, controlled by or under common control with
the advisers that provides ongoing services to the Registrant for
the fiscal years ended September 30, 2005 and 2004 were $0 and
$31,000, respectively. Services provided in 2004 included the
review and documentation of the Registrant's change in custodian
and fund accounting agent and the review and issuance of consent
related to the registration and filing of a new fund on Form
N-1A. The aggregate non-audit fees billed by the Registrant's
accountant for services rendered to the Registrant's transfer
agent by PricewaterhouseCoopers LLP for the fiscal years ended
September 30, 2005 and 2004 were $75,000 and $43,708,
respectively. Services provided in both years included a review
of the transfer agency function and to issue a report under Rule
17Ad-13(a)(3) of the Securities and Exchange Act of 1934.
(h) The Registrant's Audit Committee of the Board of Trustees had
pre-approved all of the non-audit services that were rendered to
the Registrant's investment advisers and any entity controlling,
controlled by, or under common control with the investment
advisers that provides ongoing services to the Registrant, and no
such non-audit services were not pre-approved.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the Registrant.
Item 6. Schedule of Investments
Included as part of the 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 Investment 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 second 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) Code of Ethics required by Item 2 is attached hereto as an
exhibit.
(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
(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: December 9, 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: December 9, 2005
By (Signature and Title): /s/ STEVEN M. ANDERSON
-----------------------------------------------------
Steven M. Anderson, Vice President and Treasurer
Date: December 9, 2005