-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ENqybYQMS1w6SV89XsMgCknEBx0NR9+Ol9ayXonS4930ZpzV3+65AsVRi76uz26/ dgt9SVUmimYqj4KNgg3png== 0001145443-03-001162.txt : 20030908 0001145443-03-001162.hdr.sgml : 20030908 20030908172409 ACCESSION NUMBER: 0001145443-03-001162 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030908 EFFECTIVENESS DATE: 20030908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST CENTRAL INDEX KEY: 0000799295 IRS NUMBER: 043106135 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04813 FILM NUMBER: 03886614 BUSINESS ADDRESS: STREET 1: ONE BOSTON PLACE CITY: BOSTON STATE: MA ZIP: 02108-4408 BUSINESS PHONE: 1-800-221-4795 MAIL ADDRESS: STREET 1: ONE BOSTON PLACE CITY: BOSTON STATE: MA ZIP: 02108-4408 FORMER COMPANY: FORMER CONFORMED NAME: STANDISH AYER & WOOD INVESTMENT TRUST DATE OF NAME CHANGE: 19920703 N-CSRS 1 d13242.txt OMB APPROVAL OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-04813 --------------------------------------------- Standish, Ayer & Wood Investment Trust ------------------------------------------------------------------- (Exact name of registrant as specified in charter) One Boston Place Boston, MA 02108 ------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Denise Kneeland One Boston Place Boston MA 02108 ------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 800-221-4795 Date of fiscal year end: 12/31/2003 ---------------------------- Date of reporting period: 1/1/03 - 6/30/03 ------------------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 0549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. Item 1. Reports to Stockholders. (Semi-Annual Report for the period 1/1/03 through 6/30/03 is filed herewith) MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $11,703,762 (Note 7)) (identified cost, $97,626,396) $99,200,960 Cash 1,384 Receivable for investments sold 18,388,525 Receivable for Fund shares sold 1,589 Interest receivable 437,572 Receivable for delayed delivery transactions (Note 8) 309,469 Prepaid expenses 10,935 ----------- Total assets 118,350,434 LIABILITIES Payable for investments purchased $26,994,856 Payable for variation margin on open financial futures contracts (Note 6) 9,375 Payable upon return of securities loaned (Note 7) 11,967,837 Payable for delayed delivery transactions (Note 8) 11,567,344 Options written, at value (Note 6) (premiums received, $15,277) 18,941 Accrued accounting, custody and transfer agent fees 17,763 Accrued trustees' fees and expenses (Note 2) 2,129 Accrued expenses and other liabilities 18,473 ---------- Total liabilities 50,596,718 ----------- NET ASSETS $67,753,716 =========== NET ASSETS CONSIST OF: Paid-in capital $64,041,832 Accumulated net realized gain 2,076,921 Undistributed net investment income 41,180 Net unrealized appreciation 1,593,783 ----------- TOTAL NET ASSETS $67,753,716 =========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,202,391 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 21.16 ===========
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $7,510 (Note 7)) $1,476,116 Dividend income 984 ---------- Total investment income 1,477,100 EXPENSES Investment advisory fee (Note 2) $ 163,262 Accounting, custody, and transfer agent fees 76,735 Legal and audit services 19,034 Insurance expense 5,858 Trustees' fees and expenses (Note 2) 4,337 Registration fees 3,360 Miscellaneous 3,747 --------- Total expenses 276,333 Deduct: Waiver of investment advisory fee (Note 2) (113,070) --------- Net expenses 163,263 ---------- Net investment income 1,313,837 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 2,206,823 Financial futures contracts (236,790) Written options transactions 126,295 --------- Net realized gain 2,096,328 Change in unrealized appreciation (depreciation) Investment securities (597,151) Financial futures contracts 148,462 Written options (52,219) --------- Change in net unrealized appreciation (depreciation) (500,908) ---------- Net realized and unrealized gain 1,595,420 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $2,909,257 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 1,313,837 $ 3,126,579 Net realized gain 2,096,328 1,225,101 Change in net unrealized appreciation (depreciation) (500,908) 1,604,794 ----------- ----------- Net increase in net assets from investment operations 2,909,257 5,956,474 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D) From net investment income (1,253,106) (3,279,497) From net realized gains on investments (138,062) (1,358,763) ----------- ----------- Total distributions to shareholders (1,391,168) (4,638,260) ----------- ----------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 3,705,203 21,825,313 Value of shares issued to shareholders in payment of distributions declared 513,414 2,339,137 Cost of shares redeemed (22,083,927) (4,946,160) ----------- ----------- Net increase (decrease) in net assets from Fund share transactions (17,865,310) 19,218,290 ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (16,347,221) 20,536,504 NET ASSETS At beginning of period 84,100,937 63,564,433 ----------- ----------- At end of period (including undistributed net investment income of $41,180 and distributions in excess of net investment income of $19,551, respectively) $67,753,716 $84,100,937 =========== ===========
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD SIX MONTHS YEAR ENDED JUNE 1, 2000 ENDED DECEMBER 31, (COMMENCEMENT OF JUNE 30, 2003 -------------------- OPERATIONS) TO (UNAUDITED) 2002 2001(A) DECEMBER 31, 2000 ------------- --------- --------- -------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 20.80 $ 20.41 $ 20.65 $ 20.00 ------- ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income*(1) 0.34 0.89 1.27 0.86 Net realized and unrealized gain on investments 0.40 0.79 0.59 0.89 ------- ------- ------- ------- Total from investment operations 0.74 1.68 1.86 1.75 ------- ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.35) (0.91) (1.30) (0.88) From net realized gain on investments (0.03) (0.38) (0.80) (0.22) ------- ------- ------- ------- Total distributions to shareholders (0.38) (1.29) (2.10) (1.10) ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 21.16 $ 20.80 $ 20.41 $ 20.65 ======= ======= ======= ======= TOTAL RETURN+++ 3.59%++ 8.44% 9.21% 8.87%++ RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.40%+ 0.40% 0.21% 0.00%+ Net Investment Income (to average daily net assets)* 3.22%+ 4.30% 6.00% 7.21%+ Portfolio Turnover 285%++ 391% 357% 136%++ Net Assets, End of Period (000's omitted) $67,754 $84,101 $63,564 $57,447
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory fee and reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share(1) $ 0.31 $ 0.83 $ 1.17 $ 0.78 Ratios (to average daily net assets): Expenses 0.68%+ 0.69% 0.68% 0.72%+ Net investment income 2.94%+ 4.01% 5.53% 6.48%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.004, increase net realized and unrealized gains and losses per share by $0.004 and decrease the ratio of net investment income to average net assets from 6.02% to 6.00%. Per share data and ratios/supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 113.1% ASSET BACKED -- 16.7% Advanta Home Equity Trust 1997-2 M1 7.550% 06/25/2027 $ 140,865 $ 143,933 Advanta Mortgage Loan Trust 1997-4 M1 7.040% 01/25/2029 240,403 247,465 Americredit Auto Receivables Trust 2001-D A3(a) 1.610% 09/12/2006 688,828 689,583 ANRC Auto Owner Trust 1999-A A4 6.940% 04/17/2006 252,728 253,319 BMW Vehicle Owner Trust 2001-A A3 4.700% 03/25/2005 153,729 154,741 Capital One Master Trust 2000-5 B(a) 1.555% 08/15/2006 1,000,000 1,000,455 Citibank Credit Card Issuance Trust 2003-A5 A5 2.500% 04/07/2008 1,045,000 1,061,514 Citibank Credit Card Master Trust I 1997-6 B, PO(b) 0.000% 08/15/2006 500,000 491,571 Citifinancial Mortgage Securities, Inc. 2003-2 AV1(a) 1.128% 05/25/2033 305,000 304,905 Daimler Chrysler Auto Trust 2001-C A3 4.210% 07/06/2005 1,000,000 1,011,782 Discover Card Master Trust I 1998-7 A 5.600% 05/16/2006 1,000,000 1,016,883 First Bankcard Master Credit Card Trust 2000-2A A(a) 1.350% 04/17/2006 400,000 400,062 First USA Credit Card Master Trust 1997-7 B(a) 1.666% 05/17/2007 1,500,000 1,501,484 MBNA Master Credit Card Trust 1996-K A(a) 1.310% 03/15/2006 800,000 800,158 MBNA Master Credit Card Trust 1998-J B 5.650% 02/15/2006 800,000 807,550 Residential Asset Mortgage Products, Inc. 2003-RS1 AI1(a) 1.480% 01/25/2019 316,763 316,703 Residential Asset Securities Corp. 2000-KS5 AI3 7.040% 04/25/2026 28,513 28,495 SLMA Student Loan Trust 2003-6 A1(a) 1.280% 06/16/2008 825,000 825,258 Toyota Auto Receivables Owner Trust 2002-B A2 2.790% 12/15/2004 286,795 287,592 ------------ Total Asset Backed (Cost $11,371,054) 11,343,453 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.3% Bear Stearns Mortgage 1998-2 B 6.750% 04/30/2030 64,354 63,228 Calwest Industrial Trust 2002-CALW A 144A 6.127% 02/15/2017 250,000 285,140 FNMA Grantor Trust 2001-T6 B 6.088% 05/25/2011 340,000 394,573 FNMA Grantor Trust 2002-T11 A 4.769% 04/25/2012 186,522 199,824 GNMA 2002-48 PF(a) 1.610% 05/15/2029 182,400 182,400 GNMA 2003-48 AC 2.712% 02/16/2020 284,116 285,928 Housing Securities, Inc. 1994-2 A1 6.500% 07/25/2009 53,675 56,383 Merrill Lynch Mortgage Investors, Inc. 1996-C2 D Non-ERISA 6.960% 11/21/2028 150,000 167,531 Vendee Mortgage Trust 2003-1 A 5.750% 09/15/2012 591,099 615,033 ------------ Total Collateralized Mortgage Obligations (Cost $2,175,485) 2,250,040 ------------ CORPORATE -- 17.9% BANKING -- 4.0% BankBoston NA 6.500% 12/19/2007 125,000 142,711 Fleet National Bank 5.750% 01/15/2009 225,000 250,458 National City Corp. 6.875% 05/15/2019 375,000 453,199 SunTrust Banks, Inc. 7.750% 05/01/2010 275,000 340,645 SunTrust Banks, Inc. Sub Notes 5.545% 12/01/2017 100,000 110,435 Union Planters Bank 5.125% 06/15/2007 155,000 168,250 Wachovia Corp. 7.500% 07/15/2006 25,000 28,727 Wells Fargo & Co. 4.250% 08/15/2003 1,000,000 1,003,704 Wells Fargo & Co. 5.000% 11/15/2014 200,000 212,100 ------------ 2,710,229 ------------
The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- BASIC INDUSTRY -- 0.7% Republic Services, Inc. 7.125% 05/15/2009 $ 125,000 $ 147,502 Republic Services, Inc. Senior Notes 6.750% 08/15/2011 195,000 224,113 Westvaco Corp. 8.200% 01/15/2030 95,000 120,230 ------------ 491,845 ------------ CAPITAL GOODS -- 0.1% Boeing Co. 6.125% 02/15/2033 50,000 52,532 ------------ COMMUNICATIONS -- 0.3% AOL Time Warner, Inc. 7.700% 05/01/2032 155,000 180,523 ------------ CONSUMER CYCLICAL -- 2.4% Coors Brewing Co. 6.375% 05/15/2012 180,000 204,860 General Motors Corp. 8.375% 07/15/2033 225,000 221,247 International Flavors & Fragrance 6.450% 05/15/2006 275,000 304,701 New England Telephone & Telegraph Co. 7.875% 11/15/2029 145,000 188,564 News America, Inc. 6.750% 01/09/2038 250,000 281,314 Viacom, Inc. 5.625% 05/01/2007 325,000 361,260 Wal-Mart Stores 4.550% 05/01/2013 60,000 62,359 ------------ 1,624,305 ------------ CONSUMER NONCYCLICAL -- 0.9% Aramark Services, Inc. 7.000% 07/15/2006 95,000 105,667 Archer-Daniels-Midland 7.000% 02/01/2031 325,000 393,989 Laboratory Corp. of America Holdings 5.500% 02/01/2013 85,000 90,664 ------------ 590,320 ------------ ELECTRIC -- 1.3% Dominion Resources, Inc. Senior Notes 5.700% 09/17/2012 180,000 196,542 DTE Energy Co. Senior Notes 6.650% 04/15/2009 225,000 260,733 Niagara Mohawk Power 7.375% 07/01/2003 207,927 207,954 Niagara Mohawk Power Senior Notes 7.750% 10/01/2008 200,000 240,108 ------------ 905,337 ------------ ENERGY -- 0.9% Amoco Co. 6.500% 08/01/2007 225,000 258,681 Conoco, Inc. Senior Notes 6.950% 04/15/2029 45,000 54,030 Progress Energy, Inc. Senior Notes 7.750% 03/01/2031 165,000 198,214 Waste Management, Inc. 7.750% 05/15/2032 70,000 87,548 ------------ 598,473 ------------ FINANCIAL -- 6.2% Allstate Corp. 5.350% 06/01/2033 80,000 78,465 Allstate Corp. Senior Notes 6.125% 12/15/2032 65,000 72,054 Allstate Corp. Senior Notes 7.200% 12/01/2009 125,000 152,574 Archstone-Smith Trust REIT 5.000% 08/15/2007 75,000 80,616 ASIF Global Financng XIX 144A 4.900% 01/17/2013 425,000 445,041 Boston Properties, Inc. 144A REIT 5.625% 04/15/2015 70,000 73,582 Boston Properties, Inc. REIT Senior Notes 6.250% 01/15/2013 170,000 183,641
The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- FINANCIAL (CONTINUED) City National Corp. Senior Notes 144A 5.125% 02/15/2013 $ 375,000 $ 385,657 EOP Operating LP 7.875% 07/15/2031 150,000 181,685 EOP Operating LP Senior Notes 7.000% 07/15/2011 145,000 169,420 Exxon Capital Corp. 6.125% 09/08/2008 140,000 161,482 Ford Motor Credit Co. 6.500% 01/25/2007 85,000 89,289 Ford Motor Credit Co. 7.250% 10/25/2011 380,000 389,694 General Electric Capital Corp. 6.750% 03/15/2032 200,000 234,208 General Motors Corp. 7.200% 01/15/2011 100,000 101,559 Goldman Sachs Group, Inc. 6.875% 01/15/2011 250,000 293,326 Jefferies Group, Inc. Senior Notes 7.500% 08/15/2007 195,000 223,315 Morgan Stanley 4.250% 05/15/2010 175,000 179,467 Morgan Stanley Dean Witter 6.600% 04/01/2012 200,000 233,371 Morgan Stanley Dean Witter Capital, Inc. 2001-PPM A2 6.400% 02/15/2031 153,996 172,415 SLM Corp. 5.000% 04/15/2015 200,000 207,641 Travelers Property Casualty Corp. Senior Notes 6.375% 03/15/2033 100,000 109,893 ------------ 4,218,395 ------------ PUBLIC UTILITY -- 0.6% Appalachian Power Co. 5.950% 05/15/2033 85,000 85,158 Keyspan Corp. 4.650% 04/01/2013 95,000 97,770 Northern States Power Co. 8.000% 08/28/2012 45,000 56,802 Public Service Co. of CO 7.875% 10/01/2012 45,000 56,650 Wisconsin Electric Power 5.625% 05/15/2033 130,000 133,991 ------------ 430,371 ------------ TRANSPORTATION -- 0.5% CSX Corp. 7.250% 05/01/2027 40,000 47,343 Union Pacific Corp. 3.875% 02/15/2009 250,000 254,305 ------------ 301,648 ------------ Total Corporate (Cost $11,235,701) 12,103,978 ------------ MUNICIPAL OBLIGATIONS -- 2.9% Illinois State 5.100% 06/01/2033 560,000 550,687 New Jersey Economic Development Authority(b) 0.000% 02/15/2017 380,000 190,650 New Jersey State Turnpike Authority 4.252% 01/01/2016 625,000 625,119 New York NY NCL 5.250% 06/01/2012 200,000 220,378 New York NY NCL 5.500% 08/01/2012 350,000 392,871 ------------ Total Municipal Obligations (Cost $1,997,811) 1,979,705 ------------ YANKEE BONDS -- 3.7% British Telecom PLC 8.875% 12/15/2030 40,000 54,726 Carnival Corp. 6.650% 01/15/2028 75,000 78,875 Carnival PLC 7.875% 06/01/2027 125,000 148,984 ChevronTexaco Capital Co. 3.500% 09/17/2007 225,000 233,318 Deutsche Telekom 8.750% 06/15/2030 180,000 228,181 France Telecom 8.500% 03/01/2031 140,000 193,723 National Westminster Bank(a) 7.750% 04/29/2049 545,000 644,600 Nordea Bank Sweden AB 144A 5.250% 11/30/2012 205,000 219,109 Potash Corp. Saskatchewan 7.750% 05/31/2011 175,000 213,394
The accompanying notes are an integral part of the financial statements. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- YANKEE BONDS (CONTINUED) Province of Ontario 5.125% 07/17/2012 $ 115,000 $ 127,212 Province of Quebec 5.000% 07/17/2009 115,000 126,052 United Mexican States 6.625% 03/03/2015 85,000 90,525 United Mexican States 8.300% 08/15/2031 110,000 126,665 ------------ Total Yankee Bonds (Cost $2,279,024) 2,485,364 ------------ NON-AGENCY -- 8.0% PASS THRU SECURITIES -- 8.0% Chase Commercial Mortgage Securities Corp. 1997-1 D Non-ERISA 7.370% 06/16/2029 175,000 202,324 Chase Commercial Mortgage Securities Corp. 1997-1 E Non-ERISA 7.370% 06/19/2029 300,000 345,471 Chase Commercial Mortgage Securities Corp. 1997-2 C 6.600% 12/12/2029 50,000 57,042 Chase Commercial Mortgage Securities Corp. 1998-1 A2 6.560% 05/18/2030 250,000 286,649 CS First Boston Mortgage Securities Corp. 2001-CF2 A4 6.505% 02/15/2034 220,000 256,225 DLJ Commercial Mortgage Corp. 1998-CF2 A1B 6.240% 11/12/2031 215,000 245,685 DLJ Commercial Mortgage Corp. 1998-CF2 B1(a) 7.058% 11/12/2031 215,000 248,139 DLJ Commercial Mortgage Corp. 1999-CG1 A1A 6.080% 03/10/2032 402,277 435,211 JP Morgan Commercial Mortgage Finance Corp. 1997-C5 A3 7.088% 09/15/2029 125,000 142,944 Morgan Stanley Capital I 1998-HF1 C 6.750% 03/15/2030 180,000 208,272 Morgan Stanley Capital I 1998-WF1 A2 6.550% 03/15/2030 250,000 285,958 Morgan Stanley Capital I 1999-CAM1 A2 6.760% 03/15/2032 243,208 268,245 Morgan Stanley Capital I 1999-CAM1 A4 7.020% 03/15/2032 125,000 147,891 Morgan Stanley Capital I 1999-RM1 A2 6.710% 12/15/2031 370,000 431,520 Morgan Stanley Dean Witter Capital I 2001-IQA A1 4.570% 12/18/2032 354,548 372,027 Morgan Stanley Dean Witter Capital I 2001-PPM A3 6.540% 02/01/2031 350,000 402,631 Mortgage Capital Funding, Inc. 1996-MC1A C 7.800% 04/15/2006 310,000 349,622 Mortgage Capital Funding, Inc. 1997-MC2 C 6.881% 11/20/2027 310,000 356,604 Mortgage Capital Funding, Inc. 1997-MC2 D 7.117% 11/20/2007 350,000 392,656 ------------ 5,435,116 ------------ Total Non-Agency (Cost $5,125,570) 5,435,116 ------------ U.S. GOVERNMENT AGENCY -- 37.2% PASS THRU SECURITIES -- 37.2% FHLMC Gold 6.000% 05/01/2017 497,072 516,921 FNMA 5.000% 07/01/2018 200,000 207,062 FNMA 6.000% 04/01/2017 - 05/01/2033 1,434,858 1,496,156 FNMA 6.500% 12/01/2015 - 08/01/2032 2,176,960 2,272,243 FNMA 7.000% 11/01/2031 - 06/01/2032 1,013,767 1,067,628 FNMA 7.500% 02/01/2029 - 09/01/2029 49,879 53,330 FNMA (TBA)# 5.000% 07/01/2018 - 07/01/2033 2,500,000 2,560,500 FNMA (TBA)# 5.500% 08/01/2033 - 09/01/2033 9,250,000 9,528,043 FNMA (TBA)# 6.000% 07/01/2033 6,215,000 6,457,770 FNMA (TBA)# 6.500% 07/01/2033 755,000 787,323
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- PASS THRU SECURITIES (CONTINUED) GNMA 6.500% 07/15/2032 - 10/15/2032 $ 90,349 $ 94,870 GNMA 8.000% 08/15/2025 - 11/15/2026 173,616 188,278 ------------ 25,230,124 ------------ Total U.S. Government Agency (Cost $25,170,603) 25,230,124 ------------ U.S. TREASURY OBLIGATIONS -- 23.4% TREASURY BONDS -- 4.3% U.S. Treasury Bond 5.375% 02/15/2031 410,000 461,683 U.S. Treasury Bond 6.250% 05/15/2030 1,942,000 2,417,639 ------------ 2,879,322 ------------ TREASURY NOTES -- 19.1% U.S. Treasury Inflation Index Note 3.875% 01/15/2009 2,964,542 3,395,326 U.S. Treasury Note 2.625% 05/15/2008 3,925,000 3,960,878 U.S. Treasury Note 3.250% 08/15/2007 120,000 125,236 U.S. Treasury Note+ 6.750% 05/15/2005 100,000 110,129 U.S. Treasury Note+ 7.875% 11/15/2004 50,000 54,568 United States Treasury Note 1.250% 05/31/2005 5,285,000 5,281,903 ------------ 12,928,040 ------------ Total U.S. Treasury Obligations (Cost $15,776,430) 15,807,362 ------------ TOTAL BONDS AND NOTES (COST $75,131,678) 76,635,142 ------------ SHARES --------- PREFERRED STOCKS -- 0.0% CONVERTIBLE PREFERRED STOCKS -- 0.0% General Motors Corp. Series B 5.25% CVT Pfd 425 9,520 ------------ Total Convertible Preferred Stocks (Cost $10,575) 9,520 ------------ TOTAL PREFERRED STOCKS (COST $10,575) 9,520 ------------ CONTRACT SIZE --------- PURCHASED OPTIONS -- 0.2% UST 3.00% Call, Strike Price 100.00, 07/28/2003 16,750 49,988 UST 4.88% Call, Strike Price 107.47, 07/28/2003 24,750 88,365 ------------ TOTAL PURCHASED OPTIONS (COST $66,035) 138,353 ------------
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE/ VALUE SECURITY RATE MATURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 33.1% CASH EQUIVALENTS -- 17.7% Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 $1,491,499 $ 1,491,499 Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 1,636,928 1,636,928 Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 1,309,542 1,309,542 Goldman Sachs Financial Square Funds - Prime Obligations Fund(c) 1,636,928 1,636,928 Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 2,946,470 2,946,470 Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 2,946,470 2,946,470 ------------ 11,967,837 ------------ U.S. GOVERNMENT -- 12.2% FNMA Discount Note++ 0.957% 08/18/2003 620,000 619,256 FNMA Discount Note++ 2.340% 07/17/2003 1,111,000 1,110,427 U.S. Treasury Bill++ 1.062% 07/10/2003 5,175,000 5,173,448 U.S. Treasury Bill++ 1.094% 07/17/2003 1,349,000 1,348,326 ------------ 8,251,457 ------------ REPURCHASE AGREEMENTS -- 3.2% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $2,198,697 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $2,298,545. 2,198,651 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $22,418,108) 22,417,945 ------------ TOTAL INVESTMENTS -- 146.4% (COST $97,626,396) $ 99,200,960 OTHER ASSETS, LESS LIABILITIES -- (46.4%) (31,447,244) ------------- NET ASSETS -- 100.0% $ 67,753,716 =============
NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. CVT - Convertible FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association NCL - Non-callable PO - Principal Only REIT - Real Estate Investment Trust TBA - To Be Announced UST - United States Treasury (a) Variable Rate Security; rate indicated is as of 6/30/03. (b) Zero coupon security. (c) Represents investments of security lending collateral (Note 7). # All or a portion of these securities are delayed delivery contracts (Note 8). + Denotes all or part of security pledged as collateral (Note 6). ++ Rate noted is yield to maturity. The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Investment Grade Bond Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to maximize total return, consistent with preserving principal and liquidity, primarily through the generation of current income and, to a lesser extent, capital appreciation by investing, under normal circumstances, at least 80% of net assets in investment grade fixed income securities including, but not limited to, government, agency, corporate and mortgage and asset-backed issues. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Investment Grade Bond Fund was changed to Standish Mellon Investment Grade Bond Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are primarily traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Fund are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Fund to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Fund and the counterparty. Additionally, procedures have been established by the Fund to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. 11 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- D. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for losses deferred due to wash sales, amortization and/or accretion of premiums and discounts on certain securities and the timing of recognition of gains and losses on futures contracts. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. E. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. F. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory and administrative services and general office facilities, is paid monthly at the annual rate of 0.40% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit total Fund operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.40% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $113,070 of its investment advisory fee. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. 12 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ------------ ------------ U.S. Government Securities $234,452,553 $256,573,811 ============ ============ Investments (non-U.S.Government Securities) $ 20,620,275 $ 12,143,602 ============ ============
(4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 176,824 1,054,357 Shares issued to shareholders in payment of distributions declared 24,430 113,335 Shares redeemed (1,041,548) (239,259) ---------- ---------- Net increase (decrease) (840,294) 928,433 ========== ==========
At June 30, 2003, two shareholders held of record approximately 63% and 13% of the total outstanding shares of the Fund. Investment activity of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $97,625,546 =========== Gross unrealized appreciation 1,751,464 Gross unrealized depreciation (176,050) ----------- Net unrealized appreciation $ 1,575,414 ===========
13 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (6) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Fund's Prospectus and Statement of Additional Information. The Fund trades the following instruments with off-balance sheet risk: A summary of the written put options for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS -------------------- ---------------- Outstanding, beginning of period 4 $ 86,013 Options written 11 90,269 Options expired (10) (61,763) Options closed (5) (114,519) ------------ --------- Outstanding, end of period 0 $ -- ============ =========
At June 30, 2003, the Fund held no written put option contracts. A summary of the written call options for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS -------------------- --------------- Outstanding, beginning of period 4 $ 27,179 Options written 11 52,448 Options expired (2) (11,375) Options closed (11) (52,975) ------------ -------- Outstanding, end of period 2 $ 15,277 ============ ========
At June 30, 2003, the Fund held the following written call option contracts:
SECURITY CONTRACTS VALUE ------------------------------------------------------------ --------- ---------- UST 3.00% Call, Strike Price 103.00, 11/15/2007 1 $ 8,113 UST 4.88% Call, Strike Price 112.47, 02/15/2012 1 10,828 ------- Total (premiums received $15,277) $18,941 =======
At June 30, 2003, the Fund had segregated sufficient securities for open written options contracts. INTEREST RATE FLOORS Interest rate floors purchased by the Fund entitle the Fund to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate amount. Credit and market risk exist with respect to these instruments. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or a counterparty to a transaction may not perform. The Fund expects to enter these transactions primarily for hedging purposes including, but not limited to, preserving a return or spread on a particular investment or portion of its portfolio, protecting against currency fluctuations, as a duration management technique or protecting against an increase in the price of securities the Fund 14 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- anticipates purchasing at a later date. Interest rate floors are marked-to-market daily based on quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statement of Operations. Realized gains or losses from these agreements are disclosed in the Statement of Operations. At June 30, 2003, the Fund held no open interest rate floor agreements. FUTURES CONTRACTS The Fund may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to the margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparties do not perform under the contract's terms. The Fund enters into financial futures transactions primarily to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At June 30, 2003, the Fund held the following financials futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN ----------------------------------------------------------------------------------------------- U.S. 10 Year Note (25 contracts) Short 9/30/2003 $2,935,937 $22,883
(7) SECURITIES LENDING: The Fund may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. At June 30, 2003, the Fund loaned securities having a market value of $11,703,762. The Fund received cash collateral of $11,967,837 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (8) DELAYED DELIVERY TRANSACTIONS: The Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. This Fund segregates securities having a value at least equal to the amount of the purchase commitment. 15 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- The Fund may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of the decline in the value of the Fund's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Fund may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. See Schedule of Investments for outstanding delayed delivery transactions. 16 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
17 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
18 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $125,736 (Note 7)) (identified cost, $6,920,951) $7,217,272 Receivable for investments sold 491,268 Receivable for Fund shares sold 1,850,000 Interest receivable 162,786 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 1,042 Prepaid expenses 4,702 ---------- Total assets 9,727,070 LIABILITIES Payable for investments purchased $ 412,112 Payable for closed forward foreign currency exchange contracts (Note 6) 10,898 Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 12,604 Payable upon return of securities loaned (Note 7) 128,950 Due to custodian 1,290,386 Accrued accounting, custody and transfer agent fees 7,393 Accrued trustees' fees and expenses (Note 2) 739 Accrued expenses and other liabilities 16,448 --------- Total liabilities 1,879,530 ---------- NET ASSETS $7,847,540 ========== NET ASSETS CONSIST OF: Paid-in capital $6,685,498 Accumulated net realized gain 797,574 Undistributed net investment income 80,919 Net unrealized appreciation 283,549 ---------- TOTAL NET ASSETS $7,847,540 ========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 368,785 ========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 21.28 ==========
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $115 (Note 7)) $ 314,993 EXPENSES Investment advisory fee (Note 2) $17,184 Accounting, custody, and transfer agent fees 39,014 Legal and audit services 15,944 Registration fees 2,306 Insurance expense 1,954 Trustees' fees and expenses (Note 2) 1,309 Miscellaneous 2,568 ------- Total expenses 80,279 Deduct: Waiver of investment advisory fee (Note 2) (17,184) Reimbursement of Fund operating expenses (Note 2) (52,783) ------- Total expense deductions (69,967) ------- Net expenses 10,312 ---------- Net investment income 304,681 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 884,864 Written options transactions 360 Foreign currency transactions and forward foreign currency exchange contracts (11,279) ------- Net realized gain 873,945 Change in unrealized appreciation (depreciation) Investment securities (25,964) Written options (2,295) Foreign currency and forward foreign currency exchange contracts (8,290) ------- Change in net unrealized appreciation (depreciation) (36,549) ---------- Net realized and unrealized gain 837,396 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $1,142,077 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 304,681 $ 659,881 Net realized gain 873,945 130,459 Change in net unrealized appreciation (depreciation) (36,549) 217,507 ----------- ----------- Net increase in net assets from investment operations 1,142,077 1,007,847 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F) From net investment income (210,615) (592,613) ----------- ----------- Total distributions to shareholders (210,615) (592,613) ----------- ----------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 3,770,000 10,547,142 Value of shares issued to shareholders in payment of distributions declared 205,800 577,427 Cost of shares redeemed (4,329,216) (7,972,702) ----------- ----------- Net increase (decrease) in net assets from Fund share transactions (353,416) 3,151,867 ----------- ----------- TOTAL INCREASE IN NET ASSETS 578,046 3,567,101 NET ASSETS At beginning of period 7,269,494 3,702,393 ----------- ----------- At end of period (including undistributed net investment income of $80,919 and distributions in excess of net investment income of $13,147, respectively) $ 7,847,540 $ 7,269,494 =========== ===========
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD MARCH 26, 2001 SIX MONTHS (COMMENCEMENT OF ENDED OPERATIONS) JUNE 30, 2003 YEAR ENDED TO DECEMBER 31, (UNAUDITED) DECEMBER 31, 2002 2001 ------------- ----------------- ---------------- NET ASSET VALUE, BEGINNING OF PERIOD $18.39 $17.67 $20.00 ------ ------ ------ FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.88 1.59 1.58 Net realized and unrealized gain on investments 2.61 0.65 0.10 ------ ------ ------ Total from investment operations 3.49 2.24 1.68 ------ ------ ------ LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.60) (1.52) (3.90) From tax return of capital -- -- (0.11) ------ ------ ------ Total distributions to shareholders (0.60) (1.52) (4.01) ------ ------ ------ NET ASSET VALUE, END OF PERIOD $21.28 $18.39 $17.67 ====== ====== ====== TOTAL RETURN+++ 19.14%++ 13.20% 8.94%++ RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.30%+ 0.30% 0.30%+ Net Investment Income (to average daily net assets)* 8.86%+ 8.83% 10.33%+ Portfolio Turnover 134%++ 421% 505%++ Net Assets, End of Period (000's omitted) $7,848 $7,269 $3,702
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose any of its investment advisory fee and reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share(1) $ 0.68 $ 1.23 $ 1.34 Ratios (to average daily net assets): Expenses 2.33%+ 2.31% 1.82%+ Net investment income 6.83%+ 6.82% 8.81%+
(1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absence of fee waiver and expense limitation. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ------------------------------------------------------------------------------------------------ BONDS AND NOTES -- 90.3% CORPORATE -- 12.7% ENERGY -- 6.0% Gazprom OAO 144A Notes 9.625% 03/01/2013 USD 200,000 $ 220,000 Petroliam Nasional Berhad 144A 7.750% 08/15/2015 200,000 246,907 ---------- 466,907 ---------- FINANCIAL -- 6.7% Banque Centrale de Tunisie 7.375% 04/25/2012 USD 30,000 34,500 Pemex Project Funding Master Trust 8.625% 02/01/2022 240,000 272,400 Telefonos de Mexico SA 8.250% 01/26/2006 195,000 218,887 ---------- 525,787 ---------- Total Corporate (Cost $956,913) 992,694 ---------- SOVEREIGN BONDS -- 75.7% Dominican Republic 144A 9.040% 01/23/2013 USD 39,000 34,710 Dominican Republic 144A 9.500% 09/27/2006 20,000 18,800 Dominican Republic Euro Registered 9.500% 09/27/2006 40,000 37,600 Dominican Republic Registered 9.040% 01/23/2013 25,000 22,250 Ministry Finance Russia 3.000% 05/14/2008 105,000 96,075 Nigeria Promissory Notes Series RC 5.092% 01/05/2010 240,000 84,000 Republic of Argentina(a) 1.369% 08/03/2012 125,000 74,250 Republic of Brazil(a) 2.188% 04/15/2012 155,000 116,637 Republic of Brazil 8.000% 04/15/2014 197,026 173,383 Republic of Brazil 8.875% 04/15/2024 90,000 69,300 Republic of Brazil 10.000% 01/16/2007 455,000 465,237 Republic of Brazil 10.125% 05/15/2027 250,000 215,625 Republic of Brazil 10.250% 06/17/2013 230,000 216,545 Republic of Brazil 11.000% 08/17/2040 85,000 77,137 Republic of Brazil 12.000% 04/15/2010 140,000 144,200 Republic of Brazil 14.500% 10/15/2009 110,000 126,500 Republic of Bulgaria 144A 8.250% 01/15/2015 62,000 73,160 Republic of Bulgaria IAB PDI(a) 2.188% 07/28/2011 57,600 55,296 Republic of Chile 7.125% 01/11/2012 30,000 34,885 Republic of Colombia 7.625% 02/15/2007 55,000 58,988 Republic of Colombia 9.750% 04/23/2009 130,000 148,200 Republic of Colombia 10.000% 01/23/2012 145,000 162,400 Republic of Ecuador 144A 12.000% 11/15/2012 45,000 36,450 Republic of Ecuador 144A Step Up Notes(b) 6.000% 08/15/2030 90,000 54,900 Republic of El Salvador 7.750% 01/24/2023 40,000 41,600 Republic of El Salvador 8.500% 07/25/2011 20,000 21,450 Republic of Panama 8.875% 09/30/2027 35,000 37,975 Republic of Panama 9.625% 02/08/2011 60,000 69,900 Republic of Peru 9.125% 02/21/2012 130,000 138,580 Republic of Peru PDI(a) 5.000% 03/07/2017 134,400 114,240 Republic of Philippines 8.375% 03/12/2009 140,000 149,450 Republic of Philippines 9.375% 01/18/2017 80,000 88,000 Republic of Philippines 10.625% 03/16/2025 55,000 64,075
The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ------------------------------------------------------------------------------------------------ SOVEREIGN BONDS (CONTINUED) Republic of Turkey 11.875% 01/15/2030 USD 45,000 $ 46,631 Republic of Turkey 11.750% 06/15/2010 175,000 181,563 Republic of Uruguay 7.500% 03/15/2015 48,000 36,960 Republic of Uruguay 7.875% 01/15/2033 32,115 21,356 Republic of Venezuela 9.250% 09/15/2027 300,000 222,000 Republic of Venezuela(a) 1.875% 12/18/2007 107,143 85,714 Russian Federation 5.000% 03/31/2030 630,000 610,313 Russian Federation 8.750% 07/24/2005 145,000 161,856 Russian Federation 11.000% 07/24/2018 210,000 300,300 Ukraine Government 144A 7.650% 06/11/2013 100,000 99,250 Ukraine Government Senior Notes 11.000% 03/15/2007 37,334 41,114 United Mexican States 8.125% 12/30/2019 90,000 103,275 United Mexican States 8.300% 08/15/2031 320,000 368,480 United Mexican States 8.625% 03/12/2008 65,000 77,935 United Mexican States 9.875% 02/01/2010 205,000 263,938 ---------- Total Sovereign Bonds (Cost $5,698,307) 5,942,483 ---------- FOREIGN DENOMINATED -- 1.9% FRANCE -- 0.3% Ivory Coast FLIRB{*}(a) 2.000% 03/29/2018 FRF 620,000 20,475 ---------- SOUTH AFRICA -- 1.6% Republic of South Africa 13.000% 08/31/2010 ZAR 790,000 129,045 ---------- Total Foreign Denominated (Cost $136,781) 149,520 ---------- TOTAL BONDS AND NOTES (COST $6,792,001) 7,084,697 ---------- SHARES ------- WARRANTS -- 0.1% GOVERNMENT BACKED -- 0.1% United Mexican States Series B, 6/30/2004 (USD) 250,000 2,500 United Mexican States Series C, 6/30/2005 (USD) 250,000 750 United Mexican States Series D, 6/30/2006 (USD) 250,000 250 United Mexican States Series E, 6/30/2007 (USD) 250,000 125 ---------- 3,625 ---------- TOTAL WARRANTS (COST $0) 3,625 ---------- PAR VALUE ------- SHORT-TERM INVESTMENTS -- 1.6% CASH EQUIVALENTS -- 1.6% Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 16,071 16,071 Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 17,638 17,638 Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 14,110 14,110
The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE/ VALUE SECURITY RATE MATURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------ CASH EQUIVALENTS (CONTINUED) Goldman Sachs Financial Square Funds - Prime Obligations Fund(c) USD 17,637 $ 17,637 Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 31,747 31,747 Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 31,747 31,747 ---------- 128,950 ---------- TOTAL SHORT-TERM INVESTMENTS (COST $128,950) 128,950 ---------- TOTAL INVESTMENTS -- 92.0% (COST $6,920,951) $ 7,217,272 OTHER ASSETS, LESS LIABILITIES -- 8.0% 630,268 ------------- NET ASSETS -- 100.0% $ 7,847,540 =============
NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. FLIRB - Front Loaded Interest Reduction Bond FRF - French Franc IAB - Interest Arrears Bonds PDI - Past Due Interest Bonds Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2003. Maturity date disclosed is the ultimate maturity. USD - United States Dollar ZAR - South African Rand (a) Variable Rate Security; rate indicated is as of 6/30/03. (b) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. The maturity date shown is the ultimate maturity. (c) Represents investments of security lending collateral (Note 7). {*} Defaulted security. The accompanying notes are an integral part of the financial statements. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PERCENTAGE OF NET TOP TEN COUNTRIES ASSETS - ------------------------------------------------------------------------ Brazil 20.5% Russia 17.7% Mexico 13.2% Colombia 4.7% Venezuela 3.9% Philippines 3.8% United States 3.7% Peru 3.2% Malaysia 3.1% Turkey 2.9%
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Opportunistic Emerging Markets Debt Fund (the "Fund") is a separate non-diversified investment series of the Trust. The objective of the Fund is to generate a high total return through a combination of capital appreciation and income, by investing, under normal circumstances, at least 80% of net assets in fixed income securities issued by governments, companies and banks of emerging markets, as well as preferred stocks, warrants and tax-exempt bonds. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Opportunistic Emerging Markets Debt Fund was changed to Standish Mellon Opportunistic Emerging Markets Debt Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are primarily traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Fund are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Fund to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Fund and the counterparty. Additionally, procedures have been established by the Fund to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. The Fund does not isolate that portion of the results of operations resulting from 9 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually received or paid. D. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. E. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. F. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income will be declared and distributed quarterly. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for losses deferred due to wash sales, foreign currency gains and losses, post-October losses, amortization and/or accretion of premiums and discounts on certain securities and the timing of recognition of gains and losses on futures contracts. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. G. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. 10 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- H. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 0.50% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit total Fund operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.30% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $17,184 of its investment advisory fee and reimbursed the Fund for $52,783 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ---------- ---------- U.S. Government Securities $ -- $ -- ========== ========== Investments (non-U.S.Government Securities) $9,050,539 $9,758,953 ========== ==========
(4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 175,538 583,270 Shares issued to shareholders in payment of distributions declared 10,041 32,307 Shares redeemed (212,063) (429,880) ------------ -------------- Net increase (decrease) (26,484) 185,697 ============ ==============
At June 30, 2003, three shareholders held of record approximately 40%, 25% and 19% of the total outstanding shares of the Fund. All of the Fund's shares are beneficially owned by fiduciary accounts over which Standish Mellon and its affiliates have either sole or joint investment discretion. 11 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $6,925,303 ========== Gross unrealized appreciation 360,152 Gross unrealized depreciation (68,183) ---------- Net unrealized appreciation $ 291,969 ==========
(6) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Fund's Prospectus and Statement of Additional Information. The Fund trades the following instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Fund may use options to seek to hedge against risks of market exposure and changes in securities prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. Options, both held and written by the Fund, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Fund is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. 12 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- A summary of the written put options for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 5,535 Options expired (1) (5,535) --- ------- Outstanding, end of period 0 $ -- === =======
At June 30, 2003, the Fund held no written put option contracts. A summary of the written call options for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 4,140 Options closed (1) (4,140) --- ------- Outstanding, end of period 0 $ -- === =======
At June 30, 2003, the Fund held no written call option contracts. FORWARD CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At June 30, 2003, the Fund held the following forward foreign currency or cross currency exchange contracts: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS) -------------------------------------------------------------------------------------------------- Euro 29,000 09/17/2003 $ 33,209 $ 34,251 $ 1,042 South African Rand 980,000 08/29/2003 128,889 116,285 (12,604) ------------- ------------- ------------- TOTAL $ 162,098 $ 150,536 $ (11,562) ============= ============= =============
FUTURES CONTRACTS The Fund may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to the margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged 13 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparties do not perform under the contract's terms. The Fund enters into financial futures transactions primarily to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The Fund entered into no such transactions during the six months ended June 30, 2003. (7) SECURITIES LENDING: The Fund may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. At June 30, 2003, the Fund loaned securities having a market value of $125,736. The Fund received cash collateral of $128,950 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (8) DELAYED DELIVERY TRANSACTIONS: The Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. This Fund segregates securities having a value at least equal to the amount of the purchase commitment. The Fund may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of the decline in the value of the Fund's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Fund may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. The Fund entered into no such transactions during the six months ended June 30, 2003. 14 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
15 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
16 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in Standish Mellon High Yield Bond Portfolio ("Portfolio"), at value (Note 1A) $55,270,484 Receivable for Fund shares sold 456 Prepaid expenses 9,655 ----------- Total assets 55,280,595 LIABILITIES Payable for Fund shares redeemed $55,335 Accrued accounting, custody and transfer agent fees 2,684 Accrued trustees' fees and expenses (Note 2) 492 Accrued expenses and other liabilities 9,611 ------ Total liabilities 68,122 ----------- NET ASSETS $55,212,473 =========== NET ASSETS CONSIST OF: Paid-in capital $64,751,927 Accumulated net realized loss (12,299,500) Undistributed net investment income 429,671 Net unrealized appreciation 2,330,375 ----------- TOTAL NET ASSETS $55,212,473 =========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,479,421 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 15.87 ===========
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Interest income allocated from Portfolio $2,058,436 Dividend income allocated from Portfolio 60,965 Expenses allocated from Portfolio (123,304) ---------- Net investment income allocated from Portfolio 1,996,097 EXPENSES Accounting, custody, and transfer agent fees $ 14,214 Registration fees 9,472 Legal and audit services 7,624 Trustees' fees and expenses (Note 2) 991 Insurance expense 475 Miscellaneous 3,612 --------- Total expenses 36,388 Deduct: Reimbursement of Fund operating expenses (Note 2) (36,388) --------- Net expenses 0 ---------- Net investment income 1,996,097 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 1,428,076 Written options transactions 120 Swap Contracts (25,367) Foreign currency transactions and forward foreign currency exchange contracts (350,665) --------- Net realized gain 1,052,164 Change in unrealized appreciation (depreciation) allocated from Portfolio on: Investment securities 3,250,556 Written options (765) Swap Contracts 15,100 Foreign currency and forward foreign currency exchange contracts 148,098 --------- Change in net unrealized appreciation (depreciation) 3,412,989 ---------- Net realized and unrealized gain on investments 4,465,153 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $6,461,250 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 1,996,097 $ 3,783,370 Net realized gain (loss) 1,052,164 (3,642,617) Change in net unrealized appreciation (depreciation) 3,412,989 2,085,028 ----------- ------------ Net increase in net assets from investment operations 6,461,250 2,225,781 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C) From net investment income (1,480,227) (3,605,252) Return of capital -- (6,037) ----------- ------------ Total distributions to shareholders (1,480,227) (3,611,289) ----------- ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 8,858,677 17,255,283 Value of shares issued to shareholders in payment of distributions declared 1,374,577 3,132,167 Cost of shares redeemed (4,060,818) (21,244,604) ----------- ------------ Net increase (decrease) in net assets from Fund share transactions 6,172,436 (857,154) ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 11,153,459 (2,242,662) NET ASSETS At beginning of period 44,059,014 46,301,676 ----------- ------------ At end of period (including undistributed net investment income of $429,671 and distributions in excess of net investment income of $86,199, respectively) $55,212,473 $ 44,059,014 =========== ============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 2003 ----------------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 14.34 $ 14.88 $ 15.88 $ 17.39 $ 19.02 $ 20.51 ------- ------- ------- ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.61 1.26 1.40 1.64 1.84 1.70 Net realized and unrealized gain (loss) on investments 1.37 (0.59) (1.18) (1.19) (1.45) (1.52) ------- ------- ------- ------- ------- ------- Total from investment operations 1.98 0.67 0.22 0.45 0.39 0.18 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.45) (1.21) (1.21) (1.93) (2.00) (1.67) From tax return of capital -- -- (0.01) (0.03) (0.02) -- ------- ------- ------- ------- ------- ------- Total distributions to shareholders (0.45) (1.21) (1.22) (1.96) (2.02) (1.67) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 15.87 $ 14.34 $ 14.88 $ 15.88 $ 17.39 $ 19.02 ======= ======= ======= ======= ======= ======= TOTAL RETURN+++ 13.94%++ 4.70% 1.52% 2.84% 2.20% 0.86% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)*(2) 0.50%+ 0.50% 0.50% 0.37% 0.00% 0.00% Net Investment Income (to average daily net assets)* 8.08%+ 8.68% 8.86% 10.41% 9.87% 8.40% Net Assets, End of Period (000's omitted) $55,212 $44,059 $46,302 $31,807 $31,138 $40,457
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment adisory fee payable to the Portfolio and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share(1) $ 0.57 $ 1.21 $ 1.33 $ 1.64 $ 1.64 $ 1.51 Ratios (to average daily net assets): Expenses(2) 1.00%+ 1.01% 0.97% 1.11% 1.08% 0.91% Net investment income 7.58%+ 8.17% 8.39% 9.67% 8.79% 7.49%
(a) Through its investment in the Portfolio, the Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.05, increase net realized and unrealized gains and losses per share by $.0.05 and decrease the ratio of net investment income to average net assets from 9.20% to 8.86%. Per share data and ratios/supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. (2) Includes the Fund's share of the Standish Mellon High Yield Bond Portfolio's allocated expenses. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absense of expense waivers. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon High Yield Bond Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to maximize total return, consisting primarily of a high level of income. The Fund invests all of its investable assets in an interest of the Standish Mellon High Yield Bond Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust and which has the same investment objective as the Fund. The Portfolio Trust seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in fixed income securities issued by U.S. and foreign governments, companies and banks, as well as tax-exempt securities, preferreds and warrants. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 100% at June 30, 2003). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish High Yield Bond Fund was changed to Standish Mellon High Yield Bond Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Currently, the Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually, as will dividends from net investment income. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, amortization and/or accretion of premiums and discounts on certain securities, non-taxable dividends, capital loss carryforwards, post-October losses, losses deferred due to wash sales and excise tax regulations. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. COMMITMENT AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Standish Mellon voluntarily agreed to limit the total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding commissions, taxes and extraordinary expenses) to 0.50% of the Fund's average daily net assets. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily reimbursed the Fund for $36,388 of its operating expenses. Effective January 28, 2003, the Fund began imposing a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. The redemption fee is applicable to shares of the Fund purchased on or after January 28, 2003. For the period ended June 30, 2003, the Fund received $722 in redemption fees. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the six months ended June 30, 2003 aggregated $8,858,959 and $4,193,656, respectively. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON HIGH YIELD BOND FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 587,845 1,205,169 Shares issued to shareholders in payment of distributions declared 89,536 217,488 Shares redeemed (269,861) (1,461,971) ------------ --------------- Net increase (decrease) 407,520 (39,314) ============ ===============
At June 30, 2003, one shareholder held of record approximately 55% of the total outstanding shares of the Fund. Investment activity of this shareholder could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 7 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 93.4% ASSET BACKED -- 1.7% Badger Tobacco Asset Securitization Corp. 6.125% 06/01/2027 USD 275,000 $ 255,918 Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 260,000 260,691 Louisiana Tobacco Settlement Funding Corp. 5.500% 05/15/2030 385,000 320,212 South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 90,000 82,737 ----------- Total Asset Backed (Cost $885,843) 919,558 ----------- CONVERTIBLE CORPORATE BONDS -- 1.7% Davita, Inc. 7.000% 05/15/2009 260,000 270,400 Echostar DBS Corp. 4.875% 01/01/2007 260,000 260,629 Lamar Advertising Co. 5.250% 09/15/2006 175,000 179,802 Meristar Hospitality Corp. REIT CVT 9.500% 04/01/2010 175,000 177,375 Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 50,000 23,122 Xcel Energy, Inc. 144A 7.500% 11/21/2007 40,000 55,200 ----------- Total Convertible Corporate Bonds (Cost $917,505) 966,528 ----------- CORPORATE -- 74.6% BASIC INDUSTRY -- 13.0% Corn Products International, Inc. Senior Notes 8.250% 07/15/2007 145,000 158,775 Corrections Corp. of America Senior Notes 7.500% 05/01/2011 60,000 62,850 Crompton Corp. Senior Notes 8.500% 03/15/2005 75,000 79,125 CSC Holdings, Inc. 8.125% 08/15/2009 450,000 461,250 CSC Holdings, Inc. Senior Notes 8.125% 07/15/2009 275,000 283,937 Earle M. Jorgensen Co. 9.750% 06/01/2012 100,000 106,000 Equistar Chemical/Funding 144A Senior Notes 10.625% 05/01/2011 235,000 240,875 Freeport-McMoRan Copper & Gold, Inc. 144A Senior Notes 10.125% 02/01/2010 175,000 196,000 Georgia-Pacific Corp. 144A Senior Notes 7.375% 07/15/2008 440,000 447,700 Georgia-Pacific Corp. 144A Senior Notes 8.875% 02/01/2010 150,000 162,000 Great Lakes Dredge & Dock Co. 11.250% 08/15/2008 200,000 212,000 HMP Equity Holdings Corp. 144A(b) 0.000% 05/15/2008 110,000 56,100 Huntsman International LLC 9.875% 03/01/2009 225,000 235,125 IMC Global, Inc. 10.875% 06/01/2008 165,000 170,775 Kansas City Southern 7.500% 06/15/2009 250,000 258,750 National Waterworks, Inc. Series B 10.500% 12/01/2012 55,000 61,050 Owens-Brockway Glass Container, Inc. 144A 7.750% 05/15/2011 80,000 84,200 Owens-Illinois, Inc. 7.500% 05/15/2010 80,000 77,600 Pinnacle Partners 144A Senior Notes 8.830% 08/15/2004 885,000 911,550 Pioneer Natural Resources Co. 7.500% 04/15/2012 75,000 86,250 Resolution Performance Products Senior Sub Notes 13.500% 11/15/2010 580,000 580,000 Steel Dynamics, Inc. 9.500% 03/15/2009 450,000 472,500 Texas Industries, Inc. 144A Senior Notes 10.250% 06/15/2011 390,000 405,600 US Steel Corp. Senior Notes 9.750% 05/15/2010 365,000 374,125 Williams Cos., Inc. 7.125% 09/01/2011 225,000 219,375 Williams Cos., Inc. 7.625% 07/15/2019 475,000 460,750 Williams Cos., Inc. Senior Notes 8.625% 06/01/2010 75,000 78,375 Williams Cos., Inc. Series A 7.500% 01/15/2031 115,000 109,250
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- BASIC INDUSTRY (CONTINUED) Witco Corp. 6.125% 02/01/2006 USD 50,000 $ 50,000 Xerox Corp. Senior Notes 7.125% 06/15/2010 75,000 75,562 ----------- 7,177,449 ----------- CAPITAL GOODS -- 5.7% Alliant Techsystems, Inc. 8.500% 05/15/2011 105,000 116,287 Allied Waste Industries Series B 8.500% 12/01/2008 300,000 323,250 Allied Waste Industries, Inc. 8.875% 04/01/2008 275,000 299,062 Allied Waste Industries, Inc. 9.250% 05/01/2021 360,000 385,200 Allied Waste North America Senior Notes 7.875% 04/15/2013 330,000 345,675 Esterline Technologies Corp. 144A Senior Sub Notes 7.750% 06/15/2013 120,000 125,700 K&F Industries, Inc. Senior Sub Notes 9.625% 12/15/2010 65,000 71,500 NVR Inc. Senior Notes 8.000% 06/01/2005 420,000 437,850 Smurfit-Stone Container Corp. 8.250% 10/01/2012 100,000 108,500 SPX Corp. Senior Notes 6.250% 06/15/2011 80,000 81,600 SPX Corp. Senior Notes 7.500% 01/01/2013 450,000 483,750 Stone Container Corp. Senior Notes 8.375% 07/01/2012 360,000 387,000 ----------- 3,165,374 ----------- COMMUNICATIONS -- 3.1% Block Communications, Inc. 9.250% 04/15/2009 400,000 432,000 CBD Media LLC 144A Senior Sub Notes 8.625% 06/01/2011 350,000 362,250 Fairpoint Communications 144A Senior Notes 11.875% 03/01/2010 90,000 105,300 Nextel Communications, Inc. Step Up Senior Discount Notes 9.750% 10/31/2007 145,000 150,075 Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 425,000 439,875 Triton PCS, Inc. 144A Senior Notes 8.500% 06/01/2013 80,000 86,200 Worldcom, Inc. Senior Notes{*} 6.500% 04/15/2010 200,000 152,500 ----------- 1,728,200 ----------- CONSUMER CYCLICAL -- 19.0% Advanced Accessory Systems LLC 144A Senior Notes 10.750% 06/15/2011 460,000 489,900 American Media Operations 10.250% 05/01/2009 210,000 226,800 Ameristar Casinos, Inc. 10.750% 02/15/2009 500,000 567,500 Argosy Gaming Co. 10.750% 06/01/2009 825,000 901,312 Charter Communications Holdings LLC Senior Notes 10.750% 10/01/2009 330,000 257,400 Chumash Casino & Resort 144A Senior Notes 9.000% 07/15/2010 515,000 556,200 Cinemark USA, Inc. 144A Senior Sub Notes 9.000% 02/01/2013 65,000 70,850 Cinemark USA, Inc. 144A Senior Sub Notes 9.000% 02/01/2013 70,000 76,300 Continental Cablevision Senior Notes 8.300% 05/15/2006 25,000 28,954 D.R. Horton, Inc. 8.500% 04/15/2012 50,000 56,000 D.R. Horton, Inc. 10.500% 04/01/2005 175,000 192,937 DirecTV Holdings/Finance 144A Senior Notes 8.375% 03/15/2013 275,000 307,312 Dominos, Inc. 144A Senior Sub Notes 8.250% 07/01/2011 155,000 160,037 Echostar DBS Corp. Senior Notes 9.125% 01/15/2009 225,000 251,437 Entercom Communications Corp. 7.625% 03/01/2014 50,000 54,750 Entravision Communications Corp. 8.125% 03/15/2009 565,000 589,012
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 USD 200,000 $ 213,000 Isle of Capri Casinos 8.750% 04/15/2009 260,000 278,200 John Q Hamons Hotels, Inc. Series B 8.875% 05/15/2012 350,000 369,687 Lamar Media Corp. 8.625% 09/15/2007 263,000 273,520 Mohegan Tribal Gaming Authority 8.750% 01/01/2009 50,000 53,250 Mohegan Tribal Gaming Authority Senior Notes 8.375% 07/01/2011 770,000 831,600 Mohegan Tribal Gaming Authority Senior Sub Notes 8.125% 01/01/2006 350,000 379,750 Moore North America Finance, Inc. 144A Senior Notes 7.875% 01/15/2011 225,000 239,625 Panavision, Inc. Step Up Sub Notes(a) 9.625% 02/01/2006 400,000 200,000 Radio One, Inc. Series B 8.875% 07/01/2011 60,000 66,150 Regal Cinemas, Inc. Series B 9.375% 02/01/2012 415,000 456,500 Russell Corp. 9.250% 05/01/2010 125,000 136,875 Six Flags, Inc. Senior Notes 9.500% 02/01/2009 465,000 458,025 Six Flags, Inc. Senior Notes 9.750% 06/15/2007 225,000 222,750 Speedway Motorsports, Inc. 144A Senior Sub Notes 6.750% 06/01/2013 395,000 406,850 Station Casinos, Inc. 8.375% 02/15/2008 200,000 216,000 Station Casinos, Inc. Senior Sub Notes 9.875% 07/01/2010 200,000 222,000 TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 310,000 337,900 Turning Stone Casino Resort Enterprise 9.125% 12/15/2010 250,000 267,500 United Components, Inc. 144A Senior Sub Notes 9.375% 06/15/2013 80,000 84,200 ----------- 10,500,083 ----------- CONSUMER NONCYCLICAL -- 10.5% Amerisourcebergen Corp. Senior Notes 7.250% 11/15/2012 75,000 81,563 Apogent Technologies, Inc. 144A Senior Sub Notes 6.500% 05/15/2013 100,000 103,250 Ball Corp. 6.875% 12/15/2012 30,000 31,875 Chattem, Inc. 8.875% 04/01/2008 550,000 563,750 Columbia/HCA Healthcare 8.850% 01/01/2007 175,000 195,014 Constellation Brands, Inc. Series B 8.000% 02/15/2008 150,000 164,625 Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 515,000 557,488 Elizabeth Arden, Inc. 11.750% 02/01/2011 100,000 112,000 HCA - The Healthcare Co. 8.750% 09/01/2010 225,000 266,126 HCA - The Healthcare Co. Senior Notes 7.875% 02/01/2011 100,000 110,762 Ingles Markets, Inc. 8.875% 12/01/2011 350,000 353,500 Marsh Supermarket, Inc. Series B 8.875% 08/01/2007 300,000 273,000 Medex, Inc.144A Senior Sub Notes 8.875% 05/15/2013 35,000 36,400 Pathmark Stores 8.750% 02/01/2012 135,000 139,725 Province Healthcare Co. Senior Sub Notes 7.500% 06/01/2013 150,000 149,250 Rite Aid Corp. 12.500% 09/15/2006 500,000 560,000 Rite Aid Corp. 144A 8.125% 05/01/2010 310,000 323,950 Rite Aid Corp. 144A 9.500% 02/15/2011 135,000 146,138 Smithfield Foods, Inc. 144A 7.750% 05/15/2013 160,000 170,000 Stater Brothers Holdings Senior Notes 10.750% 08/15/2006 795,000 838,725 Tenet Healthcare Corp. Senior Notes 6.500% 06/01/2012 344,000 325,080
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- CONSUMER NONCYCLICAL (CONTINUED) Tricon Global Restaurant, Inc. Senior Notes 7.650% 05/15/2008 USD 175,000 $ 194,250 Tricon Global Restaurant, Inc. Senior Notes 8.500% 04/15/2006 75,000 82,688 ----------- 5,779,159 ----------- ENERGY -- 11.8% Amerigas Partners Senior Notes 8.875% 05/20/2011 200,000 218,000 ANR Pipeline Co. 7.375% 02/15/2024 225,000 226,688 ANR Pipeline Co. Senior Notes 7.000% 06/01/2025 35,000 35,175 Calpine Corp. Senior Notes 8.500% 02/15/2011 325,000 243,750 CenterPoint Energy, Inc. 144A Notes 5.875% 06/01/2008 210,000 213,662 Chesapeake Energy Corp. 8.125% 04/01/2011 275,000 296,313 Citgo Petroleum Corp. 144A Senior Notes 11.375% 02/01/2011 320,000 358,400 CMS Energy Corp. Senior Notes 8.500% 04/15/2011 345,000 358,800 CMS Energy Corp. Senior Notes 9.875% 10/15/2007 400,000 428,000 Consumers Energy 6.250% 09/15/2006 150,000 165,253 El Paso Energy Partners 8.500% 06/01/2011 80,000 85,800 El Paso Natural Gas Co. 8.625% 01/15/2022 425,000 450,500 El Paso Natural Gas Co. 144A 8.375% 06/15/2032 140,000 147,700 El Paso Production Co. 144A Senior Notes 7.750% 06/01/2013 825,000 829,125 Frontier Escrow Corp. 144A Senior Notes 8.000% 04/15/2013 175,000 183,313 Houston Exploration Co. 144A Senior Sub Notes 7.000% 06/15/2013 150,000 157,125 Newfield Exploration Co. Senior Sub Notes 8.375% 08/15/2012 225,000 254,250 Peabody Energy Corp. 144A Senior Notes 6.875% 03/15/2013 125,000 131,250 Pogo Producing Co. 144A 8.250% 04/15/2011 55,000 61,050 Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 250,000 276,250 Reliant Resources, Inc. 144A 9.250% 07/15/2010 80,000 80,504 Teco Energy, Inc. Senior Notes 7.500% 06/15/2010 70,000 72,100 Tennessee Gas Pipeline Co. 8.375% 06/15/2032 175,000 190,313 Tesoro Petroleum Corp. 144A 8.000% 04/15/2008 65,000 66,950 Transcontinental Gas Pipeline Corp. Senior Notes 8.875% 07/15/2012 325,000 366,438 TXU Energy Co. 144A Notes 7.000% 03/15/2013 125,000 138,437 Vintage Petroleum, Inc. Senior Sub Notes 7.875% 05/15/2011 225,000 235,688 Westar Energy, Inc. 7.875% 05/01/2007 125,000 139,375 XTO Energy, Inc. Senior Notes 7.500% 04/15/2012 115,000 131,675 ----------- 6,541,884 ----------- FINANCIAL -- 3.3% Arch Western Finance LLC 144A Senior Notes 6.750% 07/01/2013 80,000 81,400 Felcor Lodging LP REIT 9.500% 09/15/2008 100,000 104,000 Leucadia National Corp. 144A Senior Notes 7.000% 08/15/2013 420,000 421,225 MeriStar Hospitality Corp. REIT 9.000% 01/15/2008 225,000 221,625 Meristar Hospitality Corp. REIT 10.500% 06/15/2009 330,000 337,425 RFS Partnership LP REIT 9.750% 03/01/2012 60,000 60,750 RH Donnelley Finance Corp. I 144A Senior Notes 8.875% 12/15/2010 220,000 242,000 RH Donnelley Finance Corp. I 144A Senior Sub Notes 10.875% 12/15/2012 320,000 371,200 ----------- 1,839,625 ----------- PUBLIC UTILITY -- 6.1% AES Corp. 144A 8.750% 05/15/2013 635,000 668,339
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- PUBLIC UTILITY (CONTINUED) AES Corp. 144A 10.000% 07/15/2005 USD 530,000 $ 551,200 AES Corp. Senior Notes 8.875% 02/15/2011 100,000 97,500 Dynegy Holdings, Inc. Senior Notes 6.875% 04/01/2011 350,000 292,250 Ipalco Enterprises, Inc. 8.375% 11/14/2008 275,000 298,375 Northwest Pipeline Corp. 6.625% 12/01/2007 525,000 538,125 Southern Cal Edison Co. 144A 8.000% 02/15/2007 250,000 273,125 Southern Natural Gas Co. 7.350% 02/15/2031 575,000 585,063 Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 50,000 54,875 ----------- 3,358,852 ----------- TECHNOLOGY -- 1.6% L-3 Communications Corp. 144A Senior Sub Notes 6.125% 07/15/2013 525,000 532,875 L-3 Communications Corp. 144A Senior Sub Notes 7.625% 06/15/2012 296,000 325,600 ----------- 858,475 ----------- TRANSPORTATION -- 0.5% Delta Air Lines 7.900% 12/15/2009 325,000 261,625 ----------- Total Corporate (Cost $39,009,325) 41,210,726 ----------- SOVEREIGN BONDS -- 0.4% Dominican Republic 144A 9.500% 09/27/2006 60,000 56,400 Ministry Finance Russia 3.000% 05/14/2008 50,000 45,750 Republic of Brazil 8.000% 04/15/2014 36,942 32,509 Republic of Brazil 10.250% 06/17/2013 95,000 89,443 ----------- Total Sovereign Bonds (Cost $237,701) 224,102 ----------- YANKEE BONDS -- 11.7% Abitibi-Consolidated, Inc. 8.550% 08/01/2010 225,000 255,868 Biovail Corp. Senior Sub Notes 7.875% 04/01/2010 175,000 187,250 British Sky Broadcasting 8.200% 07/15/2009 425,000 496,580 British Sky Broadcasting 6.875% 02/23/2009 325,000 359,910 Colt Telecom Group PLC Senior Step Up Notes(a) 12.000% 12/15/2006 65,000 65,325 Crown Euro Holdings SA 144A 9.500% 03/01/2011 275,000 298,375 Dominican Republic 144A 9.040% 01/23/2013 25,000 22,250 Dominican Republic Registered 9.040% 01/23/2013 25,000 22,250 GT Group Telecom, Inc. Senior Step Up Notes{*}(a) 0.000% 02/01/2010 925,000 93 Ipsco, Inc. 144A Senior Notes 8.750% 06/01/2013 40,000 40,152 MDP Acquisitions PLC Senior Notes 9.625% 10/01/2012 150,000 165,750 Nigeria Promissory Notes Series RC 5.092% 01/05/2010 68,184 51,699 Norampac, Inc. 144A Senior Notes 6.750% 06/01/2013 80,000 83,200 Quebecor Media, Inc. Senior Notes 11.125% 07/15/2011 150,000 172,500 Republic of Brazil(c) 2.188% 04/15/2012 60,000 45,150 Republic of Brazil 10.000% 01/16/2007 80,000 81,800 Republic of Brazil 10.125% 05/15/2027 120,000 103,500 Republic of Colombia 7.625% 02/15/2007 60,000 64,350 Republic of Colombia 9.750% 04/23/2009 65,000 74,100 Republic of Colombia 10.000% 01/23/2012 70,000 78,400
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- YANKEE BONDS (CONTINUED) Republic of Peru 9.125% 02/21/2012 USD 50,000 $ 53,300 Republic of Peru FLIRB(c) 4.500% 03/07/2017 50,000 39,125 Republic of Peru PDI(c) 5.000% 03/07/2017 62,400 53,040 Republic of Philippines 8.375% 03/12/2009 90,000 96,075 Republic of Uruguay 7.500% 03/15/2015 88,000 67,760 Republic of Uruguay 7.875% 01/15/2033 474 315 Republic of Uruguay 7.875% 01/15/2033 132,000 87,780 Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 315,000 315,447 Royal Caribbean Cruises 7.500% 10/15/2027 175,000 152,250 Royal Caribbean Cruises Senior Notes 8.000% 05/15/2010 150,000 154,875 Royal Caribbean Cruises Senior Notes 8.125% 07/28/2004 100,000 103,000 Royal Caribbean Cruises Senior Notes 8.750% 02/02/2011 900,000 945,000 Russian Federation 5.000% 03/31/2030 158,950 153,983 Russian Federation 8.750% 07/24/2005 60,000 66,975 Stena AB Senior Notes 9.625% 12/01/2012 70,000 76,825 Tyco International Group SA 6.125% 01/15/2009 500,000 527,500 Tyco International Group SA 6.375% 10/15/2011 275,000 288,750 Ukraine Government 144A 7.650% 06/11/2013 150,000 148,875 Ukraine Government Senior Notes 11.000% 03/15/2007 93,334 102,784 United Mexican States 8.300% 08/15/2031 30,000 34,545 Vivendi Universal 144A Senior Notes 9.250% 04/15/2010 265,000 307,400 ----------- Total Yankee Bonds (Cost $6,501,472) 6,444,106 ----------- NON-AGENCY -- 0.5% PASS THRU SECURITIES -- 0.5% GMAC Commercial Mortgage Securities, Inc. 1996-C1 F Non-ERISA 7.860% 11/15/2006 250,000 265,371 ----------- Total Non-Agency (Cost $249,125) 265,371 ----------- FOREIGN DENOMINATED -- 2.8% EURO -- 2.6% Colt Telecom Europe PLC CVT 2.000% 12/16/2006 EUR 125,000 112,618 Fort James Corp. 4.750% 06/29/2004 100,000 113,048 Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 425,000 546,305 Remy Cointreau SA 144A Senior Notes 6.500% 07/01/2010 60,000 70,411 Tyco International Group SA 5.500% 11/19/2008 535,000 607,879 ----------- 1,450,261 ----------- FRANCE -- 0.1% Ivory Coast FLIRB{*}(c) 2.000% 03/29/2018 FRF 2,000,000 66,050 ----------- SOUTH AFRICA -- 0.1% Republic of South Africa 13.000% 08/31/2010 ZAR 430,000 70,100 ----------- Total Foreign Denominated (Cost $1,164,588) 1,586,411 ----------- TOTAL BONDS AND NOTES (COST $48,965,559) 51,616,802 -----------
The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- EQUITIES -- 0.0% COMMON STOCKS -- 0.0% GH Water Supply Holdings Ltd. (Hong Kong) 3,644 $ 0 Guangdong Alliance Ltd. 144A (Hong Kong)* 9,590 0 HK Property Co. (Hong Kong)* 9,590 0 ----------- 0 ----------- TOTAL EQUITIES (COST $0) 0 ----------- PREFERRED STOCKS -- 3.6% CONVERTIBLE PREFERRED STOCKS -- 2.9% Equity Office Properties Trust 144A CVT Pfd 17,000 844,900 Ford Motor Co. Capital Trust II 6.50% CVT Pfd 4,000 173,800 General Motors Corp. Series B 5.25% CVT Pfd 800 17,920 General Motors Corp. Series C 6.25% CVT Pfd 4,300 107,070 Kansas City Southern 4.25% 144A CVT Pfd 290 150,510 Omnicare, Inc. 4.00% CVT Pfd 1,000 54,800 Tyco International Group SA 3.125% 144A CVT Pfd 240,000 264,852 ----------- Total Convertible Preferred Stocks (Cost $1,551,000) 1,613,852 ----------- NON-CONVERTIBLE PREFERRED STOCKS -- 0.7% CSC Holdings, Inc. 11.125% Pfd 3,500 360,500 Global Crossing PIK 10.50% Pfd*{*} 4,210 42 Paxson Communications PIK 12.50% Pfd* 0 0 ----------- Total Non-Convertible Preferred Stocks (Cost $737,125) 360,542 ----------- TOTAL PREFERRED STOCKS (COST $2,288,125) 1,974,394 ----------- WARRANTS -- 0.0% GOVERNMENT BACKED -- 0.0% United Mexican States Series B, 6/30/2004 (USD) 250,000 2,500 United Mexican States Series C, 6/30/2005 (USD) 250,000 750 United Mexican States Series D, 6/30/2006 (USD) 250,000 250 United Mexican States Series E, 6/30/2007 (USD) 250,000 125 ----------- 3,625 ----------- COMMUNICATIONS -- 0.0% GT Group Telecom, Inc., 02/01/2010* 925 9 McLeod USA, Inc., 04/16/2007* 3,379 1,386 ----------- 1,395 ----------- TOTAL WARRANTS (COST $60,043) 5,020 -----------
The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE/SHARES (NOTE 1A) - -------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 12.0% CASH EQUIVALENTS -- 10.3% Bank of Montreal Eurodollar Time Deposit(d) 1.150% 07/09/2003 $ 707,622 $ 707,622 Credit Agricole Indosuez Eurodollar Time Deposit(d) 1.050% 08/26/2003 776,618 776,618 Den Danske Bank Eurodollar Time Deposit(d) 1.040% 07/24/2003 621,295 621,295 Goldman Sachs Financial Square Funds - Prime Obligations Fund(d) 776,619 776,619 Royal Bank of Canada Eurodollar Time Deposit(d) 1.300% 07/01/2003 1,397,913 1,397,913 Royal Bank of Scotland Eurodollar Time Deposit(d) 1.125% 07/01/2003 1,397,913 1,397,913 ------------ 5,677,980 ------------ REPURCHASE AGREEMENTS -- 1.7% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $968,575 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $996,036. 968,555 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $6,646,534) 6,646,535 ------------ TOTAL INVESTMENTS -- 109.0% (COST $57,960,261) $ 60,242,751 OTHER ASSETS, LESS LIABILITIES -- (9.0%) (4,972,132) ------------- NET ASSETS -- 100.0% $ 55,270,619 =============
NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. CVT - Convertible EUR - Euro FLIRB - Front Loaded Interest Reduction Bond FRF - French Franc PDI - Past Due Interest Bonds PIK - Payment-in-kind REIT - Real Estate Investment Trust Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2003. Maturity date disclosed is the ultimate maturity. USD - United States Dollar ZAR - South African Rand (a) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. The maturity date shown is the ultimate maturity. (b) Zero coupon security. (c) Variable Rate Security; rate indicated is as of 6/30/03. (d) Represents investments of security lending collateral (Note 6). {*} Defaulted security. * Non-income producing security. The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PERCENTAGE OF NET INDUSTRY SECTOR ASSETS - ------------------------------------------------------------------------ Financial 22.9% Consumer Cyclical 20.8% Basic Industry 16.4% Consumer Non-cyclical 11.4% Capital Goods 10.3% Energy 9.4% Public Utility 6.9% Communications 5.4% Foreign Government 3.3% Technology 1.6% Transportation 0.6% ------- 109.0%
PERCENTAGE OF NET TOP TEN COUNTRIES ASSETS - ------------------------------------------------------------------------ United States 85.6% Canada 5.4% Luxembourg 3.1% France 2.8% Scotland 2.5% Liberia 2.5% Germany 2.1% United Kingdom 1.9% Brazil 0.6% Russia 0.5%
The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $5,529,223 (Note 6)) (identified cost, $57,960,261) $60,242,751 Cash 1,374 Receivable for investments sold 172,227 Interest and dividends receivable 1,053,911 Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 59,533 Prepaid expenses 5,206 ----------- Total assets 61,535,002 LIABILITIES Payable for investments purchased $ 526,364 Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 6,816 Payable for closed forward foreign currency exchange contracts (Note 5) 7,730 Interest payable on open swap contracts (Note 5) 141 Payable for open swap contracts (Note 5) 3,000 Payable upon return of securities loaned (Note 6) 5,677,980 Accrued accounting and custody fees 20,079 Accrued trustees' fees and expenses (Note 2) 1,306 Accrued expenses and other liabilities 20,967 --------- Total liabilities 6,264,383 ----------- NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $55,270,619 ===========
The accompanying notes are an integral part of the financial statements. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $7,754 (Note 6)) $2,058,441 Dividend income 60,965 ---------- Total income 2,119,406 EXPENSES Investment advisory fee (Note 2) $ 123,386 Accounting and custody fees 60,075 Legal and audit services 19,932 Insurance expense 4,270 Trustees' fees and expenses (Note 2) 2,427 Miscellaneous 941 --------- Total expenses 211,031 Deduct: Waiver of investment advisory fee (87,727) --------- Net expenses 123,304 ---------- Net investment income 1,996,102 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 1,428,080 Written options transactions 120 Swap Contracts (25,367) Foreign currency transactions and forward foreign currency exchange contracts (350,666) --------- Net realized gain 1,052,167 Change in unrealized appreciation (depreciation) Investment securities 3,250,564 Written options (765) Swap Contracts 15,100 Foreign currency and forward foreign currency exchange contracts 148,099 --------- Change in net unrealized appreciation (depreciation) 3,412,998 ---------- Net realized and unrealized gain 4,465,165 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $6,461,267 ==========
The accompanying notes are an integral part of the financial statements. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 1,996,102 $ 3,785,085 Net realized gain (loss) 1,052,167 (3,642,626) Change in net unrealized appreciation (depreciation) 3,412,998 2,085,034 ----------- ------------ Net increase in net assets from investment operations 6,461,267 2,227,493 ----------- ------------ CAPITAL TRANSACTIONS Contributions 8,858,959 17,254,281 Withdrawals (4,193,656) (22,385,787) ----------- ------------ Net increase (decrease) in net assets from capital transactions 4,665,303 (5,131,506) ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 11,126,570 (2,904,013) NET ASSETS At beginning of period 44,144,049 47,048,062 ----------- ------------ At end of period $55,270,619 $ 44,144,049 =========== ============
The accompanying notes are an integral part of the financial statements. 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 2003 ---------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- --------- -------- ------- ------- ------- TOTAL RETURN+++ 13.94%++ 4.71% 1.54% 2.84% 2.20% 0.86% RATIOS: Expenses (to average daily net assets)* 0.50%+ 0.50% 0.50% 0.37% 0.00% 0.00% Net Investment Income (to average daily net assets)* 8.08%+ 8.66% 8.87% 10.37% 9.83% 8.40% Portfolio Turnover 42%++ 130% 117% 148% 137% 145% Net Assets, End of Period (000's omitted) $55,271 $44,144 $47,048 $31,818 $31,144 $41,641
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory fee and/or reimbursed the Portfolio for a portion of its operating expenses. If this voluntary action had not been taken, the ratios would have been: Ratios (to average daily net assets): Expenses 0.85%+ 0.82% 0.81% 0.89% 0.86% 0.75% Net investment income 7.73%+ 8.34% 8.56% 9.85% 8.97% 7.65%
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease the ratio of net investment income to average net assets from 9.20% to 8.87%. Ratios for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. + Computed on an annualized basis. ++ Not annualized. +++ Total return for the Portfolio has been calculated based on the total return for the invested Fund, assuming all distributions were reinvested, and adjusted for the difference in expenses as set out in the notes to the financial statements. Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 20 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the State of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon High Yield Bond Portfolio (the "Portfolio") is a separate diversified investment series of the Portfolio Trust. The objective of the Portfolio is to maximize total return, consisting primarily of a high level of income by investing, under normal circumstances, at least 80% of net assets in fixed income securities issued by U.S. and foreign governments, companies and banks, as well as tax-exempt securities, preferreds and warrants. At June 30, 2003, there was one fund, Standish Mellon High Yield Bond Fund (the "Fund"), invested in the Portfolio. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. The Fund's proportionate interest at June 30, 2003 was approximately 100%. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish High Yield Bond Portfolio was changed to Standish Mellon High Yield Bond Portfolio. In addition, the name of the Standish, Ayer & Wood Master Portfolio was changed to Mellon Institutional Funds Master Portfolio. The name changes for the Portfolio and the Portfolio Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Portfolio and the counterparty. Additionally, procedures have been established by the Portfolio to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. 21 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. The Portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually received or paid. D. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. E. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. F. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. G. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon") for overall investment advisory and administrative services is paid monthly at the annual rate of 0.50% of the Portfolio's 22 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- average daily net assets. Standish Mellon voluntarily agreed to limit the Portfolio's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.50% of the Portfolio's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $87,727 of its investment advisory fees. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were $27,411,276 and $20,194,813, respectively. For the six months ended June 30, 2003, the Portfolio did not purchase or sell any long-term U.S. government securities. (4) FEDERAL TAXES: The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $58,074,595 ========== Gross unrealized appreciation 3,688,806 Gross unrealized depreciation (1,520,650) ---------- Net unrealized appreciation $2,168,156 ==========
(5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in Parts A and B of the Portfolio Trust's registration statement. The Portfolio trades the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and 23 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. A summary of the written put options for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 1,845 Options expired (1) (1,845) ----------- ------- Outstanding, end of period 0 $ -- =========== =======
At June 30, 2003, the Portfolio held no written put option contracts. A summary of the written call options for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 1,380 Options closed (1) (1,380) ----------- ------- Outstanding, end of period 0 $ -- =========== =======
At June 30, 2003, the Portfolio held no written call option contracts. FORWARD CURRENCY EXCHANGE CONTRACTS The Portfolio may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Portfolio primarily to protect the value of the Portfolio's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS) ----------------------------------------------------------------------------------------------------------------- Euro 1,641,500 09/17/2003 $ 1,879,755 $ 1,937,760 $ 58,005 Japanese Yen 9,467,000 09/17/2003 79,159 80,687 1,528 South African Rand 530,000 08/29/2003 69,705 62,889 (6,816) --------------- --------------- ------------ TOTAL $ 2,028,619 $ 2,081,336 $ 52,717 =============== =============== ============
24 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- SWAP AGREEMENTS The Portfolio may invest in swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Portfolio may enter into interest rate and credit default swap agreements to manage its exposure to interest rates and credit risk. Interest rate swap agreements involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Portfolio may use credit default swaps to provide a measure of protection against defaults of issuers (i.e., to reduce risk where the Portfolio owns or has exposure to the corporate or sovereign issuer) or to take an active long or short position with respect to the likelihood of a particular corporate or sovereign issuer's default. In connection with these agreements, cash or securities may be set aside as collateral in accordance with the terms of the swap agreement. The Portfolio earns interest on cash set aside as collateral. Swaps are marked to market daily based upon quotations from market makers and change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and differences could be material. Payments received or made from credit default swaps at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations. Net payments of interest on interest rate swap agreements, if any, are included as part of interest income. Entering into these agreements involves, to varying degrees, elements of credit, market, and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements, and that there may be unfavorable changes in interest rates. At June 30, 2003, the Portfolio held the following open credit default swap contracts:
NOTIONAL AMOUNT EXPIRATION NET UNREALIZED PORTFOLIO/COUNTERPARTY DATE DESCRIPTION DEPRECIATION ----------------------------------------------------------------------------------------------------------- Agreement with Goldman Sachs Capital Market, dated 4/16/03 to pay 0.46% per year times the notional amount. The Portfolio receives payment only upon a default event by JP Morgan Chase & Co., the notional amount times the difference between the par value and the then-market value of JP Morgan Chase & Co., 5.25% 1,000,000 USD 6/20/08 due 5/30/07. $(3,000)
(6) SECURITIES LENDING: The Portfolio may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. 25 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- At June 30, 2003, the Portfolio loaned securities having a market value of $5,529,223. The Portfolio received cash collateral of $5,677,980 which is invested together with collateral of other Mellon Institutional funds in high grade short-term investments. (7) DELAYED DELIVERY TRANSACTIONS: The Portfolio may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. Payment and delivery may take place a month or more after the date of the transactions. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Income on the securities will not be earned until settlement date. The Portfolio instructs its custodian to segregate securities having value at least equal to the amount of the purchase commitment. The Portfolio may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Portfolio holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Portfolio may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Portfolio's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Portfolio may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' daily and the change in market value is recorded by the Portfolio as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Portfolio realizes a gain or loss. If the Portfolio delivers securities under the commitment, the Portfolio realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. At June 30, 2003, the Portfolio did not have any delayed delivery transactions. (8) CONCENTRATION OF RISK: The Portfolio invests in low rated (non-investment grade) and comparable quality unrated high yield securities. Investments in high yield securities are accompanied by a greater degree of credit risk and the value of high yield securities tends to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default of an issuer may be significantly greater for holders of high yield securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer. There are certain additional considerations and risks associated with investing in foreign securities and currency transactions that are not inherent with investments of domestic origin. The Portfolio's investment in emerging market countries may involve greater risks than investments in more developed markets and the price of such investments may be volatile. These risks of investing in foreign and emerging markets may include foreign currency exchange rate fluctuations, perceived credit risk, adverse political and economic developments and possible adverse foreign government intervention. 26 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON HIGH YIELD BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (9) LINE OF CREDIT: The Portfolio, and other subtrusts in the Portfolio Trust and funds in the Trust are parties to a committed line of credit facility, which enables each portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is charged to each participating portfolio/fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment fee, computed at an annual rate of .065 of 1% on the daily unused portion of the facility, is allocated ratably among the participating portfolios/funds at the end of each quarter. For the six months ended June 30, 2003, the expense related to the commitment fee was $941 for the Portfolio. During the six months ended June 30, 2003, the Portfolio had no borrowings under the credit facility. 27 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. 1100 Executive Officer, Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management
28
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
29 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $2,836,659 (Note 7)) (identified cost, $34,164,926) $35,728,854 Receivable for investments sold 197,779 Interest and dividends receivable 652,264 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 22,321 Prepaid expenses 8,735 ----------- Total assets 36,609,953 LIABILITIES Payable for investments purchased $ 302,142 Interest payable on open swap contracts (Note 6) 141 Payable for open swap contracts (Note 6) 3,000 Payable upon return of securities loaned (Note 7) 2,910,940 Due to custodian 807,605 Accrued accounting, custody and transfer agent fees 16,286 Accrued trustees' fees and expenses (Note 2) 1,186 Accrued expenses and other liabilities 19,157 --------- Total liabilities 4,060,457 ----------- NET ASSETS $32,549,496 =========== NET ASSETS CONSIST OF: Paid-in capital $49,875,584 Accumulated net realized loss (19,041,967) Undistributed net investment income 133,312 Net unrealized appreciation 1,582,567 ----------- TOTAL NET ASSETS $32,549,496 =========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,887,224 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 17.25 ===========
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $4,094 (Note 7)) $1,327,681 Dividend income 34,592 ---------- Total investment income 1,362,273 EXPENSES Investment advisory fee (Note 2) $ 63,131 Accounting, custody, and transfer agent fees 55,587 Legal and audit services 18,604 Insurance expense 4,746 Registration fees 3,223 Trustees' fees and expenses (Note 2) 2,234 Miscellaneous 3,853 --------- Total expenses 151,378 Deduct: Waiver of investment advisory fee (Note 2) (63,131) Reimbursement of Fund operating expenses (Note 2) (72,464) --------- Total expense deductions (135,595) --------- Net expenses 15,783 ---------- Net investment income 1,346,490 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 1,157,640 Swap Contracts (25,367) Foreign currency transactions and forward foreign currency exchange contracts (174,787) --------- Net realized gain 957,486 Change in unrealized appreciation (depreciation) Investment securities 1,630,580 Swap Contracts 15,100 Foreign currency and forward foreign currency exchange contracts 70,608 --------- Change in net unrealized appreciation (depreciation) 1,716,288 ---------- Net realized and unrealized gain 2,673,774 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $4,020,264 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 1,346,490 $ 4,194,742 Net realized gain (loss) 957,486 (2,028,022) Change in net unrealized appreciation (depreciation) 1,716,288 222,184 ------------ ------------ Net increase in net assets from investment operations 4,020,264 2,388,904 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E) From net investment income (1,170,937) (4,225,040) Return of capital -- (19,173) ------------ ------------ Total distributions to shareholders (1,170,937) (4,244,213) ------------ ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 10,399,893 25,641,775 Value of shares issued to shareholders in payment of distributions declared 1,093,800 4,167,850 Cost of shares redeemed (20,825,492) (35,115,590) ------------ ------------ Net decrease in net assets from Fund share transactions (9,331,799) (5,305,965) ------------ ------------ TOTAL DECREASE IN NET ASSETS (6,482,472) (7,161,274) NET ASSETS At beginning of period 39,031,968 46,193,242 ------------ ------------ At end of period(including undistributed net investment income of $133,312 and distributions in excess of net investment income of $42,241, respectively) $ 32,549,496 $ 39,031,968 ============ ============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD SIX MONTHS APRIL 2, 2001 ENDED (COMMENCEMENT OF JUNE 30, 2003 YEAR ENDED OPERATIONS) TO (UNAUDITED) DECEMBER 31, 2002 DECEMBER 31, 2001 ------------- ----------------- ----------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 15.72 $ 16.36 $ 20.00 ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.70 1.41 1.34 Net realized and unrealized gain (loss) on investments 1.43 (0.46) (1.93) ------- ------- ------- Total from investment operations 2.13 0.95 (0.59) ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.60) (1.58) (2.98) From tax return of capital -- (0.01) (0.07) ------- ------- ------- Total distributions to shareholders (0.60) (1.59) (3.05) ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 17.25 $ 15.72 $ 16.36 ======= ======= ======= TOTAL RETURN+++ 13.73%++ 6.07% (2.91)%++ RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.10%+ 0.10% 0.10%+ Net Investment Income (to average daily net assets)* 8.54%+ 8.78% 9.46%+ Portfolio Turnover 62%++ 121% 191%++ Net Assets, End of Period (000's omitted) $32,549 $39,032 $46,193
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose any of its investment advisory fee and reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share(1) $ 0.63 $ 1.31 $ 1.28 Ratios (to average daily net assets): Expenses 0.96%+ 0.73% 0.54%+ Net investment income 7.68%+ 8.15% 9.02%+
(1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absence of fee waivers and expense limitations. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 97.2% ASSET BACKED -- 1.7% Badger Tobacco Asset Securitization Corp. 6.125% 06/01/2027 USD 155,000 $ 144,245 Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 170,000 170,452 Louisiana Tobacco Settlement Funding Corp. 5.500% 05/15/2030 215,000 178,820 South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 50,000 45,965 ----------- Total Asset Backed (Cost $520,581) 539,482 ----------- CONVERTIBLE CORPORATE BONDS -- 2.0% Davita, Inc. 7.000% 05/15/2009 200,000 208,000 Echostar DBS Corp. 4.875% 01/01/2007 200,000 200,484 Lamar Advertising Co. 5.250% 09/15/2006 75,000 77,058 Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 225,000 104,049 Xcel Energy, Inc. 144A 7.500% 11/21/2007 40,000 55,200 ----------- Total Convertible Corporate Bonds (Cost $593,593) 644,791 ----------- CORPORATE -- 79.7% BASIC INDUSTRY -- 12.5% Corn Products International, Inc. Senior Notes 8.250% 07/15/2007 75,000 82,125 Corrections Corp. of America Senior Notes 7.500% 05/01/2011 30,000 31,425 Crompton Corp. Senior Notes 8.500% 03/15/2005 140,000 147,700 CSC Holdings, Inc. 7.875% 12/15/2007 100,000 102,000 CSC Holdings, Inc. Senior Notes 8.125% 07/15/2009 400,000 413,000 Earle M. Jorgensen Co. 9.750% 06/01/2012 100,000 106,000 Equistar Chemical 10.125% 09/01/2008 55,000 57,200 Equistar Chemical/Funding 144A Senior Notes 10.625% 05/01/2011 15,000 15,375 Freeport-McMoRan Copper & Gold, Inc. 144A Senior Notes 10.125% 02/01/2010 75,000 84,000 Georgia-Pacific Corp. 144A Senior Notes 7.375% 07/15/2008 220,000 223,850 Georgia-Pacific Corp. 144A Senior Notes 8.875% 02/01/2010 75,000 81,000 Great Lakes Dredge & Dock Co. 11.250% 08/15/2008 275,000 291,500 HMP Equity Holdings Corp. 144A(b) 0.000% 05/15/2008 70,000 35,700 Huntsman International LLC 9.875% 03/01/2009 125,000 130,625 IMC Global, Inc. 10.875% 06/01/2008 90,000 93,150 Kansas City Southern 7.500% 06/15/2009 100,000 103,500 National Waterworks, Inc. Series B 10.500% 12/01/2012 55,000 61,050 Owens-Brockway Glass Container, Inc. 144A 7.750% 05/15/2011 45,000 47,362 Owens-Illinois, Inc. 7.500% 05/15/2010 65,000 63,050 Pinnacle Partners 144A Senior Notes 8.830% 08/15/2004 250,000 257,500 Pioneer Natural Resources Co. 7.500% 04/15/2012 75,000 86,250 Pioneer Natural Resources Co. Senior Notes 8.250% 08/15/2007 125,000 142,500 Resolution Performance Products Senior Sub Notes 13.500% 11/15/2010 200,000 200,000 Steel Dynamics, Inc. 9.500% 03/15/2009 200,000 210,000 Texas Industries, Inc. 144A Senior Notes 10.250% 06/15/2011 235,000 244,400 US Steel Corp. Senior Notes 9.750% 05/15/2010 160,000 164,000 Williams Cos., Inc. 7.875% 09/01/2021 150,000 147,375 Williams Cos., Inc. 7.625% 07/15/2019 225,000 218,250 Williams Cos., Inc. Senior Notes 8.625% 06/01/2010 70,000 73,150
The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- BASIC INDUSTRY (CONTINUED) Williams Cos., Inc. Series A 7.500% 01/15/2031 USD 100,000 $ 95,000 Xerox Corp. Senior Notes 7.125% 06/15/2010 50,000 50,375 ----------- 4,058,412 ----------- CAPITAL GOODS -- 6.5% Alliant Techsystems, Inc. 8.500% 05/15/2011 100,000 110,750 Allied Waste Industries 144A Notes 10.000% 08/01/2009 85,000 90,525 Allied Waste Industries Series B 8.500% 12/01/2008 400,000 431,000 Allied Waste Industries, Inc. 8.875% 04/01/2008 150,000 163,125 Allied Waste Industries, Inc. 9.250% 05/01/2021 200,000 214,000 Allied Waste North America Senior Notes 7.875% 04/15/2013 55,000 57,612 American Standard, Inc. 7.375% 02/01/2008 103,000 113,944 Esterline Technologies Corp. 144A Senior Sub Notes 7.750% 06/15/2013 70,000 73,325 K&F Industries, Inc. Senior Sub Notes 9.625% 12/15/2010 65,000 71,500 Smurfit-Stone Container Corp. 8.250% 10/01/2012 150,000 162,750 SPX Corp. Senior Notes 7.500% 01/01/2013 475,000 510,625 Stone Container Corp. Senior Notes 8.375% 07/01/2012 125,000 134,375 ----------- 2,133,531 ----------- COMMUNICATIONS -- 3.7% Block Communications, Inc. 9.250% 04/15/2009 400,000 432,000 CBD Media LLC 144A Senior Sub Notes 8.625% 06/01/2011 230,000 238,050 Fairpoint Communications 144A Senior Notes 11.875% 03/01/2010 55,000 64,350 Nextel Communications, Inc. Step Up Senior Discount Notes 9.750% 10/31/2007 80,000 82,800 Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 315,000 326,025 Triton PCS, Inc. 144A Senior Notes 8.500% 06/01/2013 50,000 53,875 ----------- 1,197,100 ----------- CONSUMER CYCLICAL -- 21.2% Advanced Accessory Systems LLC 144A Senior Notes 10.750% 06/15/2011 235,000 250,275 American Media Operations 10.250% 05/01/2009 125,000 135,000 Ameristar Casinos, Inc. 10.750% 02/15/2009 400,000 454,000 Argosy Gaming Co. 10.750% 06/01/2009 330,000 360,525 Chumash Casino & Resort 144A Senior Notes 9.000% 07/15/2010 270,000 291,600 Cinemark USA, Inc. 144A Senior Sub Notes 9.000% 02/01/2013 75,000 81,750 DirecTV Holdings/Finance 144A Senior Notes 8.375% 03/15/2013 175,000 195,562 Dominos, Inc. 144A Senior Sub Notes 8.250% 07/01/2011 105,000 108,412 Echostar DBS Corp. Senior Notes 9.125% 01/15/2009 200,000 223,500 Entercom Communications Corp. 7.625% 03/01/2014 50,000 54,750 Entravision Communications Corp. 8.125% 03/15/2009 250,000 260,625 Harrahs Operating Co., Inc. Senior Sub Notes 7.875% 12/15/2005 60,000 65,100 Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 370,000 394,050 Isle of Capri Casinos 8.750% 04/15/2009 195,000 208,650 John Q Hamons Hotels, Inc. Series B 8.875% 05/15/2012 235,000 248,219 Lamar Media Corp. 8.625% 09/15/2007 69,000 71,760 Mohegan Tribal Gaming Authority 8.750% 01/01/2009 25,000 26,625 Mohegan Tribal Gaming Authority Senior Notes 8.375% 07/01/2011 460,000 496,800 Mohegan Tribal Gaming Authority Senior Sub Notes 8.125% 01/01/2006 630,000 683,550 Moore North America Finance, Inc. 144A Senior Notes 7.875% 01/15/2011 165,000 175,725 Panavision, Inc. Step Up Sub Notes(a) 9.625% 02/01/2006 330,000 165,000
The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) Radio One, Inc. Series B 8.875% 07/01/2011 USD 75,000 $ 82,687 Regal Cinemas, Inc. Series B 9.375% 02/01/2012 250,000 275,000 Russell Corp. 9.250% 05/01/2010 125,000 136,875 Scotts Co. 8.625% 01/15/2009 275,000 294,250 Six Flags, Inc. Senior Notes 9.500% 02/01/2009 350,000 344,750 Speedway Motorsports, Inc. 144A Senior Sub Notes 6.750% 06/01/2013 250,000 257,500 Station Casinos, Inc. 8.375% 02/15/2008 65,000 70,200 Station Casinos, Inc. Senior Sub Notes 9.875% 07/01/2010 55,000 61,050 TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 170,000 185,300 Turning Stone Casino Resort Enterprise 9.125% 12/15/2010 190,000 203,300 United Components, Inc. 144A Senior Sub Notes 9.375% 06/15/2013 50,000 52,625 ----------- 6,915,015 ----------- CONSUMER NONCYCLICAL -- 12.2% Amerisourcebergen Corp. Senior Notes 7.250% 11/15/2012 20,000 21,750 Amerisourcebergen Corp. Senior Notes 8.125% 09/01/2008 265,000 292,162 Apogent Technologies, Inc. 144A Senior Sub Notes 6.500% 05/15/2013 50,000 51,625 Ball Corp. 6.875% 12/15/2012 100,000 106,250 Chattem, Inc. 8.875% 04/01/2008 330,000 338,250 Columbia/HCA Healthcare 8.360% 04/15/2024 275,000 300,707 Constellation Brands, Inc. Series B 8.000% 02/15/2008 150,000 164,625 Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 300,000 324,750 Elizabeth Arden, Inc. 11.750% 02/01/2011 125,000 140,000 Ingles Markets, Inc. 8.875% 12/01/2011 200,000 202,000 Medex, Inc.144A Senior Sub Notes 8.875% 05/15/2013 20,000 20,800 Pathmark Stores 8.750% 02/01/2012 140,000 144,900 Province Healthcare Co. Senior Sub Notes 7.500% 06/01/2013 85,000 84,575 Rite Aid Corp. 12.500% 09/15/2006 215,000 240,800 Rite Aid Corp. 144A 8.125% 05/01/2010 190,000 198,550 Rite Aid Corp. 144A 9.500% 02/15/2011 75,000 81,187 Smithfield Foods, Inc. 144A 7.750% 05/15/2013 70,000 74,375 Stater Brothers Holdings Senior Notes 10.750% 08/15/2006 445,000 469,475 Tenet Healthcare Corp. Senior Notes 6.500% 06/01/2012 225,000 212,625 Tricon Global Restaurant, Inc. Senior Notes 7.650% 05/15/2008 125,000 138,750 Tricon Global Restaurant, Inc. Senior Notes 8.500% 04/15/2006 15,000 16,537 Tricon Global Restaurant, Inc. Senior Notes 8.875% 04/15/2011 300,000 351,000 ----------- 3,975,693 ----------- ENERGY -- 13.2% Amerigas Partners Senior Notes 8.875% 05/20/2011 200,000 218,000 ANR Pipeline Co. 7.375% 02/15/2024 160,000 161,200 ANR Pipeline Co. Senior Notes 7.000% 06/01/2025 25,000 25,125 Calpine Corp. Senior Notes 8.500% 02/15/2011 150,000 112,500 CenterPoint Energy, Inc. 144A Notes 5.875% 06/01/2008 115,000 117,005 Chesapeake Energy Corp. 8.125% 04/01/2011 30,000 32,325 Chesapeake Energy Corp. 8.375% 11/01/2008 150,000 162,000 Citgo Petroleum Corp. 144A Senior Notes 11.375% 02/01/2011 170,000 190,400 CMS Energy Corp. Senior Notes 8.500% 04/15/2011 500,000 520,000 Consumers Energy 6.250% 09/15/2006 125,000 137,711 El Paso Energy Partners 8.500% 06/01/2011 160,000 171,600 El Paso Natural Gas Co. 8.625% 01/15/2022 200,000 212,000
The accompanying notes are an integral part of the financial statements. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- ENERGY (CONTINUED) El Paso Natural Gas Co. 144A 8.375% 06/15/2032 USD 230,000 $ 242,650 El Paso Production Co. 144A Senior Notes 7.750% 06/01/2013 350,000 351,750 Frontier Escrow Corp. 144A Senior Notes 8.000% 04/15/2013 100,000 104,750 Houston Exploration Co. 144A Senior Sub Notes 7.000% 06/15/2013 100,000 104,750 Newfield Exploration Co. Senior Sub Notes 8.375% 08/15/2012 100,000 113,000 Peabody Energy Corp. 144A Senior Notes 6.875% 03/15/2013 80,000 84,000 Pogo Producing Co. 144A 8.250% 04/15/2011 75,000 83,250 Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 140,000 154,700 Reliant Resources, Inc. 144A 9.250% 07/15/2010 55,000 55,347 Teco Energy, Inc. Senior Notes 7.500% 06/15/2010 50,000 51,500 Tennessee Gas Pipeline Co. 8.375% 06/15/2032 100,000 108,750 Tesoro Petroleum Corp. 144A 8.000% 04/15/2008 35,000 36,050 Transcontinental Gas Pipeline Corp. Senior Notes 8.875% 07/15/2012 200,000 225,500 TXU Energy Co. 144A Notes 7.000% 03/15/2013 75,000 83,062 Vintage Petroleum, Inc. Senior Sub Notes 7.875% 05/15/2011 125,000 130,938 Westar Energy, Inc. 7.875% 05/01/2007 100,000 111,500 XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 25,000 26,625 XTO Energy, Inc. Senior Notes 7.500% 04/15/2012 150,000 171,750 ----------- 4,299,738 ----------- FINANCIAL -- 4.0% Arch Western Finance LLC 144A Senior Notes 6.750% 07/01/2013 55,000 55,963 Felcor Lodging LP REIT 9.500% 09/15/2008 100,000 104,000 Leucadia National Corp. 144A Senior Notes 7.000% 08/15/2013 250,000 250,729 Meristar Hospitality Corp. REIT 10.500% 06/15/2009 355,000 362,988 RFS Partnership LP REIT 9.750% 03/01/2012 210,000 212,625 RH Donnelley Finance Corp. I 144A Senior Notes 8.875% 12/15/2010 140,000 154,000 RH Donnelley Finance Corp. I 144A Senior Sub Notes 10.875% 12/15/2012 135,000 156,600 ----------- 1,296,905 ----------- PUBLIC UTILITY -- 4.5% AES Corp. 144A 8.750% 05/15/2013 500,000 526,250 AES Corp. 144A 10.000% 07/15/2005 60,000 62,400 AES Corp. Senior Notes 8.875% 02/15/2011 123,000 119,925 Ipalco Enterprises, Inc. 8.375% 11/14/2008 155,000 168,175 Northwest Pipeline Corp. 6.625% 12/01/2007 325,000 333,125 Southern Natural Gas Co. 6.700% 10/01/2007 35,000 34,650 Southern Natural Gas Co. 7.350% 02/15/2031 200,000 203,500 Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 25,000 27,438 ----------- 1,475,463 ----------- TECHNOLOGY -- 1.4% L-3 Communications Corp. 144A Senior Sub Notes 7.625% 06/15/2012 405,000 445,500 ----------- TRANSPORTATION -- 0.5% Delta Air Lines 7.900% 12/15/2009 190,000 152,950 ----------- Total Corporate (Cost $24,568,784) 25,950,307 ----------- YANKEE BONDS -- 10.1% Biovail Corp. Senior Sub Notes 7.875% 04/01/2010 80,000 85,600 British Sky Broadcasting 8.200% 07/15/2009 570,000 666,001
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - -------------------------------------------------------------------------------------------------------------- YANKEE BONDS (CONTINUED) British Sky Broadcasting 6.875% 02/23/2009 USD 150,000 $ 166,113 Colt Telecom Group PLC Senior Step Up Notes(a) 12.000% 12/15/2006 155,000 155,775 Crown Euro Holdings SA 144A 9.500% 03/01/2011 125,000 135,625 Donohue Forest Products 7.625% 05/15/2007 245,000 263,539 GT Group Telecom, Inc. Senior Step Up Notes{*}(a) 0.000% 02/01/2010 900,000 90 Ipsco, Inc. 144A Senior Notes 8.750% 06/01/2013 25,000 25,095 MDP Acquisitions PLC Senior Notes 9.625% 10/01/2012 100,000 110,500 Norampac, Inc. 144A Senior Notes 6.750% 06/01/2013 45,000 46,800 Quebecor Media, Inc. Senior Notes 11.125% 07/15/2011 95,000 109,250 Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 205,000 205,291 Royal Caribbean Cruises 8.250% 04/01/2005 200,000 207,000 Royal Caribbean Cruises 7.500% 10/15/2027 200,000 174,000 Royal Caribbean Cruises Senior Notes 8.750% 02/02/2011 510,000 535,500 Tyco International Group SA 6.750% 02/15/2011 35,000 37,713 Tyco International Group SA 6.375% 10/15/2011 200,000 210,000 Vivendi Universal 144A Senior Notes 9.250% 04/15/2010 150,000 174,000 ----------- Total Yankee Bonds (Cost $3,494,936) 3,307,892 ----------- NON-AGENCY -- 0.8% PASS THRU SECURITIES -- 0.8% GMAC Commercial Mortgage Securities, Inc. 1996-C1 F Non-ERISA 7.860% 11/15/2006 250,000 265,371 ----------- Total Non-Agency (Cost $249,125) 265,371 ----------- FOREIGN DENOMINATED -- 2.9% EURO -- 2.9% Fort James Corp. 4.750% 06/29/2004 EUR 75,000 84,786 Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 200,000 257,085 Remy Cointreau SA 144A Senior Notes 6.500% 07/01/2010 40,000 46,941 Tyco International Group SA 5.500% 11/19/2008 480,000 545,387 ----------- 934,199 ----------- Total Foreign Denominated (Cost $640,340) 934,199 ----------- TOTAL BONDS AND NOTES (COST $30,067,359) 31,642,042 ----------- SHARES ------- PREFERRED STOCKS -- 3.6% CONVERTIBLE PREFERRED STOCKS -- 3.0% Equity Office Properties Trust 5.25% CVT Pfd REIT 8,800 437,360 Ford Motor Co. Capital Trust II 6.50% CVT Pfd 2,250 97,763 General Motors Corp. Series B 5.25% CVT Pfd 525 11,760 General Motors Corp. Series C 6.25% CVT Pfd 2,750 68,475 Kansas City Southern 4.25% 144A CVT Pfd 160 83,040 Omnicare, Inc. 4.00% CVT Pfd 700 38,360 Tyco International Group SA 3.125% 144A CVT Pfd 210,000 231,745 ----------- Total Convertible Preferred Stocks (Cost $888,265) 968,503 -----------
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------------------------- NON-CONVERTIBLE PREFERRED STOCKS -- 0.6% CSC Holdings, Inc. 11.125% Pfd 2,000 $ 206,000 ----------- Total Non-Convertible Preferred Stocks (Cost $210,500) 206,000 ----------- TOTAL PREFERRED STOCKS (COST $1,098,765) 1,174,503 ----------- WARRANTS -- 0.0% COMMUNICATIONS -- 0.0% GT Group Telecom, Inc., 02/01/2010* 1,900 19 McLeod USA, Inc., 04/16/2007* 3,291 1,350 ----------- 1,369 ----------- TOTAL WARRANTS (COST $87,862) 1,369 ----------- PAR RATE MATURITY VALUE/SHARES ------- ---------- ------------ SHORT-TERM INVESTMENTS -- 9.0% CASH EQUIVALENTS -- 9.0% Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 362,778 362,778 Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 398,150 398,150 Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 318,520 318,520 Goldman Sachs Financial Square Funds - Prime Obligations Fund(c) 398,150 398,150 Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 716,671 716,671 Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 716,671 716,671 ------------- 2,910,940 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $2,910,940) 2,910,940 ------------- TOTAL INVESTMENTS -- 109.8% (COST $34,164,926) $ 35,728,854 OTHER ASSETS, LESS LIABILITIES -- (9.8%) (3,179,358) ------------- NET ASSETS -- 100.0% $ 32,549,496 =============
NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. CVT - Convertible EUR - Euro REIT - Real Estate Investment Trust Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2003. Maturity date disclosed is the ultimate maturity. USD - United States Dollar (a) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. The maturity date shown is the ultimate maturity. (b) Zero coupon security. (c) Represents investments of security lending collateral (Note 7). {*} Defaulted security. * Non-income producing security. The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Opportunistic High Yield Fund (the "Fund") is a separate non-diversified investment series of the Trust. The objective of the Fund is to maximize total return, consistent with preserving principal, primarily through the generation of current income and, to a lesser extent, capital appreciation by investing, under normal circumstances, at least 80% of net assets in below investment grade fixed income securities. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Opportunistic High Yield Fund was changed to Standish Mellon Opportunistic High Yield Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are primarily traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Fund are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Fund to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Fund and the counterparty. Additionally, procedures have been established by the Fund to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. The Fund does not isolate that portion of the results of operations resulting from 11 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually received or paid. D. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. E. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income will be declared and distributed quarterly. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for losses deferred due to wash sales, capital loss carryforwards, foreign currency, and amortization and/or accretion of premiums and discounts on certain securities. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. F. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. G. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory and administrative services, and 12 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- general office facilities, is paid monthly at the annual rate of 0.40% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit total Fund operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.10% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $63,131 of its investment advisory fee and reimbursed the Fund for $72,464 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were $19,269,095 and $27,110,198, respectively. For the six months ended June 30, 2003, the Fund did not purchase or sell any long-term U.S. government securities. (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 602,886 1,619,440 Shares issued to shareholders in payment of distributions declared 65,702 263,456 Shares redeemed (1,265,019) (2,223,499) ------------- --------------- Net decrease (596,431) (340,603) ============= ===============
At June 30, 2003, 4 shareholders held of record approximately 27%, 19%, 17% and 11% of the total outstanding shares of the Fund. All of the Fund's shares are beneficially owned by fiduciary accounts over which Standish Mellon and its affiliates have either sole or joint investment discretion. Investment activity of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $34,340,088 =========== Gross unrealized appreciation 2,068,170 Gross unrealized depreciation (679,404) ----------- Net unrealized appreciation $ 1,388,766 ===========
13 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (6) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Fund's Prospectus and Statement of Additional Information. The Fund trades the following instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Fund may use options to seek to hedge against risks of market exposure and changes in securities prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. Options, both held and written by the Fund, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Fund is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Fund entered into no such transactions during the six months ended June 30, 2003. FORWARD CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. 14 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- At June 30, 2003, the Fund held the following forward foreign currency or cross currency exchange contracts: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN ------------------------------------------------------------------------------------------- Euro 674,500 09/17/2003 $772,400 $794,721 $22,321 -------- -------- -------
SWAP AGREEMENTS The Fund may invest in swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate and credit default swap agreements to manage its exposure to interest rates and credit risk. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of issuers (i.e., to reduce risk where the Fund owns or has exposure to the corporate or sovereign issuer) or to take an active long or short position with respect to the likelihood of a particular corporate or sovereign issuer's default. In connection with these agreements, cash or securities may be set aside as collateral in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral. Swaps are marked to market daily based upon quotations from market makers and change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and differences could be material. Payments received or made from credit default swaps at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations. Net payments of interest on interest rate swap agreements are included as part of interest income. Entering into these agreements, if any, involves, to varying degrees, elements of credit, market, and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements, and that there may be unfavorable changes in interest rates. At June 30, 2003, the Fund held the following credit default swap contracts:
NOTIONAL AMOUNT EXPIRATION NET UNREALIZED FUND/COUNTERPARTY DATE DESCRIPTION (DEPRECIATION) --------------------- ---------- ---------------------------------------------------- -------------- 1,000,000 USD 6/28/08 Agreement with Goldman Sachs Capital Market, dated $(3,000) 04/16/03 to pay 0.46% per year times the notional amount. The Fund receives payment only upon a default event by JP Morgan Chase & Co., the notional amount times the difference between the par value and the then-market value of JP Morgan Chase & Co., 5.25% due 05/30/07.
FUTURES CONTRACTS The Fund may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to the margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for 15 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- financial statement purposes as unrealized gains or losses by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparties do not perform under the contract's terms. The Fund enters into financial futures transactions primarily to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The Fund entered into no such transactions during the six months ended June 30, 2003. (7) SECURITIES LENDING: The Fund may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. At June 30, 2003, the Fund loaned securities having a market value of $2,836,659. The Fund received cash collateral of $2,910,940 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (8) DELAYED DELIVERY TRANSACTIONS: The Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. This Fund segregates securities having a value at least equal to the amount of the purchase commitment. The Fund may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of the decline in the value of the Fund's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Fund may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' 16 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. The Fund entered into no such transactions during the six months ended June 30, 2003. (9) CONCENTRATION OF RISK: The Fund invests in low rated (non-investment grade) and comparable quality unrated high yield securities. Investments in high yield securities are accompanied by a greater degree of credit risk and the value of high yield securities tends to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default of an issuer may be significantly greater for holders of high yield securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer. 17 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
18 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
19 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in Standish Mellon Global Fixed Income Portfolio ("Portfolio"), at value (Note 1A) $158,383,945 Prepaid expenses 9,855 ------------ Total assets 158,393,800 LIABILITIES Accrued accounting, custody and transfer agent fees $2,783 Accrued trustees' fees and expenses (Note 2) 492 Accrued expenses and other liabilities 15,091 ------ Total liabilities 18,366 ------------ NET ASSETS $158,375,434 ============ NET ASSETS CONSIST OF: Paid-in capital $175,289,204 Accumulated net realized loss (34,456,547) Undistributed net investment income 1,107,109 Net unrealized appreciation 16,435,668 ------------ TOTAL NET ASSETS $158,375,434 ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING 7,753,393 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 20.43 ============
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Interest income allocated from Portfolio $3,596,160 Dividend income allocated from Portfolio 63,503 Expenses allocated from Portfolio (508,628) ---------- Net investment income allocated from Portfolio 3,151,035 EXPENSES Accounting, custody, and transfer agent fees $ 17,892 Legal and audit services 13,523 Registration fees 10,835 Insurance expense 886 Trustees' fees and expenses (Note 2) 515 Miscellaneous 7,870 ----------- Total expenses 51,521 Deduct: Reimbursement of Fund operating expenses (Note 2) (37,744) ----------- Net expenses 13,777 ---------- Net investment income 3,137,258 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 12,652,193 Financial futures contracts (519,711) Written options transactions 80,351 Foreign currency transactions and forward foreign currency exchange contracts (13,662,722) ----------- Net realized loss (1,449,889) Change in unrealized appreciation (depreciation) allocated from Portfolio on: Investment securities 275,921 Financial futures contracts 416,107 Written options (42,045) Foreign currency and forward foreign currency exchange contracts 5,660,256 ----------- Change in net unrealized appreciation (depreciation) 6,310,239 ---------- Net realized and unrealized gain on investments 4,860,350 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $7,997,608 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 3,137,258 $ 11,853,212 Net realized loss (1,449,889) (16,266,885) Change in net unrealized appreciation (depreciation) 6,310,239 20,302,604 ------------ ------------- Net increase in net assets from investment operations 7,997,608 15,888,931 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C) From net investment income -- (5,079,763) Return of capital -- (106,692) ------------ ------------- Total distributions to shareholders -- (5,186,455) ------------ ------------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 2,503,072 16,933,516 Value of shares issued to shareholders in payment of distributions declared -- 3,839,481 Cost of shares redeemed (16,707,239) (226,251,292) ------------ ------------- Net decrease in net assets from Fund share transactions (14,204,167) (205,478,295) ------------ ------------- TOTAL DECREASE IN NET ASSETS (6,206,559) (194,775,819) NET ASSETS At beginning of period 164,581,993 359,357,812 ------------ ------------- At end of period (including undistributed net investment income of $1,107,109 and distributions in excess of net investment income of $2,030,149, respectively) $158,375,434 $ 164,581,993 ============ =============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 ---------------------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, BEGINNING OF PERIOD $ 19.43 $ 18.45 $ 18.53 $ 18.76 $ 20.28 $ 20.39 -------- -------- -------- -------- -------- -------- FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.39 0.82 0.84 1.06 1.26 1.28 Net realized and unrealized gain (loss) on investments 0.61 0.44 (0.01)(2) 0.71 (1.38) 0.12 -------- -------- -------- -------- -------- -------- Total from investment operations 1.00 1.26 0.83 1.77 (0.12) 1.40 -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- (0.27) (0.91) (2.00) (1.40) (1.21) From net realized gain on investments -- -- -- -- -- (0.30) From tax return of capital -- (0.01) -- -- -- -- -------- -------- -------- -------- -------- -------- Total distributions to shareholders -- (0.28) (0.91) (2.00) (1.40) (1.51) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 20.43 $ 19.43 $ 18.45 $ 18.53 $ 18.76 $ 20.28 ======== ======== ======== ======== ======== ======== TOTAL RETURN 5.15%++ 6.94% 4.51% 9.79% (0.64)% 6.98% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.65%+ 0.60% 0.56% 0.56% 0.54% 0.56% Net Investment Income (to average daily net assets)* 3.90%+ 4.43% 4.46% 5.59% 6.31% 6.18% Net Assets, End of Period (000's omitted) $158,375 $164,582 $359,358 $373,739 $379,246 $458,526
- ----------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee payable to the Portfolio and/or reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share $ 0.38 N/A N/A N/A N/A N/A Ratios (to average daily net assets): Expenses 0.70%+ N/A N/A N/A N/A N/A Net investment income 3.85%+ N/A N/A N/A N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.007, to increase net realized and unrealized gains and losses per share by $0.007 and decrease the ratio of net investment income to average net assets from 4.50% to 4.46%. Per share data and ratios/supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. (2) The amount shown for a share outstanding does not correspond with the aggregate net realized and unrealized gain/loss for the period due to the timing of purchases and redemptions of Fund shares in relation to the fluctuating market values of the Fund. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Global Fixed Income Fund (the "Fund") is a separate non-diversified investment series of the Trust. The objective of the Fund is to maximize total return while realizing a market level of income consistent with preserving principal and liquidity. The Fund invests all of its investable assets in an interest of Standish Mellon Global Fixed Income Portfolio (the "Portfolio"), a subtrust Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust and which has the same investment objective as the Fund. The Portfolio Trust seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in U.S. and non-U.S. dollar denominated fixed income securities of U.S. and foreign governments and companies located in the U.S. and various countries, including emerging markets. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 100% at June 30, 2003). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Global Fixed Income Fund was changed to Standish Mellon Global Fixed Income Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Currently, the Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. C. DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income will be declared and distributed quarterly. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Distributions to shareholders are recorded on ex-dividend date. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, options, futures, amortization and/or accretion of premiums and discounts on certain securities, capital loss carryforwards and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Standish Mellon voluntarily agreed to limit the total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.65% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily reimbursed the Fund for $37,744 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the six months ended June 30, 2003, aggregated $2,503,072 and $16,720,305, respectively. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON GLOBAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 126,308 931,692 Shares issued to shareholders in payment of distributions declared -- 212,596 Shares redeemed (843,241) (12,149,438) ------------ ---------------- Net decrease (716,933) (11,005,150) ============ ================
At June 30, 2003, four shareholders held of record approximately 29%, 17%,13% and 11% of the total outstanding shares of the Fund, respectively. Investment activity of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 7 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 94.5% ASSET BACKED -- 1.7% First USA Credit Card Master Trust 1996-6 A(a) 1.414% 07/10/2006 USD 1,570,000 $ 1,570,602 Golden State Tobacco Securitization Corp. 5.000% 06/01/2021 190,000 185,360 Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 500,000 501,330 South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 430,000 395,299 ------------- Total Asset Backed (Cost $2,624,907) 2,652,591 ------------- CORPORATE -- 11.3% BANKING -- 0.5% FleetBoston Financial Corp. Sub Notes 7.375% 12/01/2009 210,000 251,726 Union Planters Bank 5.125% 06/15/2007 455,000 493,894 ------------- 745,620 ------------- BASIC INDUSTRY -- 1.2% Alcoa, Inc. 4.250% 08/15/2007 85,000 90,145 Crompton Corp. Senior Notes 8.500% 03/15/2005 395,000 416,725 CSC Holdings, Inc. 7.875% 12/15/2007 155,000 158,100 Equistar Chemical 10.125% 09/01/2008 180,000 187,200 Freeport-McMoRan Copper & Gold, Inc. 144A Senior Notes 10.125% 02/01/2010 130,000 145,600 Huntsman International LLC 9.875% 03/01/2009 165,000 172,425 Pinnacle Partners 144A Senior Notes 8.830% 08/15/2004 615,000 633,450 Republic Services, Inc. Senior Notes 6.750% 08/15/2011 150,000 172,395 ------------- 1,976,040 ------------- CAPITAL GOODS -- 0.8% Allied Waste Industries Series B 7.375% 01/01/2004 170,000 173,400 American Standard, Inc. 7.375% 02/01/2008 145,000 160,406 Raytheon Corp. 6.500% 07/15/2005 480,000 522,599 Smurfit-Stone Container Corp. 8.250% 10/01/2012 15,000 16,275 SPX Corp. Senior Notes 7.500% 01/01/2013 155,000 166,625 Stone Container Corp. Senior Notes 8.375% 07/01/2012 150,000 161,250 ------------- 1,200,555 ------------- COMMUNICATIONS -- 1.2% AOL Time Warner, Inc. 7.700% 05/01/2032 350,000 407,632 Comcast Cable Communication Senior Notes NCL 6.750% 01/30/2011 75,000 86,089 Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 90,000 93,150 Sprint Capital Corp. 6.125% 11/15/2008 435,000 473,173 Sprint Capital Corp. 6.900% 05/01/2019 435,000 457,913 Sprint Capital Corp. 8.750% 03/15/2032 340,000 406,091 ------------- 1,924,048 ------------- CONSUMER CYCLICAL -- 1.7% Argosy Gaming Co. 10.750% 06/01/2009 130,000 142,025 Cox Communications, Inc. 7.125% 10/01/2012 200,000 238,489 ERAC USA Finance Company 144A 7.350% 06/15/2008 155,000 180,171
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) General Motors Corp. 7.125% 07/15/2013 USD 280,000 $ 278,113 General Motors Corp. 8.375% 07/15/2033 425,000 417,911 Harrahs Operating Co., Inc. 7.125% 06/01/2007 160,000 179,518 HMH Properties, Inc. 7.875% 08/01/2008 175,000 178,062 Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 135,000 143,775 Mohegan Tribal Gaming Authority Senior Notes 8.375% 07/01/2011 155,000 167,400 Moore North America Finance, Inc. 144A Senior Notes 7.875% 01/15/2011 125,000 133,125 News America Holdings Corp. 9.250% 02/01/2013 180,000 238,781 TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 140,000 152,600 TRW Automotive, Inc. 144A Senior Sub Notes 11.000% 02/15/2013 65,000 71,500 Univision Communications, Inc. 7.850% 07/15/2011 200,000 236,597 ------------- 2,758,067 ------------- CONSUMER NONCYCLICAL -- 0.5% Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 140,000 151,550 HCA - The Healthcare Co. Senior Notes 7.875% 02/01/2011 140,000 155,066 Kroger Co. 6.800% 04/01/2011 155,000 175,909 Stater Brothers Holdings Senior Notes 10.750% 08/15/2006 165,000 174,075 Tricon Global Restaurant, Inc. Senior Notes 8.875% 04/15/2011 145,000 169,650 ------------- 826,250 ------------- ELECTRIC -- 0.9% Niagara Mohawk Power 7.375% 07/01/2003 907,317 907,438 Niagara Mohawk Power Senior Notes 7.750% 10/01/2008 425,000 510,230 ------------- 1,417,668 ------------- ENERGY -- 2.4% ANR Pipeline Co. 7.375% 02/15/2024 95,000 95,712 Chesapeake Energy Corp. 8.125% 04/01/2011 250,000 269,375 Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 165,000 182,325 Progress Energy, Inc. 7.000% 10/30/2031 230,000 255,519 TXU Energy Co. 144A Notes 7.000% 03/15/2013 270,000 299,024 Waste Management, Inc. 6.375% 12/01/2003 2,370,000 2,415,773 Waste Management, Inc. 7.375% 05/15/2029 225,000 266,507 XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 30,000 31,950 ------------- 3,816,185 ------------- FINANCIAL -- 1.4% Boston Properties, Inc. REIT Senior Notes 6.250% 01/15/2013 370,000 399,689 EOP Operating LP 7.875% 07/15/2031 155,000 187,741 Fifth Third Bank Sub Notes 4.500% 06/01/2018 565,000 556,510 Goldman Sachs Group, Inc. 5.700% 09/01/2012 215,000 236,968 Morgan Stanley Dean Witter 6.600% 04/01/2012 205,000 239,206 Petronas Capital Ltd. 144A 7.875% 05/22/2022 160,000 189,649 RH Donnelley Finance Corp. I 144A Senior Notes 8.875% 12/15/2010 50,000 55,000
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- FINANCIAL (CONTINUED) RH Donnelley Finance Corp. I 144A Senior Sub Notes 10.875% 12/15/2012 USD 90,000 $ 104,400 Travelers Property Casualty Corp. Senior Notes 5.000% 03/15/2013 190,000 200,105 ------------- 2,169,268 ------------- PUBLIC UTILITY -- 0.7% AES Corp. 144A 8.750% 05/15/2013 200,000 210,500 AES Corp. 144A 10.000% 07/15/2005 90,000 93,600 Northern States Power Co. 8.000% 08/28/2012 195,000 246,142 Public Service Co. of CO 7.875% 10/01/2012 355,000 446,902 Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 100,000 109,750 ------------- 1,106,894 ------------- Total Corporate (Cost $17,091,568) 17,940,595 ------------- YANKEE BONDS -- 4.2% Abitibi-Consolidated, Inc. 6.000% 06/20/2013 340,000 326,162 Banque Centrale de Tunisie 7.375% 04/25/2012 210,000 241,500 British Sky Broadcasting 8.200% 07/15/2009 500,000 584,211 Carnival Corp. 6.150% 04/15/2008 95,000 104,168 Dominican Republic 144A 9.500% 09/27/2006 135,000 126,900 Dominican Republic Euro Registered 9.500% 09/27/2006 115,000 108,100 France Telecom 8.500% 03/01/2031 180,000 249,072 Inco Ltd. 7.750% 05/15/2012 205,000 244,471 Merita Bank FLIRB 144A 7.500% 12/29/2049 445,000 495,303 Republic of Brazil(a) 2.188% 04/15/2012 190,000 142,975 Republic of Brazil 8.875% 04/15/2024 210,000 161,700 Republic of Brazil 10.000% 01/16/2007 270,000 276,075 Republic of Brazil 10.250% 06/17/2013 150,000 141,225 Republic of Colombia 10.750% 01/15/2013 260,000 304,460 Republic of El Salvador 8.500% 07/25/2011 160,000 171,600 Republic of Peru 9.125% 02/21/2012 145,000 153,337 Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 200,000 200,284 Royal Caribbean Cruises 8.250% 04/01/2005 100,000 103,500 Russian Federation 5.000% 03/31/2030 315,000 305,156 Russian Federation 11.000% 07/24/2018 115,000 164,450 Teck Cominico Ltd. 7.000% 09/15/2012 340,000 367,658 Telus Corp. 8.000% 06/01/2011 155,000 181,350 Tyco International Group SA 6.750% 02/15/2011 410,000 441,775 Ukraine Government 144A 7.650% 06/11/2013 135,000 133,987 Ukraine Government Senior Notes 11.000% 03/15/2007 149,334 164,454 United Mexican States 8.300% 08/15/2031 380,000 437,570 United Mexican States 9.875% 02/01/2010 270,000 347,625 ------------- Total Yankee Bonds (Cost $6,247,164) 6,679,068 ------------- U.S. GOVERNMENT AGENCY -- 8.8% PASS THRU SECURITIES -- 8.8% FNMA 6.500% 09/01/2032 - 10/01/2032 1,067,151 1,112,859
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- PASS THRU SECURITIES (CONTINUED) FNMA (TBA) 5.500% 07/01/2033 USD 1,650,000 $ 1,705,173 FNMA (TBA) 6.000% 07/01/2033 10,650,000 11,066,010 ------------- 13,884,042 ------------- Total U.S. Government Agency (Cost $13,866,432) 13,884,042 ------------- U.S. TREASURY OBLIGATIONS -- 2.7% TREASURY BONDS -- 1.2% U.S. Treasury Bond+ 6.250% 05/15/2030 1,545,000 1,923,404 ------------- TREASURY NOTES -- 1.5% U.S. Treasury Note 1.625% 03/31/2005 1,255,000 1,263,628 U.S. Treasury Note 3.000% 01/31/2004 250,000 252,920 U.S. Treasury Note 4.625% 05/15/2006 750,000 813,017 ------------- 2,329,565 ------------- Total U.S. Treasury Obligations (Cost $4,113,711) 4,252,969 ------------- FOREIGN DENOMINATED -- 65.8% AUSTRALIA -- 1.0% Australian Government 6.500% 05/15/2013 AUD 2,055,000 1,542,653 ------------- CANADA -- 0.3% Canadian Pacific Railway 144A 5.200% 06/20/2010 CAD 620,000 455,602 ------------- DENMARK -- 4.6% Denmark Realkredit 4.000% 01/01/2006 DKK 5,140,000 820,519 Denmark Realkredit 6.000% 10/01/2032 41,227,899 6,547,601 Denmark Realkredit 8.000% 10/01/2026 373 63 ------------- 7,368,183 ------------- EURO -- 46.2% Allied Domecq PLC 5.875% 06/12/2009 EUR 145,000 180,659 Allied Irish Banks Ltd.(a) 7.500% 02/28/2011 135,000 182,114 Bank of Ireland Holdings(a) 7.400% 12/29/2049 135,000 182,799 Barclays Bank PLC(a) 7.500% 12/15/2010 135,000 183,467 British Telecom PLC 6.125% 02/15/2006 150,000 186,186 Bundes Obligation Series 135 5.000% 05/20/2005 5,040,000 6,082,016 Bundes Obligation Series 136 5.000% 08/19/2005 4,570,000 5,542,118 Bundes Obligation Series 140 4.500% 08/17/2007 8,075,000 9,876,749 Daimlerchrysler International Finance 6.125% 03/21/2006 410,000 502,956 DePfa ACS Bank 144A 3.875% 07/15/2013 2,800,000 3,182,006 Deutsche Telekom International Finance BV 8.125% 05/29/2012 580,000 819,102 Deutschland Republic 4.000% 07/04/2009 1,615,000 1,932,718 Deutschland Republic 4.125% 07/04/2008 800,000 966,758 Deutschland Republic 5.000% 07/04/2011 780,000 980,806 Deutschland Republic 5.250% 01/04/2011 625,000 797,960 Deutschland Republic 5.625% 01/04/2028 710,000 923,529 Deutschland Republic 6.250% 01/04/2030 1,045,000 1,475,736 Dexia Municipal Agency 5.375% 04/26/2007 1,305,000 1,632,029
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- EURO (CONTINUED) Eurohypo AG 4.500% 01/21/2013 EUR 390,000 $ 464,343 European Investment Bank 3.625% 10/15/2013 360,000 399,329 FBG Treasury BV 5.750% 03/17/2005 295,000 355,727 Fort James Corp. 4.750% 06/29/2004 1,060,000 1,198,314 France Telecom 7.250% 01/28/2013 610,000 818,063 France Telecom 8.250% 03/14/2008 345,000 457,132 France Telecom CDS CLN 5.549% 02/13/2004 840,000 975,637 French Government 3.150% 07/25/2032 1,637,352 2,038,544 French Treasury Note 5.000% 01/12/2006 2,720,000 3,310,051 HBOS PLC(a) 6.050% 11/23/2049 145,000 184,278 Heinz BV 5.125% 04/10/2006 200,000 243,599 Hilton Group Finance PLC 6.500% 07/17/2009 225,000 287,388 Honeywell Holding BV 5.250% 12/20/2006 135,000 162,295 Household Finance Corp. Senior Unsubordinated Notes 6.500% 05/05/2009 300,000 391,962 Inco, Ltd. 15.750% 07/15/2006 200,000 410,345 International Paper Co. 5.375% 08/11/2006 135,000 163,881 Italian Government 4.750% 07/01/2005 3,945,000 4,753,608 Italian Government 7.750% 11/01/2006 2,025,000 2,705,244 Kappa Beheer BV 10.625% 07/15/2009 135,000 166,560 Kingdom of Belgium Series 41 4.250% 09/28/2013 1,580,000 1,860,876 Lear Corp. Senior Notes 8.125% 04/01/2008 135,000 167,335 MBNA Corp. Series 6 4.375% 08/19/2004 1,100,000 1,291,949 Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 135,000 173,532 National Westminister Bank(a) 6.625% 10/29/2049 280,000 363,868 Netherland Government Notes 5.500% 07/15/2010 3,165,000 4,096,337 NGG Finance PLC 5.250% 08/23/2006 485,000 590,610 Nordbanken(a) 6.000% 12/13/2010 140,000 172,753 Parker-Hannifin Corp. 6.250% 11/21/2005 75,000 91,540 Pemex Project Funding Master Trust 144A 6.625% 04/04/2010 180,000 217,173 Republic of Bulgaria 144A 7.500% 01/15/2013 195,000 246,548 Republic of South Africa 5.250% 05/16/2013 110,000 121,765 Sara Lee Corp. 6.125% 07/27/2007 215,000 273,541 Sogerim 7.000% 04/20/2011 210,000 276,808 Spanish Government 4.250% 10/31/2007 3,130,000 3,786,885 Spanish Government 5.000% 07/30/2012 1,555,000 1,939,048 Svenska Handelsbanken(a) 5.500% 03/07/2011 100,000 122,301 Telelfonica Europe BV 5.125% 02/14/2013 485,000 583,075 ThyssenKrupp 7.000% 03/19/2009 160,000 200,618 Tyco International Group SA 5.500% 11/19/2008 880,000 999,876 Vivendi Environnement Senior Notes 5.875% 06/27/2008 330,000 414,206 ------------- 73,106,652 ------------- NEW ZEALAND -- 3.9% New Zealand Government 7.000% 07/15/2009 NZD 5,235,000 3,359,764 New Zealand Government 8.000% 11/15/2006 4,465,000 2,861,528 ------------- 6,221,292 ------------- SINGAPORE -- 3.3% Singapore Government 5.625% 07/01/2008 SGD 7,680,000 5,231,782 -------------
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- SOUTH AFRICA -- 0.2% Republic of South Africa 13.000% 08/31/2010 ZAR 1,680,000 $ 273,880 ------------- SWEDEN -- 2.5% Swedish Government Series 1037 8.000% 08/15/2007 SEK 27,600,000 4,039,034 ------------- UNITED KINGDOM -- 3.8% UK Treasury Gilt Stock 5.000% 03/07/2008 GBP 3,455,000 6,010,162 ------------- Total Foreign Denominated (Cost $92,190,498) 104,249,240 ------------- TOTAL BONDS AND NOTES (COST $136,134,280) 149,658,505 ------------- SHARES ------------ PREFERRED STOCKS -- 0.1% CONVERTIBLE PREFERRED STOCKS -- 0.1% Tyco International Group SA 3.125% 144A CVT Pfd 195,000 215,192 ------------- Total Convertible Preferred Stocks (Cost $195,000) 215,192 ------------- TOTAL PREFERRED STOCKS (COST $195,000) 215,192 ------------- CONTRACT SIZE ------------ PURCHASED OPTIONS -- 0.3% JPY Put/USD Call, Strike Price 119.35, 10/17/2003 (USD) 760,000 14,455 JPY Put/USD Call, Strike Price 130.00, 05/13/2004 (USD) 6,985,000 33,941 JPY Put/USD Call, Strike Price 130.00, 09/23/2003 (USD) 8,150,000 2,599 USD Put/AUD Call, Strike Price 0.61, 10/21/2003 (USD) 1,615,000 134,530 USD Put/CAD Call, Strike Price 1.36, 11/19/2003 (USD) 3,200,000 60,480 USD Put/EUR Call, Strike Price 1.16, 08/13/2003 (USD) 1,690,000 14,872 USD Put/JPY Call, Strike Price 119.35, 10/17/2003 (USD) 760,000 13,490 USD Put/NZD Call, Strike Price 0.55, 07/21/2003 (USD) 3,340,000 216,098 ------------- TOTAL PURCHASED OPTIONS (COST $498,392) 490,465 ------------- PAR VALUE/SHARES ------------ SHORT-TERM INVESTMENTS -- 11.1% CASH EQUIVALENTS -- 1.6% Bank of Montreal Eurodollar Time Deposit(b) 1.150% 07/09/2003 309,414 309,414 Credit Agricole Indosuez Eurodollar Time Deposit(b) 1.050% 08/26/2003 339,584 339,584 Den Danske Bank Eurodollar Time Deposit(b) 1.040% 07/24/2003 271,667 271,667 Goldman Sachs Financial Square Funds - Prime Obligations Fund(b) 339,584 339,584 Royal Bank of Canada Eurodollar Time Deposit(b) 1.300% 07/01/2003 611,251 611,251 Royal Bank of Scotland Eurodollar Time Deposit(b) 1.125% 07/01/2003 611,250 611,250 ------------- 2,482,750 -------------
The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT -- 4.9% U.S. Treasury Bill=/= 1.025% 07/17/2003 USD 1,539,000 $ 1,538,300 U.S. Treasury Bill=/= 1.062% 07/10/2003 6,265,000 6,263,120 ------------- 7,801,420 ------------- U.S. GOVERNMENT AGENCY -- 4.2% FNMA Discount Note=/= 1.150% 07/14/2003 6,680,000 6,677,226 ------------- REPURCHASE AGREEMENTS -- 0.4% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $550,921 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $566,974. 550,909 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $17,512,518) 17,512,305 ------------- TOTAL INVESTMENTS -- 106.0% (COST $154,340,190) $ 167,876,467 OTHER ASSETS, LESS LIABILITIES -- (6.0%) (9,492,351) ------------- NET ASSETS -- 100.0% $ 158,384,116 ============= NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. AUD - Australian Dollar CAD - Canadian Dollar CDS - Credit Default Swap CLN - Credit-Linked Notes CVT - Convertible DKK - Danish Krone EUR - Euro FLIRB - Front Loaded Interest Reduction Bond FNMA - Federal National Mortgage Association GBP - Great British Pound JPY - Japanese Yen NCL - Non-callable NZD - New Zealand Dollar REIT - Real Estate Investment Trust SEK - Swedish Krona SGD - Singapore Dollar TBA - To Be Announced USD - United States Dollar ZAR - South African Rand (a) Variable Rate Security; rate indicated is as of 6/30/03. (b) Represents investments of security lending collateral (Note 6). + Denotes all or part of security segregated as collateral. =/= Rate noted is yield to maturity. The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PERCENTAGE OF NET INDUSTRY SECTOR ASSETS - ------------------------------------------------------------------------ Foreign Government 46.4% Financial 24.7% U.S. Government 16.4% Communications 4.4% Basic Industry 2.9% Capital Goods 2.5% Energy 2.4% Consumer Cyclical 1.8% Banking 1.2% Consumer Noncyclical 1.0% Electric 0.9% Public Utility 0.8% Transportation 0.4% Technology 0.2% ------- 106.0%
PERCENTAGE OF NET TOP TEN COUNTRIES ASSETS - ------------------------------------------------------------------------ United States 36.0% Germany 18.6% France 6.7% United Kingdom 5.8% Italy 4.7% Denmark 4.6% Netherlands 4.3% New Zealand 4.1% Spain 3.6% Singapore 3.3%
The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $2,419,765 (Note 6))(identified cost, $154,340,190) $167,876,467 Cash 859 Foreign currency, at value (identified cost, $22,154) 22,251 Receivable for investments sold 1,870,416 Interest receivable 3,353,623 Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 2,764,860 Prepaid expenses 9,569 ------------ Total assets 175,898,045 LIABILITIES Payable for investments purchased $14,750,947 Payable for variation margin on open financial futures contracts (Note 5) 28,672 Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 95,058 Payable for closed forward foreign currency exchange contracts (Note 5) 57,617 Payable upon return of securities loaned (Note 6) 2,482,750 Options written, at value (Note 5) (premiums received, $39,645) 23,281 Accrued accounting and custody fees 25,846 Accrued trustees' fees and expenses (Note 2) 6,547 Accrued expenses and other liabilities 43,211 ---------- Total liabilities 17,513,929 ------------ NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $158,384,116 ============
The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $3,452 (Note 6)) $3,596,160 Dividend income 63,503 ---------- Total income 3,659,663 EXPENSES Investment advisory fee (Note 2) $ 321,483 Accounting and custody fees 129,366 Legal and audit services 28,445 Trustees' fees and expenses (Note 2) 11,473 Licensing fees 9,918 Insurance expense 7,943 ----------- Total expenses 508,628 ---------- Net investment income 3,151,035 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 12,652,207 Financial futures contracts (519,711) Written options transactions 80,351 Foreign currency transactions and forward foreign currency exchange contracts (13,662,735) ----------- Net realized loss (1,449,888) Change in unrealized appreciation (depreciation) Investment securities 275,921 Financial futures contracts 416,107 Written options (42,046) Foreign currency and forward foreign currency exchange contracts 5,660,263 ----------- Change in net unrealized appreciation (depreciation) 6,310,245 ---------- Net realized and unrealized gain 4,860,357 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $8,011,392 ==========
The accompanying notes are an integral part of the financial statements. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 3,151,035 $ 11,973,451 Net realized loss (1,449,888) (16,266,897) Change in net unrealized appreciation (depreciation) 6,310,245 20,302,620 ------------ ------------- Net increase in net assets from investment operations 8,011,392 16,009,174 ------------ ------------- CAPITAL TRANSACTIONS Contributions 2,503,072 21,983,740 Withdrawals (16,720,305) (237,470,874) ------------ ------------- Net decrease in net assets from capital transactions (14,217,233) (215,487,134) ------------ ------------- TOTAL DECREASE IN NET ASSETS (6,205,841) (199,477,960) NET ASSETS At beginning of period 164,589,957 364,067,917 ------------ ------------- At end of period $158,384,116 $ 164,589,957 ============ =============
The accompanying notes are an integral part of the financial statements. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 ------------------------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- ---------- ------------- ---------- ---------- ---------- TOTAL RETURN+++ 5.17%++ 6.98% 4.54% 9.82% (0.62)% 7.03% RATIOS: Expenses (to average daily net assets) 0.63%+ 0.56% 0.53% 0.53% 0.52% 0.51% Net Investment Income (to average daily net assets) 3.92%+ 4.47% 4.49% 5.61% 6.33% 6.22% Portfolio Turnover 128%++ 205% 251% 236% 172% 162% Net Assets, End of Period (000's omitted) $158,384 $164,590 $364,068 $375,348 $379,604 $461,588
- ----------------- (a) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease the ratio of net investment income to average net assets from 4.53% to 4.49%. Ratios for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. + Computed on an annualized basis. ++ Not annualized. +++ Total return for the Portfolio has been calculated based on the total return for the invested Fund, assuming all distributions were reinvested, and adjusted for the difference in expenses as set out in the notes to the financial statements. The accompanying notes are an integral part of the financial statements. 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the state of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Global Fixed Income Portfolio (the "Portfolio") is a separate non-diversified investment series of the Portfolio Trust. The objective of the Portfolio is to maximize total return while realizing a market level of income consistent with preserving principal and liquidity by investing, under normal circumstances, at least 80% of its net assets in U.S. and non-U.S. dollar denominated fixed income securities of U.S. and foreign governments and companies located in the U.S. and various countries, including emerging markets. At June 30, 2003 there was one fund, Standish Mellon Global Fixed Income Fund (the "Fund"), invested in the Portfolio. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. The Fund's proportionate interest at June 30, 2003 was approximately 100%. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Global Fixed Income Portfolio was changed to Standish Mellon Global Fixed Income Portfolio. In addition, the name of the Standish, Ayer & Wood Master Portfolio was changed to Mellon Institutional Funds Master Portfolio. The name changes for the Portfolio and the Master Portfolio are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Portfolio and the counterparty. Additionally, procedures have been established by the Portfolio to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. 20 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Realized gains and losses from securities sold are recorded on the identified cost basis. The Portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually required or paid. D. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. E. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. F. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. G. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. 21 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon") for overall investment advisory and administrative services, and general office facilities, is paid monthly at the annual rate of 0.40% of the Portfolio's average daily net assets. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term investments, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ------------ ------------ U.S. Government Securities $ 66,617,486 $ 71,771,448 ============ ============ Investments (non-U.S.Government Securities) $125,995,971 $129,649,486 ============ ============
(4) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $154,393,033 =========== Gross unrealized appreciation 14,003,861 Gross unrealized depreciation (520,427) ----------- Net unrealized appreciation $13,483,434 ===========
(5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in Parts A and B of the Portfolio Trust's registration statement. The Portfolio trades the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount 22 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. A summary of the written put options for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- --------------- Outstanding, beginning of period 2 $ 45,729 Options expired (2) (45,729) ----------- -------- Outstanding, end of period 0 $ -- =========== ========
At June 30, 2003, the Fund held no written put options. A summary of the written call options for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 2,576 Options closed (1) (2,576) ----------- ------- Outstanding, end of period 0 $ -- =========== =======
At June 30, 2003, the Fund held no written call options. A summary of the written currency options for the six months ended June 30, 2003 is as follows: WRITTEN CURRENCY OPTION TRANSACTIONS ---------------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- --------------- Outstanding, beginning of period 1 $ 18,009 Options written 5 113,712 Options closed (4) (92,076) ----------- -------- Outstanding, end of period 2 $ 39,645 =========== ========
23 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- At June 30, 2003, the Portfolio held the following written currency option contracts:
SECURITY CONTRACTS VALUE ------------------------------------------------------------------------------ CAD Put/USD Call, Strike Price 1.41, 11/19/2003 1 $21,760 USD Put/EUR Call, Strike Price 1.22, 08/13/2003 1 1,521 ------- Total (premiums received $39,645) $23,281 =======
FORWARD CURRENCY EXCHANGE CONTRACTS The Portfolio may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Portfolio primarily to protect the value of the Portfolio's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At June 30, 2003, the Portfolio held the following forward foreign currency exchange contracts: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS) ------------------------------------------------------------------------------------------------------------- Australian Dollar 2,340,000 09/17/2003 $ 1,559,411 $ 1,556,919 $ (2,492) British Pound Sterling 3,905,000 09/17/2003 6,430,364 6,467,687 37,323 Canadian Dollar 620,000 09/17/2003 457,075 456,352 (723) Danish Krone 51,210,000 09/17/2003 7,898,755 8,031,177 132,422 Euro 63,323,000 09/17/2003 72,514,014 74,871,933 2,357,919 Japanese Yen 2,090 10/17/2003 17 18 1 New Zealand Dollar 10,510,000 09/17/2003 6,110,934 6,045,713 (65,221) Singapore Dollar 8,810,000 09/17/2003 5,010,664 5,092,486 81,822 South African Rand 2,070,000 08/29/2003 272,245 245,623 (26,622) Swedish Krona 29,780,000 09/17/2003 3,703,819 3,795,565 91,746 ----------------- ----------------- --------------- TOTAL $ 103,957,298 $ 106,563,473 $ 2,606,175 ================= ================= ===============
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET IN EXCHANGE MARKET CONTRACT UNREALIZED CONTRACTS TO DELIVER VALUE FOR VALUE VALUE DATE GAIN ----------------------------------------------------------------------------------------------------- New Zealand Dollar $ 3,666,211 Australian Dollar $ 3,729,838 09/04/2003 $ 63,627 --------------- --------------- ------------ TOTAL $ 3,666,211 $ 3,729,838 $ 63,627 =============== =============== ============
FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or 24 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At June 30, 2003, the Portfolio held the following financials futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN ---------------------------------------------------------------------------------------------- U.S. 5 Year Note (43 Contracts) Short 9/30/2003 $4,950,375 $36,301 U.S. 10 Year Note (46 Contracts) Short 9/30/2003 5,402,125 56,106 ------- $92,407 =======
INTEREST RATE SWAP CONTRACTS Interest rate swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Credit and market risk exist with respect to these instruments. If forecasts of interest rates and other market factors are incorrect, investment performance will be diminished compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or a counterparty to a transaction may not perform. The Portfolio expects to enter into these transactions primarily for hedging purposes including, but not limited to, preserving a return or spread on a particular investment or portion of its portfolio, protecting against currency fluctuations, managing duration or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swaps are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments made or received are included as part of interest income. Gains and losses are realized upon the expiration or closing of the swap contracts. The Portfolio entered into no such transactions during the six months ended June 30, 2003. (6) SECURITIES LENDING: The Portfolio may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or 25 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. At June 30, 2003, the Portfolio loaned securities having a market value of $2,419,765. The Portfolio received cash collateral of $2,482,750 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (7) DELAYED DELIVERY TRANSACTIONS: The Portfolio may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. Payment and delivery may take place a month or more after the date of the transactions. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Income on the securities will not be earned until settlement date. The Portfolio instructs its custodian to segregate securities having value at least equal to the amount of the purchase commitment. The Portfolio may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Portfolio holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Portfolio may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Portfolio's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Portfolio may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' daily and the change in market value is recorded by the Portfolio as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Portfolio realizes a gain or loss. If the Portfolio delivers securities under the commitment, the Portfolio realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. The Portfolio entered into no such transactions during the six months ended June 30, 2003. 26 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Trustee Trustee since William Joseph 29 None Benjamin M. Friedman 9/13/1986 Maier, Professor of c/o Harvard University Political Economy, Cambridge, MA 02138 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
27 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
28 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $859,805 (Note 8)) (identified cost, $413,008,945) $449,201,453 Cash 551 Foreign currency, at value (cost $63,151) 63,427 Receivable for investments sold 3,621,542 Receivable for Fund shares sold 14,264 Interest receivable 10,476,778 Unrealized appreciation on forward foreign currency exchange contracts (Note 7) 10,754,560 Receivable for closed forward foreign currency exchange contracts (Note 7) 754,139 Prepaid expenses 44,067 ------------ Total assets 474,930,781 LIABILITIES Payable for investments purchased $12,762,472 Payable for Fund shares redeemed 395,019 Payable for variation margin on open financial futures contracts (Note 7) 111,811 Unrealized depreciation on forward foreign currency exchange contracts (Note 7) 254,905 Payable upon return of securities loaned (Note 8) 885,100 Options written, at value (Note 7) (premiums received, $116,490) 69,861 Accrued accounting, custody and transfer agent fees 64,002 Accrued trustees' fees and expenses (Note 2) 9,010 Accrued expenses and other liabilities 47,616 ---------- Total liabilities 14,599,796 ------------ NET ASSETS $460,330,985 ============ NET ASSETS CONSIST OF: Paid-in capital $495,360,184 Accumulated net realized loss (86,072,562) Undistributed net investment income 3,899,745 Net unrealized appreciation 47,143,618 ------------ TOTAL NET ASSETS $460,330,985 ============ NET ASSETS ATTRIBUTABLE TO: Institutional Class $460,173,811 ============ Service Class $ 157,174 ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING Institutional Class 22,004,548 ============ Service Class 7,591 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) Institutional Class $ 20.91 ============ Service Class $ 20.70 ============
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $1,736 (Note 8)) $ 9,040,552 Dividend income 67,482 ----------- Total investment income 9,108,034 EXPENSES Investment advisory fee (Note 2) $ 874,556 Accounting and custody fees 273,944 Legal and audit services 46,717 Registration fees 27,718 Trustees' fees and expenses (Note 2) 17,039 Insurance expense 10,163 Transfer agent fees - Institutional Class 7,762 Service fees - Service Class (Note 3) 5,225 Transfer agent fees - Service Class 5,111 Miscellaneous 11,813 ----------- Total expenses 1,280,048 Deduct: Reimbursement of operating expenses - Service Class (Note 2) (6,569) ----------- Net expenses 1,273,479 ----------- Net investment income 7,834,555 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 41,846,858 Financial futures contracts (2,031,574) Written options transactions (137,222) Foreign currency transactions and forward foreign currency exchange contracts (50,232,229) ----------- Net realized loss (10,554,167) Change in unrealized appreciation (depreciation) Investment securities (282,865) Financial futures contracts 952,251 Written options 14,391 Foreign currency and forward foreign currency exchange contracts 20,558,953 ----------- Change in net unrealized appreciation (depreciation) 21,242,730 ----------- Net realized and unrealized gain 10,688,563 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $18,523,118 ===========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 7,834,555 $ 14,070,865 Net realized loss (10,554,167) (35,294,689) Change in net unrealized appreciation (depreciation) 21,242,730 43,416,019 ------------- ------------- Net increase in net assets from investment operations 18,523,118 22,192,195 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F) From net investment income Institutional Class -- (8,973,023) Service Class -- (50,553) Return of capital Institutional Class -- (2,482,598) Service Class -- (13,987) ------------- ------------- Total distributions to shareholders -- (11,520,161) ------------- ------------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5) Net proceeds from sale of shares Institutional Class 210,363,655 129,553,707 Service Class 1,051,380 2,480,257 Value of shares issued to shareholders in payment of distributions declared Institutional Class -- 8,100,619 Service Class -- 64,540 Cost of shares redeemed Institutional Class (133,051,418) (206,444,379) Service Class (3,648,180) (1,840,537) ------------- ------------- Net increase (decrease) in net assets from Fund share transactions 74,715,437 (68,085,793) ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 93,238,555 (57,413,759) NET ASSETS At beginning of period 367,092,430 424,506,189 ------------- ------------- At end of period (including undistributed net investment income of $3,899,745 and distributions in excess of net investment income of $3,934,810, respectively) $ 460,330,985 $ 367,092,430 ============= =============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 -------------------------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- ---------- ---------- ---------- ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 20.04 $ 19.43 $ 18.97 $ 21.32 $ 23.22 $ 22.81 -------- -------- -------- -------- ---------- ---------- FROM INVESTMENT OPERATIONS: Net investment income(1) 0.36 0.75 0.76 1.12 1.34 1.38 Net realized and unrealized gain (loss) on investments 0.51 0.46 0.01 0.84 (1.15) 0.58 -------- -------- -------- -------- ---------- ---------- Total from investment operations 0.87 1.21 0.77 1.96 0.19 1.96 -------- -------- -------- -------- ---------- ---------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- (0.47) (0.31) (4.31) (2.08) (1.21) From net realized gain on investments -- -- -- -- (0.01) (0.34) From tax return of capital -- (0.13) -- -- -- -- -------- -------- -------- -------- ---------- ---------- Total distributions to shareholders -- (0.60) (0.31) (4.31) (2.09) (1.55) -------- -------- -------- -------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 20.91 $ 20.04 $ 19.43 $ 18.97 $ 21.32 $ 23.22 ======== ======== ======== ======== ========== ========== TOTAL RETURN 4.34%++ 6.44% 4.07% 9.68% 0.79% 8.73% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets) 0.58%+ 0.59% 0.56% 0.53% 0.52% 0.52% Net Investment Income (to average daily net assets) 3.58%+ 3.89% 3.94% 5.21% 5.82% 5.92% Portfolio Turnover 119%++ 159% 211% 240% 162% 156% Net Assets, End of Period (000's omitted) $460,174 $364,460 $422,626 $454,333 $1,051,443 $1,352,383
- ----------------- (a) The Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.007, increase net realized and unrealized gains and losses per share by $0.007 and decrease the ratio of net investment income to average net assets from 3.98% to 3.94%. Per share data and ratios/supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND FINANCIAL HIGHLIGHTS - SERVICE CLASS - --------------------------------------------------------------------------------
FOR THE PERIOD SIX MONTHS YEAR ENDED APRIL 25, 2000 ENDED DECEMBER 31, (COMMENCEMENT OF JUNE 30, 2003 ------------------ OPERATIONS) TO (UNAUDITED) 2002 2001(A) DECEMBER 31, 2000 ------------- --------- ------- ----------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.78 $19.24 $18.81 $21.48 ------ ------ ------ ------ FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.33 0.69 0.69 0.69 Net realized and unrealized gain on investments 0.59 0.45 0.02 0.67 ------ ------ ------ ------ Total from investment operations 0.92 1.14 0.71 1.36 ------ ------ ------ ------ LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- (0.47) (0.28) (4.03) From tax return of capital -- (0.13) -- -- ------ ------ ------ ------ Total distributions to shareholders -- (0.60) (0.28) (4.03) ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $20.70 $19.78 $19.24 $18.81 ====== ====== ====== ====== TOTAL RETURN+++ 4.65%++ 6.13% 3.81% 6.61%++ RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.82%+ 0.84% 0.81% 0.78%+ Net Investment Income (to average daily net assets)* 3.29%+ 3.64% 3.56% 4.89%+ Portfolio Turnover 119%++ 159% 211% 240% Net Assets, End of Period (000's omitted) $ 157 $2,633 $1,880 $ 213
- ----------------- * For the periods indicated, the investment advisor voluntarily agreed to reimburse the Class for a portion of its operating expenses. If this voluntary action had not been taken, the investment income (loss) per share and ratios would have been: Net investment income (loss) per share(1) $ 0.29 $ 0.59 $ 0.51 $(0.19) Ratios (to average daily net assets): Expenses 1.26%+ 1.36% 1.75% 7.02%+ Net investment income 2.85%+ 3.12% 2.62% (1.35)%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.007, increase net realized and unrealized gains and losses per share by $0.007 and decrease the ratio of net investment income to average net assets from 3.60% to 3.56%. Per share data and ratio/supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ----------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 93.5% ASSET BACKED -- 0.7% Golden State Tobacco Securitization Corp. 5.000% 06/01/2021 USD 490,000 $ 478,034 Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 1,620,000 1,624,309 South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 1,150,000 1,057,195 ------------ Total Asset Backed (Cost $3,082,472) 3,159,538 ------------ CONVERTIBLE CORPORATE BONDS -- 0.0% Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 375,000 173,415 ------------ Total Convertible Corporate Bonds (Cost $171,161) 173,415 ------------ CORPORATE -- 2.9% BASIC INDUSTRY -- 0.4% Crompton Corp. Senior Notes 8.500% 03/15/2005 1,275,000 1,345,125 CSC Holdings, Inc. 7.875% 12/15/2007 420,000 428,400 ------------ 1,773,525 ------------ CAPITAL GOODS -- 0.1% SPX Corp. Senior Notes 6.250% 06/15/2011 335,000 341,700 ------------ COMMUNICATIONS -- 0.9% Sprint Capital Corp. 6.125% 11/15/2008 1,150,000 1,250,918 Sprint Capital Corp. 6.900% 05/01/2019 1,380,000 1,452,688 Sprint Capital Corp. 8.750% 03/15/2032 1,125,000 1,343,682 ------------ 4,047,288 ------------ CONSUMER CYCLICAL -- 0.3% Mohegan Tribal Gaming Authority 8.750% 01/01/2009 925,000 985,125 TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 370,000 403,300 TRW Automotive, Inc. 144A Senior Sub Notes 11.000% 02/15/2013 150,000 165,000 ------------ 1,553,425 ------------ CONSUMER NONCYCLICAL -- 0.6% Aramark Services, Inc. 7.000% 07/15/2006 2,000,000 2,224,570 Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 300,000 324,750 ------------ 2,549,320 ------------ ENERGY -- 0.3% ANR Pipeline Co. 7.375% 02/15/2024 250,000 251,875 Chesapeake Energy Corp. 8.125% 04/01/2011 555,000 598,012 Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 435,000 480,675 XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 85,000 90,525 ------------ 1,421,087 ------------
The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ----------------------------------------------------------------------------------------------------- FINANCIAL -- 0.1% RH Donnelley Finance Corp. I 144A Senior Notes 8.875% 12/15/2010 USD 125,000 $ 137,500 RH Donnelley Finance Corp. I 144A Senior Sub Notes 10.875% 12/15/2012 195,000 226,200 ------------ 363,700 ------------ PUBLIC UTILITY -- 0.2% AES Corp. 144A 8.750% 05/15/2013 610,000 642,025 Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 255,000 279,862 ------------ 921,887 ------------ Total Corporate (Cost $12,283,799) 12,971,932 ------------ YANKEE BONDS -- 3.0% Abitibi-Consolidated, Inc. 6.000% 06/20/2013 1,075,000 1,031,247 Banque Centrale de Tunisie 7.375% 04/25/2012 580,000 667,000 Brascan Corp. 7.125% 12/16/2003 1,600,000 1,634,091 Dominican Republic 144A 9.500% 09/27/2006 265,000 249,100 Dominican Republic Euro Registered 9.500% 09/27/2006 525,000 493,500 Petronas Capital Ltd. 144A 7.875% 05/22/2022 430,000 509,682 Republic of Brazil(b) 2.188% 04/15/2012 570,000 428,925 Republic of Brazil 8.000% 04/15/2014 430,994 379,274 Republic of Brazil 8.875% 04/15/2024 645,000 496,650 Republic of Brazil 10.000% 01/16/2007 605,000 618,613 Republic of Brazil 10.250% 06/17/2013 485,000 456,628 Republic of Colombia 10.750% 01/15/2013 830,000 971,930 Republic of El Salvador 8.500% 07/25/2011 510,000 546,975 Republic of Peru 9.125% 02/21/2012 420,000 447,720 Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 640,000 640,909 Royal Caribbean Cruises 8.250% 04/01/2005 225,000 232,875 Russian Federation 5.000% 03/31/2030 960,000 930,000 Russian Federation 11.000% 07/24/2018 360,000 514,800 Ukraine Government 144A 7.650% 06/11/2013 510,000 506,175 Ukraine Government Senior Notes 11.000% 03/15/2007 448,002 493,362 United Mexican States 8.300% 08/15/2031 845,000 973,018 United Mexican States 9.875% 02/01/2010 730,000 939,875 ------------ Total Yankee Bonds (Cost $13,790,763) 14,162,349 ------------ U.S. GOVERNMENT AGENCY -- 2.2% PASS THRU SECURITIES -- 2.2% FNMA 6.500% 09/01/2032 - 10/01/2032 1,728,229 1,802,253 FNMA (TBA) 6.000% 07/01/2033 8,225,000 8,546,285 ------------ 10,348,538 ------------ Total U.S. Government Agency (Cost $10,333,478) 10,348,538 ------------
The accompanying notes are an integral part of the financial statements. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ----------------------------------------------------------------------------------------------------- FOREIGN DENOMINATED -- 84.7% CANADA -- 0.3% Canadian Pacific Railway 144A 5.200% 06/20/2010 CAD 2,000,000 $ 1,469,683 ------------ DENMARK -- 5.9% Denmark Realkredit 4.000% 01/01/2006 DKK 13,965,000 2,229,289 Denmark Realkredit 6.000% 10/01/2032 105,211,895 16,709,206 Denmark Realkredit 8.000% 10/01/2026 745 126 Kingdom of Denmark 4.000% 11/15/2004 53,200,000 8,422,634 ------------ 27,361,255 ------------ EURO -- 64.2% Air Products & Chemicals 6.000% 03/30/2005 EUR 1,050,000 1,275,303 Allied Domecq PLC 5.875% 06/12/2009 370,000 460,993 Allied Irish Banks Ltd.(b) 7.500% 02/28/2011 365,000 492,382 Bank of Ireland Holdings(b) 7.400% 12/29/2049 355,000 480,694 Barclays Bank PLC(b) 7.500% 12/15/2010 350,000 475,654 British Telecom PLC 6.125% 02/15/2006 375,000 465,464 Bundes Obligation Series 135 5.000% 05/20/2005 17,400,000 20,997,435 Bundes Obligation Series 136 5.000% 08/19/2005 15,860,000 19,233,695 Bundes Obligation Series 140 4.500% 08/17/2007 9,075,000 11,099,876 Buoni del Tesoro Poliennali 4.500% 03/01/2007 10,675,000 13,035,806 Daimlerchrysler International Finance 6.125% 03/21/2006 1,240,000 1,521,136 DePfa ACS Bank 144A 3.875% 07/15/2013 4,350,000 4,943,474 Deutsche Telekom International Finance BV 8.125% 05/29/2012 1,795,000 2,534,980 Deutschland Republic 4.000% 07/04/2009 8,010,000 9,585,805 Deutschland Republic 4.125% 07/04/2008 1,000,000 1,208,448 Deutschland Republic 4.750% 07/04/2028 6,265,000 7,244,771 Deutschland Republic 5.000% 07/04/2011 5,015,000 6,306,077 Deutschland Republic 5.000% 07/04/2012 780,000 977,296 Deutschland Republic 5.250% 01/04/2011 5,420,000 6,919,909 Deutschland Republic 5.625% 01/04/2028 940,000 1,222,701 Deutschland Republic 6.250% 01/04/2030 9,185,000 12,970,942 Dexia Municipal Agency 5.375% 04/26/2007 3,500,000 4,377,090 Eurohypo AG 4.500% 01/21/2013 970,000 1,154,905 European Investment Bank 3.625% 10/15/2013 1,130,000 1,253,448 FBG Treasury BV 5.750% 03/17/2005 750,000 904,390 Fort James Corp. 4.750% 06/29/2004 3,345,000 3,781,471 France Telecom 7.250% 01/28/2013 1,890,000 2,534,655 France Telecom 8.250% 03/14/2008 855,000 1,132,892 France Telecom CDS CLN 5.549% 02/13/2004 2,140,000 2,485,551 French Government 3.150% 07/25/2032 3,649,824 4,544,122 French Treasury Note 5.000% 01/12/2006 12,775,000 15,546,286 General Motors Corp. 6.050% 07/01/2008 1,000,000 1,143,109 General Motors Corp. 7.250% 07/01/2013 1,000,000 1,141,617 HBOS PLC(b) 6.050% 11/23/2049 390,000 495,644 Heinz BV 5.125% 04/10/2006 550,000 669,898 Hilton Group Finance PLC 6.500% 07/17/2009 565,000 721,664 Honeywell Holding BV 5.250% 12/20/2006 405,000 486,885
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ----------------------------------------------------------------------------------------------------- EURO (CONTINUED) Household Finance Corp. Senior Unsubordinated Notes 6.500% 05/05/2009 EUR 965,000 $ 1,260,813 Inco, Ltd. 15.750% 07/15/2006 796,000 1,633,171 International Paper Co. 5.375% 08/11/2006 405,000 491,643 Italian Government 7.750% 11/01/2006 16,410,000 21,922,493 Kappa Beheer BV 10.625% 07/15/2009 365,000 450,329 Kingdom of Belgium 5.750% 09/28/2010 11,400,000 14,953,452 Kingdom of Belgium Series 41 4.250% 09/28/2013 3,915,000 4,610,969 Lear Corp. Senior Notes 8.125% 04/01/2008 365,000 452,423 MBNA Corp. Series 6 4.375% 08/19/2004 3,620,000 4,251,686 Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 360,000 462,753 Morgan Stanley Dean Witter 5.750% 04/01/2009 585,000 737,122 National Westminister Bank(b) 6.625% 10/29/2049 740,000 961,652 Netherland Government Notes 5.500% 07/15/2010 8,795,000 11,383,028 NGG Finance PLC 5.250% 08/23/2006 1,235,000 1,503,925 Nordbanken(b) 6.000% 12/13/2010 380,000 468,901 Parker-Hannifin Corp. 6.250% 11/21/2005 200,000 244,106 Pemex Project Funding Master Trust 144A 6.625% 04/04/2010 440,000 530,869 Republic of Austria 5.500% 10/20/2007 7,500,000 9,498,781 Republic of Bulgaria 144A 7.500% 01/15/2013 630,000 796,539 Republic of South Africa 5.250% 05/16/2013 345,000 381,900 Sara Lee Corp. 6.125% 07/27/2007 545,000 693,395 Sogerim 7.000% 04/20/2011 555,000 731,564 Spanish Government 3.250% 01/31/2005 10,500,000 12,262,427 Spanish Government 4.250% 10/31/2007 14,595,000 17,658,016 Spanish Government 5.000% 07/30/2012 10,825,000 13,498,516 Svenska Handelsbanken(b) 5.500% 03/07/2011 400,000 489,205 Telelfonica Europe BV 5.125% 02/14/2013 1,290,000 1,550,858 Telenor ASA 5.875% 12/05/2012 1,100,000 1,397,480 ThyssenKrupp 7.000% 03/19/2009 420,000 526,622 Tyco International Group SA 5.500% 11/19/2008 2,295,000 2,607,632 Vivendi Environnement Senior Notes 5.875% 06/27/2008 940,000 1,179,858 ------------ 295,418,596 ------------ JAPAN -- 2.1% GE Financial Assurance 1.600% 06/20/2011 JPY 1,185,000,000 9,811,108 ------------ NEW ZEALAND -- 3.5% New Zealand Government 7.000% 07/15/2009 NZD 13,660,000 8,766,835 New Zealand Government 8.000% 11/15/2006 11,300,000 7,241,941 ------------ 16,008,776 ------------ SINGAPORE -- 3.0% Singapore Government 3.500% 07/01/2012 SGD 21,800,000 13,757,447 ------------ SOUTH AFRICA -- 0.2% Republic of South Africa 13.000% 08/31/2010 ZAR 5,265,000 858,320 ------------
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ----------------------------------------------------------------------------------------------------- SWEDEN -- 2.2% Swedish Government Series 1037 8.000% 08/15/2007 SEK 67,800,000 $ 9,921,974 ------------ UNITED KINGDOM -- 3.3% UK Treasury Gilt Stock 5.000% 03/07/2008 GBP 8,745,000 15,212,406 ------------ Total Foreign Denominated (Cost $354,968,311) 389,819,565 ------------ TOTAL BONDS AND NOTES (COST $394,629,984) 430,635,337 ------------ CONTRACT SIZE ------------ PURCHASED OPTIONS -- 0.3% JPY Put/USD Call, Strike Price 119.35, 10/17/2003 (USD) 2,020,000 38,420 JPY Put/USD Call, Strike Price 130.00, 05/13/2004 (USD) 7,320,000 35,569 JPY Put/USD Call, Strike Price 130.00, 09/23/2003 (USD) 16,230,000 5,176 USD Put/AUD Call, Strike Price 0.61, 10/21/2003 (USD) 3,610,000 300,713 USD Put/CAD Call, Strike Price 1.36, 11/19/2003 (USD) 9,700,000 183,330 USD Put/EUR Call, Strike Price 1.16, 08/13/2003 (USD) 4,335,000 38,148 USD Put/JPY Call, Strike Price 119.35, 10/17/2003 (USD) 2,020,000 35,855 USD Put/NZD Call, Strike Price 0.55, 07/21/2003 (USD) 8,290,000 536,363 ------------- TOTAL PURCHASED OPTIONS (COST $986,390) 1,173,574 ------------- PAR RATE MATURITY VALUE/SHARES ------- ----------------------- ------------- SHORT-TERM INVESTMENTS -- 3.8% CASH EQUIVALENTS -- 0.2% Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 110,306 110,306 Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 121,062 121,062 Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 96,849 96,849 Goldman Sachs Financial Square Funds - Prime Obligations Fund(c) 121,061 121,061 Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 217,911 217,911 Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 217,911 217,911 ------------ 885,100 ------------ U.S. GOVERNMENT -- 0.1% U.S. Treasury Bill=/=+ 0.843% 09/25/2003 400,000 399,180 ------------
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - ----------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY -- 0.1% FNMA Discount Note=/=+ 4.770% 07/01/2003 USD 250,000 $ 250,000 ------------ REPURCHASE AGREEMENTS -- 3.4% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $15,858,592 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $16,243,048. 15,858,262 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $17,392,571) 17,392,542 ------------ TOTAL INVESTMENTS -- 97.6% (COST $413,008,945) $ 449,201,453 OTHER ASSETS, LESS LIABILITIES -- 2.4% 11,129,532 ------------- NET ASSETS -- 100.0% $ 460,330,985 =============
NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. AUD - Australian Dollar CAD - Canadian Dollar CDS - Credit Default Swap CLN - Credit-Linked Notes DKK - Danish Krone EUR - Euro FNMA - Federal National Mortgage Association GBP - Great British Pound JPY - Japanese Yen NZD - New Zealand Dollar SEK - Swedish Krona SGD - Singapore Dollar Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2003. Maturity date disclosed is the ultimate maturity. TBA - To Be Announced ZAR - South African Rand (a) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. The maturity date shown is the ultimate maturity. (b) Variable Rate Security; rate indicated is as of 6/30/03. (c) Represents investments of security lending collateral (Note 8). =/= Rate noted is yield to maturity. + Denotes all or part of security segregated as collateral. The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PERCENTAGE OF NET INDUSTRY SECTOR ASSETS - ------------------------------------------------------------------------ Foreign Government 63.1% Financial 21.9% Communications 3.6% U.S. Government 2.3% Basic Industry 1.9% Capital Goods 1.5% Consumer Noncyclical 1.0% Consumer Cyclical 0.8% Transportation 0.4% Banking 0.4% Public Utility 0.3% Energy 0.2% Technology 0.2% ------- 97.6%
PERCENTAGE OF NET TOP TEN COUNTRIES ASSETS - ------------------------------------------------------------------------ Germany 21.6% United States 12.2% Spain 9.4% Italy 7.6% France 7.1% Denmark 5.9% United Kingdom 4.5% Belgium 4.3% Netherlands 4.2% New Zealand 3.6%
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon International Fixed Income Fund (the "Fund") is a separate non-diversified investment series of the Trust. The Fund currently offers two classes of shares: Institutional Class and Service Class. Expenses of the Fund are borne pro-rata by the holders of each class of shares, except for transfer agent fees and an account service fee of up to 0.25% of the average daily net assets of the Service Class of shares. Each class votes separately as a class only with respect to its own distribution plan (Service Class only) or other matters that relate only to that class. Shares of each class would receive their pro-rata share of the net assets of the Fund (after satisfaction of any class-specific expenses) if the Fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. Shares of the Service Class may be purchased by entities ("Account Administrators") that provide omnibus accounting services for groups of individuals who beneficially own Service Class shares ("Omnibus Accounts"). Omnibus Accounts include pension and retirement plans (such as 401(k) plans, 457 plans and 403(b) plans), and programs through which personal and or account maintenance services are provided to groups of individuals whether or not such individuals invest on a tax-deferred basis. Individual investors may only purchase Service Class shares through their Omnibus Account Administrators. The objective of the Fund is to maximize total return while realizing a market level of income consistent with preserving principal and liquidity by investing, under normal circumstances, at least 80% of net assets in fixed income securities. The Fund also invests, under normal circumstances, at least 65% of net assets in non-U.S. dollar denominated fixed income securities of foreign governments and companies located in various countries, including emerging markets. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish International Fixed Income Fund was changed to Standish Mellon International Fixed Income Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are primarily traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Fund are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. 13 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- B. REPURCHASE AGREEMENTS It is the policy of the Fund to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Fund and the counterparty. Additionally, procedures have been established by the Fund to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of trade date. Interest income is determined on the basis of interest accrued, adjusted accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Realized gains and losses from securities sold are recorded on the identified cost basis. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually received or paid. D. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. E. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. F. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-dividend date. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, amortization and/or accretion of premiums and discounts on certain securities, capital loss carry forwards, losses deferred due to wash sales and excise tax regulations. 14 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. G. ALLOCATION OF OPERATING ACTIVITY The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated among the share classes of the Fund based on the relative net assets of each class. Transfer agent fees, which are directly attributable to a class of shares, are charged to that class' operations. Service fees, which are directly attributable to the Service Class shares, are charged to the Service Class operations. H. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory and administrative services, and general office facilities is paid monthly at the annual rate of 0.40% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit the Service Class operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) for the six months ended June 30, 2003, so that the Service Class annual operating expenses do not exceed the total operating expenses of the Institutional Class (net of any expense limitation) for the comparable period plus 0.25% (the maximum Service Fee). Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon reimbursed the Service Class $6,569 for class specific operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. Effective January 28, 2003, the Institutional Class of the Fund began imposing a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. The redemption fee is applicable to shares of the Institutional Class purchased on or after January 28, 3003. For the period ended June 30, 2003, the Fund received $142 in redemption fees. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) SERVICE FEE: Pursuant to a service plan, the Service Class pays a service fee at an aggregate annual rate of up to 0.25% of the class' average daily net assets. The service fee is payable for the benefit of participants in the omnibus accounts that are 15 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- shareholders in the Service Class and is intended to be compensation to Account Administrators for providing personal services and/or account maintenance services to participants in omnibus accounts that are the beneficial owners of Service Class shares. (4) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term investments, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ------------ ------------ U.S. Government Securities $ 62,508,053 $ 73,911,400 ============ ============ Investments (non-U.S.Government Securities) $466,065,549 $417,066,147 ============ ============
(5) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED INSTITUTIONAL CLASS: (UNAUDITED) DECEMBER 31, 2002 -------------------------------------------------- ---------------- -------------------- Shares sold 10,284,202 6,633,795 Shares issued to shareholders in payment of distributions declared -- 431,803 Shares redeemed (6,468,696) (10,629,935) ------------- ---------------- Net increase (decrease) 3,815,506 (3,564,337) ============= ================
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED SERVICE CLASS: (UNAUDITED) DECEMBER 31, 2002 -------------------------------------------------- ---------------- -------------------- Shares sold 52,107 129,719 Shares issued to shareholders in payment of distributions declared -- 3,477 Shares redeemed (177,628) (97,810) ------------ -------------- Net increase (decrease) (125,521) 35,386 ============ ==============
(6) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. 16 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $413,192,152 =========== Gross unrealized appreciation 38,031,210 Gross unrealized depreciation (2,021,909) ----------- Net unrealized appreciation $36,009,301 ===========
(7) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Fund's Prospectus and Statement of Additional Information. The Fund trades the following instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Fund may use options to seek to hedge against risks of market exposure and changes in securities prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. Options, both held and written by the Fund, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Fund is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. A summary of written put option transactions for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 6,150 Options expired (1) (6,150) ----------- ------- Outstanding, end of period 0 $ -- =========== =======
At June 30, 2003, the Fund held no open written put option contracts. 17 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- A summary of written call option transactions for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 4,600 Options closed (1) (4,600) ----------- ------- Outstanding, end of period 0 $ -- =========== =======
At June 30, 2003, the Fund held no open written call option contracts. A summary of written currency option transactions for the six months ended June 30, 2003 is as follows: WRITTEN CURRENCY OPTION TRANSACTIONS ---------------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- ---------------- Outstanding, beginning of period 2 $ 108,650 Options written 5 304,049 Options closed (5) (296,209) ----------- --------- Outstanding, end of period 2 $ 116,490 =========== =========
At June 30, 2003, the Fund held the following written currency option contracts:
SECURITY CONTRACTS VALUE ------------------------------------------------------------ --------- ---------- CAD Put/USD Call, Strike Price 1.41, 11/19/2003 1 $65,960 USD Put/EUD Call, Strike Price 1.22, 08/13/2003 1 3,901 ------- Total (premiums received $116,490) $69,861 =======
FORWARD CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. 18 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- At June 30, 2003, the Fund held the following forward foreign currency contracts: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS) ------------------------------------------------------------------------------------------------------------- British Pound Sterling 9,350,000 09/17/2003 $ 15,396,645 $ 15,485,470 $ 88,825 Canadian Dollar 2,000,000 09/17/2003 1,474,437 1,472,104 (2,333) Danish Krone 184,190,000 09/17/2003 28,409,915 28,886,205 476,290 Euro 255,899,000 09/17/2003 293,041,447 302,444,288 9,402,841 Japanese Yen 1,036,330,000 09/17/2003 8,665,329 8,832,609 167,280 New Zealand Dollar 27,220,000 09/17/2003 15,826,795 15,657,563 (169,232) Singapore Dollar 23,795,000 09/17/2003 13,533,342 13,762,131 228,789 South African Rand 6,480,000 08/29/2003 852,246 768,906 (83,340) Swedish Krona 74,800,000 09/17/2003 9,303,078 9,533,520 230,442 ----------------- ----------------- ---------------- TOTAL $ 386,503,234 $ 396,842,796 $ 10,339,562 ================= ================= ================
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET MARKET CONTRACT UNREALIZED CONTRACTS TO DELIVER VALUE IN EXCHANGE FOR VALUE VALUE DATE GAIN -------------------------------------------------------------------------------------------------------------------- New Zealand Dollar $ 9,224,553 Australian Dollar $ 9,384,646 09/04/2003 $ 160,093 --------------- --------------- ------------- TOTAL $ 9,224,553 $ 9,384,646 $ 160,093 =============== =============== =============
FUTURES CONTRACTS The Fund may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to the margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparties do not perform under the contract's terms. The Fund enters into financial futures transactions primarily to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At June 30, 2003, the Fund held the following financials futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN ----------------------------------------------------------------------------------------------- U.S. 10 Year Note (148 contracts) Short 9/30/2003 $17,380,750 $179,182 U.S. 5 Year Note (212 contracts) Short 9/30/2003 24,406,500 114,879 -------- $294,061 ========
19 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- INTEREST RATE SWAP CONTRACTS Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Credit and market risk exist with respect to these instruments. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or a counterparty to a transaction may not perform. The Fund expects to enter into these transactions primarily for hedging purposes including, but not limited to, preserving a return or spread on a particular investment or portion of its portfolio, protecting against currency fluctuations, as a duration management technique or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments made or received are included as part of interest income. Gains and losses are realized upon the expiration or closing of the swap contracts. The Fund entered into no such transactions during the six months ended June 30, 2003. (8) SECURITIES LENDING: The Fund may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. At June 30, 2003, the Fund loaned securities having a market value of $859,805. The Fund received cash collateral of $885,100 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. 20 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - -------------------------------------------------------------------------------------------------------------------------- Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 Port Financial c/o Decision 11/3/1986 and Chief Executive Corp. Resources, Inc. Officer, Decision 1100 Winter Street Resources, Inc. Waltham, MA 02154 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None c/o Essex Street 11/3/1986 Associates (family Associates investment trust 400 Essex Street office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None c/o Harvard University 9/13/1986 Professor of Political Cambridge, MA 02138 Economy, Harvard 8/5/44 University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President and Management, Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset Management 5/20/54
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - -------------------------------------------------------------------------------------------------------------------------- Patrick J. Sheppard President and Since 2003 Senior Vice President 29 None c/o Standish Mellon Asset Chief Executive and Chief Operating Management Company LLC, Officer Officer, Mellon One Boston Place Institutional Asset Boston, MA 02108 Management; formerly 7/24/65 Vice President and Chief Financial Officer, Mellon Institutional Asset Management
21
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER TERM OF OFFNAME, OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS POSITION(S) AND LENGADDRESS, AND DURING PAST OVERSEEN BY HELD BY HELD WITH TRUST TIME SDATEDOF BIRTH 5 YEARS OFFICER OFFICER - -------------------------------------------------------------------------------------------------------------------------- Beverly E. Banfield Vice President and Vice President Director and Secretary; 29 None c/o Standish Mellon Asset Secretary since 1996; Compliance Officer, Management, Secretary Standish Mellon Asset One Boston Place since 2002 Management Boston, MA 02108 7/6/56 Steven M. Anderson Vice President and Vice President Vice President and 29 None c/o Standish Mellon Asset Treasurer since 1999; Mutual Funds Management, Treasurer Controller, Standish One Boston Place since 2002 Mellon Asset Management Boston, MA 02108 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Funds Management, Operations, Standish One Boston Place Mellon Asset Management Boston, MA 02108 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, Standish One Boston Place Mellon Asset Management Boston, MA 02108 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Operations Management, since 2001; Shareholder One Boston Place Representative, Boston, MA 02108 Standish Mellon Asset 1/19/71 Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Fund Management, Accountant, Mellon One Boston Place Financial Corp. Boston, MA 02108 8/17/60
22 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in Standish Mellon Fixed Income Portfolio ("Portfolio"), at value (Note 1A) $808,777,195 Receivable for Fund shares sold 39,092 Miscellaneous receivable 6,616 Prepaid expenses 17,229 ------------ Total assets 808,840,132 LIABILITIES Payable for Fund shares redeemed $638,497 Accrued accounting, custody and transfer agent fees 5,350 Accrued trustees' fees and expenses (Note 2) 492 Accrued expenses and other liabilities 42,536 ------- Total liabilities 686,875 ------------ NET ASSETS $808,153,257 ============ NET ASSETS CONSIST OF: Paid-in capital $975,727,960 Accumulated net realized loss (210,264,023) Undistributed net investment income 5,595,997 Net unrealized appreciation 37,093,323 ------------ TOTAL NET ASSETS $808,153,257 ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING 39,950,086 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 20.23 ============
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Interest income allocated from Portfolio $18,169,349 Dividend income allocated from Portfolio 640,170 Expenses allocated from Portfolio (1,667,065) ----------- Net investment income allocated from Portfolio 17,142,454 EXPENSES Accounting, custody, and transfer agent fees $ 41,693 Legal and audit services 34,236 Registration fees 17,654 Insurance expense 1,476 Trustees' fees and expenses (Note 2) 991 Miscellaneous 25,856 ----------- Total expenses 121,906 Deduct: Reimbursement of Fund operating expenses (Note 2) (121,350) ----------- Net expenses 556 ----------- Net investment income 17,141,898 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 21,404,435 Financial futures contracts (4,126,264) Written options transactions 611,705 Foreign currency transactions and forward foreign currency exchange contracts (10,085,171) ----------- Net realized gain 7,804,705 Change in unrealized appreciation (depreciation) allocated from Portfolio on: Investment securities 5,823,182 Financial futures contracts 2,445,104 Written options (907,740) Foreign currency and forward foreign currency exchange contracts 4,289,662 ----------- Change in net unrealized appreciation (depreciation) 11,650,208 ----------- Net realized and unrealized gain on investments 19,454,913 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $36,596,811 ===========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 17,141,898 $ 53,285,875 Net realized gain 7,804,705 13,179,486 Change in net unrealized appreciation (depreciation) 11,650,208 23,791,586 ------------- -------------- Net increase in net assets from investment operations 36,596,811 90,256,947 ------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C) From net investment income (13,160,444) (48,646,406) ------------- -------------- Total distributions to shareholders (13,160,444) (48,646,406) ------------- -------------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 10,016,875 94,184,646 Value of shares issued to shareholders in payment of distributions declared 9,715,993 34,960,251 Cost of shares redeemed (176,256,030) (705,084,925) ------------- -------------- Net decrease in net assets from Fund share transactions (156,523,162) (575,940,028) ------------- -------------- TOTAL DECREASE IN NET ASSETS (133,086,795) (534,329,487) NET ASSETS At beginning of period 941,240,052 1,475,569,539 ------------- -------------- At end of period (including undistributed net investment income of $5,595,997 and $1,614,543) $ 808,153,257 $ 941,240,052 ============= ==============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 ------------------------------------------------------------------ (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- ---------- ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 19.70 $ 18.93 $ 18.92 $ 18.55 $ 20.13 $ 20.80 -------- -------- ---------- ---------- ---------- ---------- FROM INVESTMENT OPERATIONS: Net investment income*(1) 0.39 0.93 1.22 1.35 1.34 1.37 Net realized and unrealized gain (loss) on investments 0.44 0.71 0.10 0.47 (1.47) (0.30) -------- -------- ---------- ---------- ---------- ---------- Total from investment operations 0.83 1.64 1.32 1.82 (0.13) 1.07 -------- -------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.30) (0.87) (1.31) (1.45) (1.42) (1.38) From net realized gain on investments -- -- -- -- (0.03) (0.36) -------- -------- ---------- ---------- ---------- ---------- Total distributions to shareholders (0.30) (0.87) (1.31) (1.45) (1.45) (1.74) -------- -------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 20.23 $ 19.70 $ 18.93 $ 18.92 $ 18.55 $ 20.13 ======== ======== ========== ========== ========== ========== TOTAL RETURN+++ 4.24%++ 8.89% 7.16% 10.21% (0.70)% 5.25% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.38%+ 0.38% 0.38% 0.37% 0.36% 0.36% Net Investment Income (to average daily net assets)* 3.91%+ 4.86% 6.35% 7.23% 6.85% 6.54% Net Assets, End of Period (000's omitted) $808,153 $941,240 $1,475,570 $2,220,981 $2,910,545 $3,392,570
- ----------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee payable to the Portfolio and/or reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share(1) $ 0.38 $ 0.93 N/A N/A N/A N/A Ratios (to average daily net assets): Expenses 0.44%+ 0.42% N/A N/A N/A N/A Net investment income 3.85%+ 4.82% N/A N/A N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.004, increase net realized and unrealized gains and losses per share by $0.004 and decrease the ratio of net investment income to average net assets from 6.37% to 6.35%. Per share data and ratios/supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absense of the expense waivers. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Fixed Income Fund (the "Fund") is a separate diversified investment series of the Trust. The Fund invests all of its investable assets in an interest of the Standish Mellon Fixed Income Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust and which has the same investment objective as the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 100% at June 30, 2003). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The objective of the Fund is to achieve a high level of current income, consistent with conserving principal and liquidity, and secondarily to seek capital appreciation when changes in interest rates and economic conditions indicate that capital appreciation may be available without significant risk to principal by the Portfolio investing, under normal circumstances, at least 80% of net assets in fixed income securities issued by U.S. and foreign governments and companies. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Fixed Income Fund was changed to Standish Mellon Fixed Income Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Currently, the Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with generally accepted accounting principles. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income will be declared and distributed quarterly. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, options, futures, interest rate floor, capital loss carryforwards, losses deferred due to wash sales, paydown gains and losses, and amortization and/or accretion of premiums and discounts on certain securities. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Standish Mellon voluntarily agreed to limit the total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.38% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily reimbursed the Fund for $121,350 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the six months ended June 30, 2003, aggregated $10,021,412 and $181,939,231, respectively. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 499,640 4,867,816 Shares issued to shareholders in payment of distributions declared 486,278 1,827,424 Shares redeemed (8,825,518) (36,871,959) ------------- ---------------- Net decrease (7,839,600) (30,176,719) ============= ================
At June 30, 2003, one shareholder held of record approximately 13% of the total outstanding shares of the Fund. Investment activity of this shareholder could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 7 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 113.8% ASSET BACKED -- 18.9% Advanta Mortgage Loan Trust 1997-4 M1 7.040% 01/25/2029 USD 2,306,087 $ 2,373,828 Advanta Mortgage Loan Trust 1999-3 A4 7.750% 10/25/2026 2,195,789 2,352,292 Americredit Auto Receivables Trust 2001-1 A3 5.130% 11/06/2005 1,841,251 1,864,306 Americredit Auto Receivables Trust 2001-D A3(a) 1.610% 09/12/2006 4,231,370 4,236,011 ARG Funding Corp. 1999-1A A3 6.020% 05/20/2005 400,000 400,000 Capital Auto Receivables Asset Trust 2003-2 A3A 1.440% 02/15/2007 7,625,000 7,610,703 Capital One Master Trust 2000-5 B(a) 1.555% 08/15/2006 11,500,000 11,505,228 Capital One Multi-Asset Execution Trust 2003-B2 B2 3.500% 02/17/2009 725,000 737,461 Chase Funding Mortgage Loan Asset-Backed 2001-1 2A1(a) 1.275% 12/25/2030 5,702,003 5,702,223 Chase Manhattan Auto Owner Trust 2003-A A3 1.520% 05/15/2007 3,500,000 3,498,654 Citibank Credit Card Issuance Trust 2000-C1 7.450% 09/15/2007 3,250,000 3,595,231 Citibank Credit Card Issuance Trust 2003-A2 A2 2.700% 01/15/2008 8,500,000 8,677,116 Citibank Credit Card Master Trust I 1997-6 B, PO(b) 0.000% 08/15/2006 4,500,000 4,424,136 Citifinancial Mortgage Securities, Inc. 2003-2 AV1(a) 1.128% 05/25/2033 4,000,000 3,998,750 Daimler Chrysler Auto Trust 2001-C A3 4.210% 07/06/2005 19,000,000 19,223,852 Discover Card Master Trust I 1998-7 A 5.600% 05/16/2006 12,227,000 12,433,427 First Bankcard Master Credit Card Trust 2000-2A A(a) 1.350% 04/17/2006 3,100,000 3,100,484 First Bankcard Master Credit Card Trust 2000-2A C(a) 2.230% 04/17/2006 2,000,000 1,998,750 First USA Credit Card Master Trust 1996-6 A(a) 1.414% 07/10/2006 1,470,000 1,470,563 First USA Credit Card Master Trust 1997-7 B(a) 1.666% 05/17/2007 9,430,000 9,439,329 Golden State Tobacco Securitization Corp. 5.000% 06/01/2021 2,195,000 2,141,398 Green Tree Home Equity Loan Trust 1999-A A1B(a) 1.460% 02/15/2029 4,062,796 4,065,908 Harley-Davidson Motorcycle Trust 2001-3 B 3.720% 10/15/2009 3,003,197 3,065,302 Honda Auto Receivables Owner Trust 2003-1 A3 1.920% 11/20/2006 4,635,000 4,672,987 MBNA Master Credit Card Trust 1996-J B(a) 1.730% 02/15/2006 2,930,000 2,931,202 MBNA Master Credit Card Trust 1996-K A(a) 1.310% 03/15/2006 3,000,000 3,000,591 MBNA Master Credit Card Trust 1998-D C 6.300% 12/15/2005 4,000,000 4,005,625 MBNA Master Credit Card Trust 1998-J B 5.650% 02/15/2006 4,200,000 4,239,635 MBNA Master Credit Card Trust 2000-A C 7.900% 07/16/2007 2,070,000 2,246,597 Residential Asset Mortgage Products, Inc. 2003-RS1 AI1(a) 1.480% 01/25/2019 3,642,771 3,642,085 Residential Asset Securities Corp. 2002-KS5 AI1(a) 1.493% 07/25/2017 937,660 937,543
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- ASSET BACKED (CONTINUED) SLMA Student Loan Trust 2003-6 A1(a) 1.280% 06/16/2008 USD 8,000,000 $ 8,002,500 Vanderbilt Mortgage Finance 1999-A 1A6 6.750% 03/07/2029 1,110,000 1,126,650 -------------- Total Asset Backed (Cost $152,573,195) 152,720,367 -------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.6% Bear Stearns Mortgage 1998-2 B 6.750% 04/30/2030 1,374,831 1,350,772 Calwest Industrial Trust 2002-CALW A 144A 6.127% 02/15/2017 3,945,000 4,499,515 FNMA Grantor Trust 2001-T6 B 6.088% 05/25/2011 3,983,000 4,622,310 FNMA Grantor Trust 2002-T11 A 4.769% 04/25/2012 1,604,091 1,718,485 FNMA Grantor Trust 2002-T3 A 5.139% 12/25/2011 6,790,377 7,371,733 GNMA 2003-48 AC 2.712% 02/16/2020 2,950,823 2,969,634 Merrill Lynch Mortgage Investors, Inc. 1996-C2 B 6.960% 11/21/2028 1,035,000 1,166,341 Merrill Lynch Mortgage Investors, Inc. 1996-C2 D Non-ERISA 6.960% 11/21/2028 1,030,000 1,150,381 Permanent Financing PLC 2 1C Step Up(a) 2.581% 06/10/2042 3,000,000 3,000,000 Prudential Home Mortgage 1993-B 3B 144A(a) 7.634% 04/28/2023 377,497 377,497 Vendee Mortgage Trust 2003-1 A 5.750% 09/15/2012 551,693 574,031 -------------- Total Collateralized Mortgage Obligations (Cost $27,800,720) 28,800,699 -------------- CORPORATE -- 23.2% BANKING -- 4.2% BankBoston NA 6.375% 04/15/2008 933,000 1,053,239 First Union National Bank Sub Notes 7.800% 08/18/2010 3,900,000 4,893,155 FleetBoston Corp. 6.500% 03/15/2008 1,500,000 1,724,611 National City Bank 6.200% 12/15/2011 2,300,000 2,616,998 National City Corp. 6.875% 05/15/2019 1,025,000 1,238,744 Union Planters Corp. 7.750% 03/01/2011 1,900,000 2,320,690 Wells Fargo & Co. 4.250% 08/15/2003 15,000,000 15,055,564 Wells Fargo & Co. 5.000% 11/15/2014 4,535,000 4,809,359 -------------- 33,712,360 -------------- BASIC INDUSTRY -- 1.5% Crompton Corp. Senior Notes 8.500% 03/15/2005 2,815,000 2,969,825 General Electric Co. 5.000% 02/01/2013 2,830,000 2,988,583 International Paper Co. 6.750% 09/01/2011 600,000 693,965 International Paper Co. 144A 5.300% 04/01/2015 675,000 694,556 Occidental Petroleum Senior Notes 8.450% 02/15/2029 370,000 506,429 Sealed Air Corp. 144A 5.625% 07/15/2013 1,465,000 1,460,063 Tosco Corp. 7.250% 01/01/2007 1,415,000 1,609,251 Tosco Corp. 7.800% 01/01/2027 201,000 256,337 Tosco Corp. 8.125% 02/15/2030 450,000 602,664 Westvaco Corp. 8.200% 01/15/2030 341,000 431,561 -------------- 12,213,234 -------------- CAPITAL GOODS -- 1.9% Allied Waste Industries 144A Notes 7.625% 01/01/2006 4,200,000 4,357,500 American Standard, Inc. 7.375% 02/01/2008 500,000 553,125
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- CAPITAL GOODS (CONTINUED) Lockheed Martin Corp. 8.200% 12/01/2009 USD 1,045,000 $ 1,317,864 Lockheed Martin Corp. 8.500% 12/01/2029 1,200,000 1,631,890 Northrop Grumman Corp. 7.125% 02/15/2011 820,000 982,591 Northrop Grumman Corp. 7.750% 02/15/2031 2,360,000 3,042,351 NVR Inc. Senior Notes 8.000% 06/01/2005 760,000 792,300 Raytheon Co. 5.500% 11/15/2012 755,000 807,366 SPX Corp. Senior Notes 6.250% 06/15/2011 230,000 234,600 SPX Corp. Senior Notes 7.500% 01/01/2013 1,225,000 1,316,875 -------------- 15,036,462 -------------- COMMUNICATIONS -- 0.8% AOL Time Warner, Inc. 7.700% 05/01/2032 1,485,000 1,729,523 Comcast Corp. 5.500% 03/15/2011 735,000 783,798 Verizon Global Funding Corp. 4.375% 06/01/2013 1,300,000 1,281,955 Verizon Virginia, Inc. 4.625% 03/15/2013 2,605,000 2,660,590 -------------- 6,455,866 -------------- CONSUMER CYCLICAL -- 2.5% Cox Communications, Inc. 7.750% 11/01/2010 1,875,000 2,280,355 Daimler Chrysler NA Holding 8.500% 01/18/2031 325,000 383,444 ERAC USA Finance Co. 144A 8.250% 05/01/2005 1,950,000 2,153,638 Harrahs Operating Co., Inc. 7.125% 06/01/2007 1,278,000 1,433,904 Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 495,000 527,175 International Flavors & Fragrance 6.450% 05/15/2006 950,000 1,052,603 Lear Corp. 8.110% 05/15/2009 2,225,000 2,564,312 Liberty Media Corp. 5.700% 05/15/2013 2,050,000 2,118,498 MGM Mirage, Inc. 6.950% 02/01/2005 720,000 752,400 Mohegan Tribal Gaming Authority Senior Notes 8.375% 07/01/2011 1,035,000 1,117,800 Mohegan Tribal Gaming Authority Senior Sub Notes 8.125% 01/01/2006 1,355,000 1,470,175 Moore North America Finance, Inc. 144A Senior Notes 7.875% 01/15/2011 350,000 372,750 News America, Inc. Deb Notes 144A 7.625% 11/30/2028 910,000 1,081,899 TCI Communications, Inc. 7.875% 02/15/2026 825,000 962,080 Univision Communications, Inc. 7.850% 07/15/2011 1,617,000 1,912,889 -------------- 20,183,922 -------------- CONSUMER NONCYCLICAL -- 3.1% Amerisourcebergen Corp. Senior Notes 7.250% 11/15/2012 275,000 299,062 Amerisourcebergen Corp. Senior Notes 8.125% 09/01/2008 950,000 1,047,375 Aramark Services, Inc. 7.000% 07/15/2006 4,890,000 5,439,074 Aramark Services, Inc. 7.000% 05/01/2007 2,825,000 3,085,469 Archer-Daniels-Midland 5.935% 10/01/2032 2,100,000 2,239,619 Ball Corp. 6.875% 12/15/2012 740,000 786,250 HJ Heinz Finance Co. 6.750% 03/15/2032 2,575,000 3,009,235 Kroger Co. 7.500% 04/01/2031 1,252,000 1,478,139 Laboratory Corp. of America Holdings 5.500% 02/01/2013 1,920,000 2,047,936 Tenet Healthcare Corp. Senior Notes 6.375% 12/01/2011 420,000 396,900
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- CONSUMER NONCYCLICAL (CONTINUED) Tricon Global Restaurant, Inc. Senior Notes 7.650% 05/15/2008 USD 275,000 $ 305,250 Tricon Global Restaurant, Inc. Senior Notes 8.875% 04/15/2011 3,060,000 3,580,200 Weyerhaeuser Co. 7.250% 07/01/2013 1,350,000 1,595,969 -------------- 25,310,478 -------------- ELECTRIC -- 0.5% Dominion Resources, Inc. Senior Notes 5.000% 03/15/2013 1,200,000 1,242,625 Dominion Resources, Inc. Senior Notes 5.700% 09/17/2012 1,025,000 1,119,200 Niagara Mohawk Power 7.625% 10/01/2005 593,536 653,114 Niagara Mohawk Power Senior Notes 7.750% 10/01/2008 1,000,000 1,200,542 -------------- 4,215,481 -------------- ENERGY -- 1.0% CenterPoint Energy, Inc. 144A 7.875% 04/01/2013 1,200,000 1,380,271 Consumers Energy Co. 144A 5.375% 04/15/2013 1,580,000 1,657,717 Devon Energy Corp. 7.950% 04/15/2032 1,600,000 2,056,582 Progress Energy, Inc. 7.000% 10/30/2031 905,000 1,005,410 Waste Management, Inc. 7.375% 05/15/2029 50,000 59,224 Waste Management, Inc. Senior Notes 7.000% 07/15/2028 1,600,000 1,811,379 XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 380,000 404,700 -------------- 8,375,283 -------------- FINANCIAL -- 5.9% Allstate Corp. Senior Notes 6.125% 12/15/2032 733,000 812,546 Archstone-Smith Trust REIT 5.000% 08/15/2007 1,675,000 1,800,434 Archstone-Smith Trust REIT 6.500% 02/15/2012 580,000 654,472 ASIF Global Financing XVIII 144A 3.850% 11/26/2007 1,695,000 1,771,954 Boston Properties, Inc. 144A REIT 5.625% 04/15/2015 675,000 709,537 Boston Properties, Inc. REIT Senior Notes 6.250% 01/15/2013 1,987,000 2,146,439 Citigroup, Inc. Sub Notes 5.625% 08/27/2012 2,495,000 2,750,644 City National Corp. Senior Notes 144A 5.125% 02/15/2013 1,840,000 1,892,293 Duke Realty Corp. REIT Senior Notes 7.750% 11/15/2009 2,200,000 2,670,901 Duke Realty Investments REIT Senior Notes 6.950% 03/15/2011 25,000 29,123 Duke Realty LP REIT 5.875% 08/15/2012 1,800,000 1,983,284 EOP Operating LP 7.500% 04/19/2029 1,260,000 1,457,473 EOP Operating LP Senior Notes 7.000% 07/15/2011 1,100,000 1,285,254 Ford Motor Credit Co. 6.500% 01/25/2007 3,700,000 3,886,679 General Electric Capital Corp. 6.000% 06/15/2012 2,130,000 2,411,784 General Motors Acceptance Corp. 4.500% 07/15/2006 1,150,000 1,156,060 General Motors Acceptance Corp. 8.000% 11/01/2031 880,000 863,826 Goldman Sachs Group, Inc. 5.700% 09/01/2012 950,000 1,047,067 Healthcare Realty Trust Senior Notes 8.125% 05/01/2011 1,090,000 1,217,700 Host Marriott LP REIT 9.500% 01/15/2007 900,000 974,250 Jefferies Group, Inc. Senior Notes 7.750% 03/15/2012 2,200,000 2,576,125 JP Morgan Chase & Co. Sub Notes 5.750% 01/02/2013 1,485,000 1,617,569 Leucadia National Corp. 144A Senior Notes 7.000% 08/15/2013 590,000 591,721 Morgan Stanley Dean Witter 6.600% 04/01/2012 2,490,000 2,905,475 Prudential Financial Inc. 4.500% 07/15/2013 1,885,000 1,881,814
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- FINANCIAL (CONTINUED) RBS Capital Trust I(a) 4.709% 12/31/2049 USD 4,500,000 $ 4,531,050 Travelers Property Casualty Corp. Senior Notes 5.000% 03/15/2013 1,655,000 1,743,017 -------------- 47,368,491 -------------- PUBLIC UTILITY -- 0.8% AES Corp. 144A 10.000% 07/15/2005 900,000 936,000 Appalachian Power Co. 5.950% 05/15/2033 450,000 450,835 Keyspan Corp. Senior Notes 8.000% 11/15/2030 970,000 1,308,215 NiSource Finance Corp. 7.625% 11/15/2005 440,000 485,761 NiSource Finance Corp. 7.875% 11/15/2010 1,450,000 1,709,004 Northern States Power Co. 8.000% 08/28/2012 415,000 523,840 Southern Natural Gas Co. 6.700% 10/01/2007 945,000 935,550 -------------- 6,349,205 -------------- TECHNOLOGY -- 0.2% L-3 Communications Corp. 144A Senior Sub Notes 7.625% 06/15/2012 1,450,000 1,595,000 -------------- TRANSPORTATION -- 0.8% CSX Corp. 6.250% 10/15/2008 865,000 986,555 Norfolk Southern Corp. 7.050% 05/01/2037 1,500,000 1,752,346 Norfolk Southern Corp. Senior Notes 7.250% 02/15/2031 670,000 801,240 Union Pacific Corp. 3.625% 06/01/2010 1,645,000 1,611,649 Union Pacific Corp. 3.875% 02/15/2009 1,400,000 1,424,107 -------------- 6,575,897 -------------- Total Corporate (Cost $175,584,552) 187,391,679 -------------- MUNICIPAL OBLIGATIONS -- 1.1% Illinois State 5.100% 06/01/2033 5,770,000 5,674,045 New York NY NCL 5.250% 06/01/2013 1,100,000 1,210,187 New York NY NCL 5.500% 08/01/2012 1,750,000 1,964,357 -------------- Total Municipal Obligations (Cost $8,976,887) 8,848,589 -------------- YANKEE BONDS -- 7.6% Abbey National PLC 7.950% 10/26/2029 1,383,000 1,837,890 Abitibi-Consolidated, Inc. 8.850% 08/01/2030 1,410,000 1,530,816 Amvescap Senior Notes 144A 6.600% 05/15/2005 2,125,000 2,301,035 British Sky Broadcasting 8.200% 07/15/2009 2,955,000 3,452,688 British Telecom PLC 8.875% 12/15/2030 692,000 946,763 Carnival Corp. 6.650% 01/15/2028 2,800,000 2,944,668 ChevronTexaco Capital Co. 3.500% 09/17/2007 4,595,000 4,764,876 Deutsche Telekom 8.750% 06/15/2030 1,255,000 1,590,926 Dominican Republic 144A 9.500% 09/27/2006 390,000 366,600 Domtar, Inc. 7.875% 10/15/2011 1,160,000 1,395,019 Donohue Forest Products 7.625% 05/15/2007 2,575,000 2,769,848 Financement Quebec 5.000% 10/25/2012 3,375,000 3,640,414 France Telecom(a) 7.750% 03/01/2011 1,795,000 2,259,124 France Telecom 8.500% 03/01/2031 175,000 242,154 Koninklijke KPN NV 8.000% 10/01/2010 1,325,000 1,640,280
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- YANKEE BONDS (CONTINUED) Nordea Bank Sweden AB 144A 5.250% 11/30/2012 USD 3,710,000 $ 3,965,338 Province of Ontario 4.200% 06/30/2005 1,505,000 1,583,650 Republic of Brazil 8.000% 04/15/2014 708,061 623,093 Republic of Brazil 10.250% 06/17/2013 1,360,000 1,280,440 Republic of Bulgaria 144A 8.250% 01/15/2015 835,000 985,300 Republic of El Salvador 8.500% 07/25/2011 870,000 933,075 Republic of Peru 9.875% 02/06/2015 470,000 515,825 Republic of South Africa 8.500% 06/23/2017 1,118,000 1,369,550 Republic of South Africa 9.125% 05/19/2009 850,000 1,049,750 Rio Tinto Finance USA Ltd. 2.625% 09/30/2008 4,255,000 4,176,926 Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 550,000 550,781 Royal Caribbean Cruises Senior Notes 8.750% 02/02/2011 2,350,000 2,467,500 Russian Federation 5.000% 03/31/2030 1,140,000 1,104,375 State of Qatar 144A 9.750% 06/15/2030 565,000 779,700 Teck Cominico Ltd. 7.000% 09/15/2012 1,865,000 2,016,710 Telus Corp. 8.000% 06/01/2011 790,000 924,300 Tyco International Group SA 6.750% 02/15/2011 975,000 1,050,562 United Mexican States 6.625% 03/03/2015 1,590,000 1,693,350 United Mexican States 8.300% 08/15/2031 1,610,000 1,853,915 UPM-Kymmene Corp. Senior Notes 5.625% 12/01/2014 895,000 964,953 -------------- Total Yankee Bonds (Cost $57,394,694) 61,572,194 -------------- NON-AGENCY -- 3.8% PASS THRU SECURITIES -- 3.8% CS First Boston Mortgage Securities Corp. 2001-CF2 A4 6.505% 02/15/2034 825,000 960,842 DLJ Commercial Mortgage Corp. 1998-CF2 A1B 6.240% 11/12/2031 3,705,000 4,233,773 DLJ Commercial Mortgage Corp. 1998-CF2 B1(a) 7.058% 11/12/2031 2,225,000 2,567,953 First Chicago/Lennar Trust 1997-CHL1-D(a) 7.999% 04/29/2039 7,610,000 7,820,462 GMAC Commercial Mortgage Securities, Inc. 1996-C1 F Non-ERISA 7.860% 11/15/2006 2,375,000 2,521,025 JP Morgan Commercial Mortgage Finance Corp. 1997-C5 A3 7.088% 09/15/2029 1,300,000 1,486,616 Morgan Stanley Capital 1998-HF1 E(a) 7.565% 03/15/2030 5,800,000 6,509,310 Morgan Stanley Dean Witter Capital I 2001-IQA A1 4.570% 12/18/2032 4,075,219 4,276,127 Residential Funding Mortgage Securities I 2002-S4 A8 5.500% 02/25/2032 486,894 491,344 -------------- 30,867,452 -------------- Total Non-Agency (Cost $29,049,952) 30,867,452 -------------- U.S. GOVERNMENT AGENCY -- 34.0% PASS THRU SECURITIES -- 34.0% FHLMC 7.000% 11/01/2031 918,425 962,865 FNMA 5.000% 07/01/2018 1,500,000 1,552,969 FNMA 5.703% 05/25/2011 1,634,160 1,802,980
The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- PASS THRU SECURITIES (CONTINUED) FNMA 6.500% 08/01/2032 - 09/01/2032 USD 15,445,087 $ 16,106,636 FNMA 7.000% 05/01/2031 - 07/01/2032 229,366 241,544 FNMA 7.500% 11/01/2029 3,345 3,556 FNMA 8.500% 06/01/2012 105,062 114,554 FNMA (TBA)# 5.000% 07/01/2018 - 08/01/2018 22,725,000 23,455,344 FNMA (TBA)# 5.500% 07/01/2033 - 09/01/2033 84,850,000 87,425,238 FNMA (TBA)# 6.000% 07/01/2033 98,850,000 102,711,279 FNMA (TBA)# 6.500% 07/01/2033 38,350,000 39,991,840 GNMA 6.500% 08/15/2032 785,507 824,806 GNMA 9.000% 02/15/2021 22,484 25,058 -------------- 275,218,669 -------------- Total U.S. Government Agency (Cost $274,310,064) 275,218,669 -------------- U.S. TREASURY OBLIGATIONS -- 10.4% TREASURY BONDS -- 2.7% U.S. Treasury Bond+ 5.375% 02/15/2031 11,722,000 13,199,617 U.S. Treasury Bond 6.250% 05/15/2030 6,712,000 8,355,916 -------------- 21,555,533 -------------- TREASURY NOTES -- 7.7% U.S. Treasury Note 2.000% 05/15/2006 45,770,000 46,256,306 U.S. Treasury Note 2.625% 05/15/2008 7,120,000 7,185,084 U.S. Treasury Note 3.250% 08/15/2007 8,290,000 8,651,718 -------------- 62,093,108 -------------- Total U.S. Treasury Obligations (Cost $83,621,301) 83,648,641 -------------- FOREIGN DENOMINATED -- 11.2% DENMARK -- 0.4% Denmark Realkredit 6.000% 10/01/2032 DKK 21,211,509 3,368,702 -------------- EURO -- 10.8% Bundes Obligation Series 136 5.000% 08/19/2005 EUR 8,375,000 10,156,507 Deutschland Republic 4.125% 07/04/2008 23,235,000 28,078,284 Deutschland Republic 4.500% 01/04/2013 10,150,000 12,257,241 Deutschland Republic 5.000% 07/04/2011 1,940,000 2,439,440 Deutschland Republic 5.250% 07/04/2010 1,280,000 1,629,771 Deutschland Republic 5.250% 01/04/2011 10,995,000 14,037,711 Deutschland Republic 5.625% 01/04/2028 5,222,205 6,792,761 Kingdom of Belgium 5.750% 09/28/2010 375,000 491,890 Kingdom of Belgium Series 38 5.000% 09/28/2012 4,100,000 5,134,246 Sappi Pappier Holding AG 144A 6.750% 06/15/2012 1,401,000 1,583,436 Spanish Government 5.000% 07/30/2012 4,100,000 5,112,602 -------------- 87,713,889 -------------- Total Foreign Denominated (Cost $76,683,770) 91,082,591 -------------- TOTAL BONDS AND NOTES (COST $885,995,135) 920,150,881 --------------
The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------- EQUITIES -- 0.0% COMMON STOCKS -- 0.0% GH Water Supply Holdings Ltd. (Hong Kong) 87,018 $ 0 Guangdong Alliance Ltd. 144A (Hong Kong)* 228,997 0 HK Property Co. (Hong Kong)* 228,997 0 -------------- 0 -------------- TOTAL EQUITIES (COST $0) 0 -------------- PREFERRED STOCKS -- 0.3% CONVERTIBLE PREFERRED STOCKS -- 0.3% Equity Office Properties Trust 144A CVT Pfd REIT 50,600 2,514,820 -------------- Total Convertible Preferred Stocks (Cost $2,513,200) 2,514,820 -------------- TOTAL PREFERRED STOCKS (COST $2,513,200) 2,514,820 -------------- CONTRACT SIZE ------------- PURCHASED OPTIONS -- 0.0% JPY Put/USD Call, Strike Price 150.00, 02/02/2004 (USD) 38,880,000 3,888 -------------- TOTAL PURCHASED OPTIONS (COST $583,200) 3,888 -------------- PAR VALUE/ RATE MATURITY SHARES ------- ---------- ------------- SHORT-TERM INVESTMENTS -- 27.5% CASH EQUIVALENTS -- 11.5% Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 $ 11,594,308 11,594,308 Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 12,724,815 12,724,815 Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 10,179,852 10,179,852 Goldman Sachs Financial Square Funds - Prime Obligations Fund(c) 12,724,815 12,724,815 Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 22,904,668 22,904,668 Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 22,904,667 22,904,667 -------------- 93,033,125 -------------- U.S. GOVERNMENT -- 16.0% U.S. Treasury Bill++ 1.062% 07/10/2003 129,558,000 129,519,132 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $222,564,197) 222,552,257 -------------- TOTAL INVESTMENTS -- 141.6% (COST $1,111,655,732) $1,145,221,846 OTHER ASSETS, LESS LIABILITIES -- (41.6%) (336,444,484) ------------- NET ASSETS -- 100.0% $ 808,777,362 =============
The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. CVT - Convertible DKK - Danish Krone EUR - Euro FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association GNMA - Government National Mortgage Association JPY - Japanese Yen NCL - Non-callable PO - Principal Only REIT - Real Estate Investment Trust Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2003. Maturity date disclosed is the ultimate maturity. TBA - To Be Announced USD - United States Dollar (a) Variable Rate Security; rate indicated is as of 6/30/03. (b) Zero coupon security. (c) Represents investments of security lending collateral (Note 7). # All or a portion of these securities are delayed delivery contracts (Note 6). + Denotes all or part of security pledged as collateral. * Non-income producing security. ++ Rate noted is yield to maturity. The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $91,070,541 (Note 7)) (identified cost, $1,111,655,732) $1,145,221,846 Cash 306,497 Receivable for investments sold 53,464,930 Interest receivable 8,404,735 Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 2,693,268 Prepaid expenses 14,843 ------------- Total assets 1,210,106,119 LIABILITIES Payable for investments purchased $276,663,946 Payable for variation margin on open financial futures contracts (Note 5) 151,503 Payable upon return of securities loaned (Note 7) 93,033,125 Payable for delayed delivery transactions (Note 6) 31,365,547 Accrued accounting and custody fees 35,970 Accrued trustees' fees and expenses (Note 2) 18,291 Accrued expenses and other liabilities 60,375 ----------- Total liabilities 401,328,757 ------------- NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $ 808,777,362 =============
The accompanying notes are an integral part of the financial statements. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $47,200 (Note 7)) $18,169,353 Dividend income 640,170 ----------- Total income 18,809,523 EXPENSES Investment advisory fee (Note 2) $ 1,502,497 Accounting and custody fees 188,189 Legal and audit services 43,168 Trustees' fees and expenses (Note 2) 34,426 Insurance expense 13,272 Licensing fees 9,918 ----------- Total expenses 1,791,470 Deduct: Waiver of investment advisory fee (Note 2) (124,405) ----------- Net expenses 1,667,065 ----------- Net investment income 17,142,458 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 21,404,439 Financial futures contracts (4,126,265) Written options transactions 611,705 Foreign currency transactions and forward foreign currency exchange contracts (10,085,173) ----------- Net realized gain 7,804,706 Change in unrealized appreciation (depreciation) Investment securities 5,823,184 Financial futures contracts 2,445,104 Written options (907,740) Foreign currency and forward foreign currency exchange contracts 4,289,662 ----------- Change in net unrealized appreciation (depreciation) 11,650,210 ----------- Net realized and unrealized gain 19,454,916 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $36,597,374 ===========
The accompanying notes are an integral part of the financial statements. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 17,142,458 $ 53,285,882 Net realized gain 7,804,706 13,179,491 Change in net unrealized appreciation (depreciation) 11,650,210 23,791,589 ------------- -------------- Net increase in net assets from investment operations 36,597,374 90,256,962 ------------- -------------- CAPITAL TRANSACTIONS Contributions 10,021,412 94,362,926 Withdrawals (181,939,231) (735,911,427) ------------- -------------- Net decrease in net assets from capital transactions (171,917,819) (641,548,501) ------------- -------------- TOTAL DECREASE IN NET ASSETS (135,320,445) (551,291,539) NET ASSETS At beginning of period 944,097,807 1,495,389,346 ------------- -------------- At end of period $ 808,777,362 $ 944,097,807 ============= ==============
The accompanying notes are an integral part of the financial statements. 19 STANDISH, AYER & WOOD MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 ------------------------------------------------------------------ (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- ---------- ------------ ------------ ------------ ------------ TOTAL RETURN+++ 4.24%++ 8.89% 7.18% 10.23% (0.69)% 5.27% RATIOS: Expenses (to average daily net assets)* 0.38%+ 0.38% 0.36% 0.35% 0.35% 0.34% Net Investment Income (to average daily net assets)* 3.91%+ 4.86% 6.37% 7.24% 6.86% 6.56% Portfolio Turnover 222%++ 384% 329% 233% 159% 148% Net Assets, End of Period (000's omitted) $808,777 $944,098 $1,495,389 $2,226,002 $2,911,705 $3,416,462
- ----------------- * For the period indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee. If this voluntary action had not been taken, the ratios would have been: Ratios (to average daily net assets): Expenses 0.41%+ 0.39% N/A N/A N/A N/A Net investment income 3.88%+ 4.85% N/A N/A N/A N/A
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease the ratio of net investment income to average net assets from 6.39% to 6.37%. Ratios for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. + Computed on an annualized basis. ++ Not annualized. +++ Total return for the Portfolio has been calculated based on the total return for the invested Fund, assuming all distributions were reinvested, and adjusted for the difference in expenses as set out in the notes to the financial statements. Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 20 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the state of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Fixed Income Portfolio (the "Portfolio") is a separate diversified investment series of the Portfolio Trust. At June 30, 2003, there was one fund, Standish Mellon Fixed Income Fund (the "Fund"), invested in the Portfolio. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. The Fund's proportionate interest at June 30, 2003 was approximately 100%. The objective of the Portfolio is to achieve a high level of current income, consistent with conserving principal and liquidity, and secondarily to seek capital appreciation when changes in interest rates and economic conditions indicate that capital appreciation may be available without significant risk to principal by investing, under normal circumstances, at least 80% of net assets in fixed income securities issued by U.S. and foreign governments and companies. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Fixed Income Portfolio was changed to Standish Mellon Fixed Income Portfolio. In addition, the name of the Standish, Ayer & Wood Master Portfolio was changed to Mellon Institutional Funds Master Portfolio. The name changes for the Portfolio and the Portfolio Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Portfolio and the counterparty. Additionally, procedures have been established by the Portfolio to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. 21 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. The Portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually received or paid. D. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. E. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. F. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. G. COMMITMENT AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. 22 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon") for overall investment advisory and administrative services is paid monthly at the annual rate of 0.40% of the Portfolio's first $250,000,000 of average daily net assets, 0.35% of the next $250,000,000 of average daily net assets, and 0.30% of the average daily net assets in excess of $500,000,000. Standish Mellon voluntarily agreed to limit the Portfolio's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.38% of the Portfolio's average daily net assets. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily waived $124,405 of its investment advisory fee. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES -------------- -------------- U.S. Government Securities $1,892,586,049 $2,177,655,495 ============== ============== Investments (non-U.S.Government Securities) $ 291,872,669 $ 141,580,790 ============== ==============
(4) FEDERAL TAXES: The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal tax basis, were as follows: Aggregate Cost $1,111,662,762 ============== Gross unrealized appreciation 36,211,521 Gross unrealized depreciation (2,652,437) -------------- Net unrealized appreciation $ 33,559,084 ==============
(5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in Parts A and B of the Portfolio Trust's registration statement. The Portfolio trades the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to 23 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. A summary of the written put options for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- ------------------ Outstanding, beginning of period 4 $ 855,084 Options written 4 305,461 Options expired (8) (1,160,545) ----------- ----------- Outstanding, end of period 0 $ -- =========== ===========
At June 30, 2003, the Portfolio held no written put option contracts. A summary of the written call options for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- ---------------- Outstanding, beginning of period 3 $ 105,383 Options written 4 305,461 Options expired (2) (94,895) Options closed (5) (315,949) ----------- --------- Outstanding, end of period 0 $ -- =========== =========
At June 30, 2003, the Portfolio held no written call option contracts. INTEREST RATE FLOORS Interest rate floors purchased by the Portfolio entitle the Portfolio to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate amount. Credit and market risk exist with respect to these instruments. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or a counterparty to a transaction may not perform. The Portfolio expects to enter these transactions primarily for hedging purposes including, 24 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- but not limited to, preserving a return or spread on a particular investment or portion of its portfolio, protecting against currency fluctuations, as a duration management technique or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate floors are "marked-to-market" daily based on quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statement of Operations. Periodic payments of interest, if any, are reported as additions to interest income in the Statement of Operations. Realized gains or losses from these agreements are disclosed in the Statement of Operations. At June 30, 2003, the Portfolio did not hold any open interest rate floor agreements. FORWARD CURRENCY EXCHANGE CONTRACTS The Portfolio may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Portfolio primarily to protect the value of the Portfolio's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At June 30, 2003, the Portfolio held the following forward foreign currency exchange contracts: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN ----------------------------------------------------------------------------------------------------------- Danish Krone 23,960,000 09/17/2003 $ 3,695,649 $ 3,757,606 $ 61,957 Euro 74,475,000 09/17/2003 85,284,670 87,915,981 2,631,311 ---------------- ---------------- --------------- TOTAL $ 88,980,319 $ 91,673,587 $ 2,693,268 ================ ================ ===============
FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. 25 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- At June 30, 2003, the Portfolio held the following financials futures contracts:
EXPIRATION UNDERLYING FACE CONTRACT POSITION DATE AMOUNT AT VALUE UNREALIZED GAIN --------------------------------------------------------------------------------------------- U.S. 5 Year Note (61 Contracts) Short 9/30/2003 $ 7,031,550 $ 52,392 U.S. 10 Year Note (337 Contracts) Short 9/30/2003 39,576,437 536,120 -------- $588,512 ========
(6) DELAYED DELIVERY TRANSACTIONS: The Portfolio may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. Payment and delivery may take place a month or more after the date of the transactions. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Income on the securities will not be earned until settlement date. The Portfolio instructs its custodian to segregate securities having value at least equal to the amount of the purchase commitment. The Portfolio may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Portfolio holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Portfolio may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Portfolio's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Portfolio may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is "marked-to- market" daily and the change in market value is recorded by the Portfolio as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Portfolio realizes a gain or loss. If the Portfolio delivers securities under the commitment, the Portfolio realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. See the Schedule of Investments for outstanding delayed delivery transactions. (7) SECURITIES LENDING: The Portfolio may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or 26 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON FIXED INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. At June 30, 2003, the Portfolio loaned securities having a market value of $91,070,541. The Portfolio received cash collateral of $93,033,125 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. 27 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management
28
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Assistant Vice Since 2001 Assistant Manager, 29 None Cara E. Hultgren, President Mutual Fund c/o Standish Mellon Asset Operations since Management, 2001; Shareholder One Boston Place Representative, Boston, MA 02108 Standish Mellon 1/19/71 Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
29 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $32,405 (Note 7)) (identified cost, $22,833,016) $24,898,862 Cash 2,045,272 Foreign currency, at value (cost $2,688) 2,699 Receivable for investments sold 272,657 Receivable for Fund shares sold 1,646 Interest receivable 558,149 Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 126,293 Prepaid expenses 11,487 ----------- Total assets 27,917,065 LIABILITIES Payable for investments purchased $ 466,458 Payable for Fund shares redeemed 1,486,757 Payable for variation margin on open financial futures contracts (Note 6) 4,641 Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 161,997 Payable for closed forward foreign currency exchange contracts (Note 6) 15,043 Payable upon return of securities loaned (Note 7) 33,275 Options written, at value (Note 6) (premiums received, $5,965) 3,593 Accrued accounting, custody and transfer agent fees 13,093 Accrued trustees' fees and expenses (Note 2) 1,026 Accrued expenses and other liabilities 18,024 --------- Total liabilities 2,203,907 ----------- NET ASSETS $25,713,158 =========== NET ASSETS CONSIST OF: Paid-in capital $23,577,066 Accumulated net realized gain 47,827 Undistributed net investment income 29,661 Net unrealized appreciation 2,058,604 ----------- TOTAL NET ASSETS $25,713,158 =========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,100,352 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 23.37 ===========
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $86 (Note 7)) $ 448,314 Dividend income 1,090 ---------- Total investment income 449,404 EXPENSES Investment advisory fee (Note 2) $ 45,227 Accounting, custody, and transfer agent fees 66,066 Legal and audit services 19,123 Registration fees 8,125 Insurance expense 3,672 Trustees' fees and expenses (Note 2) 1,789 Miscellaneous 3,516 --------- Total expenses 147,518 Deduct: Waiver of investment advisory fee (Note 2) (45,227) Reimbursement of Fund operating expenses (Note 2) (40,103) --------- Total expense deductions (85,330) --------- Net expenses 62,188 ---------- Net investment income 387,216 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 1,812,535 Financial futures contracts (75,486) Written options transactions (2,375) Foreign currency transactions and forward foreign currency exchange contracts (182,114) --------- Net realized gain 1,552,560 Change in unrealized appreciation (depreciation) Investment securities 280,044 Financial futures contracts 31,730 Written options 1,737 Foreign currency and forward foreign currency exchange contracts (146,030) --------- Change in net unrealized appreciation (depreciation) 167,481 ---------- Net realized and unrealized gain 1,720,041 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $2,107,257 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 387,216 $ 941,984 Net realized gain (loss) 1,552,560 (971,630) Change in net unrealized appreciation (depreciation) 167,481 3,385,918 ----------- ------------ Net increase in net assets from investment operations 2,107,257 3,356,272 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F) From net investment income (401,470) -- ----------- ------------ Total distributions to shareholders (401,470) -- ----------- ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 5,782,712 12,416,156 Value of shares issued to shareholders in payment of distributions declared 399,170 -- Cost of shares redeemed (3,376,626) (34,907,479) ----------- ------------ Net increase (decrease) in net assets from Fund share transactions 2,805,256 (22,491,323) ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 4,511,043 (19,135,051) NET ASSETS At beginning of period 21,202,115 40,337,166 ----------- ------------ At end of period (including undistributed net investment income of $29,661 and $43,915) $25,713,158 $ 21,202,115 =========== ============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS FOR THE PERIOD ENDED YEAR ENDED DECEMBER 31, JUNE 30, 1999 JUNE 30, 2003 ---------------------------- (COMMENCEMENT OF OPERATIONS) (UNAUDITED) 2002 2001(A) 2000 TO DECEMBER 31, 1999 ------------- --------- -------- ------- ---------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 21.66 $ 17.83 $ 18.87 $ 19.47 $ 20.00 ------- ------- ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.39 0.73 0.73 0.98 0.61 Net realized and unrealized gain (loss) on investments 1.72 3.10 (1.74) (1.50) (0.04) ------- ------- ------- ------- ------- Total from investment operations 2.11 3.83 (1.01) (0.52) 0.57 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.40) -- (0.03) (0.08) (1.10) ------- ------- ------- ------- ------- Total distributions to shareholders (0.40) -- (0.03) (0.08) (1.10) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 23.37 $ 21.66 $ 17.83 $ 18.87 $ 19.47 ======= ======= ======= ======= ======= TOTAL RETURN+++ 9.78%++ 21.48% (5.31)% (2.73)% 2.84%++ RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.55%+ 0.55% 0.55% 0.27% 0.00%+ Net Investment Income (to average daily net assets)* 3.42%+ 3.87% 3.99% 5.30% 5.93%+ Portfolio Turnover 107%++ 178% 205% 216% 91%++ Net Assets, End of Period (000's omitted) $25,713 $21,202 $40,337 $41,614 $23,999
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share(1) $ 0.30 $ 0.60 $ 0.68 $ 0.86 $ 0.51 Ratios (to average daily net assets): Expenses 1.30%+ 1.23% 0.85% 0.90% 1.02%+ Net investment income 2.67%+ 3.19% 3.69% 4.67% 4.91%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.002, increase net realized and unrealized gains and losses per share by $0.002 and decrease the ratio of net investment income to average net assets from 4.00% to 3.99%. Per share data and ratios/supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized +++ Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 84.1% ASSET BACKED -- 0.6% Golden State Tobacco Securitization Corp. 5.000% 06/01/2021 USD 25,000 $ 24,389 Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 75,000 75,199 South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 60,000 55,158 ----------- Total Asset Backed (Cost $150,777) 154,746 ----------- CONVERTIBLE CORPORATE BONDS -- 0.0% Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 25,000 11,561 ----------- Total Convertible Corporate Bonds (Cost $11,411) 11,561 ----------- CORPORATE -- 2.1% BASIC INDUSTRY -- 0.3% Crompton Corp. Senior Notes 8.500% 03/15/2005 60,000 63,300 CSC Holdings, Inc. 7.875% 12/15/2007 20,000 20,400 ----------- 83,700 ----------- CAPITAL GOODS -- 0.1% SPX Corp. Senior Notes 6.250% 06/15/2011 15,000 15,300 ----------- COMMUNICATIONS -- 0.8% Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 15,000 15,525 Sprint Capital Corp. 6.125% 11/15/2008 60,000 65,265 Sprint Capital Corp. 6.900% 05/01/2019 65,000 68,424 Sprint Capital Corp. 8.750% 03/15/2032 50,000 59,719 ----------- 208,933 ----------- CONSUMER CYCLICAL -- 0.2% Mohegan Tribal Gaming Authority Senior Notes 8.375% 07/01/2011 20,000 21,600 TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 15,000 16,350 TRW Automotive, Inc. 144A Senior Sub Notes 11.000% 02/15/2013 5,000 5,500 ----------- 43,450 ----------- CONSUMER NONCYCLICAL -- 0.1% Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 20,000 21,650 ----------- ENERGY -- 0.3% ANR Pipeline Co. 7.375% 02/15/2024 10,000 10,075 Chesapeake Energy Corp. 8.125% 04/01/2011 30,000 32,325 Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 20,000 22,100 XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 5,000 5,325 ----------- 69,825 ----------- FINANCIAL -- 0.1% RH Donnelley Finance Corp. I 144A Senior Notes 8.875% 12/15/2010 5,000 5,500
The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- FINANCIAL (CONTINUED) RH Donnelley Finance Corp. I 144A Senior Sub Notes 10.875% 12/15/2012 USD 10,000 $ 11,600 ----------- 17,100 ----------- PUBLIC UTILITY -- 0.2% AES Corp. 144A 8.750% 05/15/2013 25,000 26,312 Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 15,000 16,462 ----------- 42,774 ----------- Total Corporate (Cost $483,316) 502,732 ----------- YANKEE BONDS -- 2.1% Abitibi-Consolidated, Inc. 6.000% 06/20/2013 50,000 47,965 Banque Centrale de Tunisie 7.375% 04/25/2012 30,000 34,500 Dominican Republic Euro Registered 9.500% 09/27/2006 35,000 32,900 Republic of Brazil(b) 2.188% 04/15/2012 30,000 22,575 Republic of Brazil 8.000% 04/15/2014 12,314 10,836 Republic of Brazil 8.875% 04/15/2024 35,000 26,950 Republic of Brazil 10.000% 01/16/2007 20,000 20,450 Republic of Brazil 10.250% 06/17/2013 20,000 18,830 Republic of Colombia 10.750% 01/15/2013 40,000 46,840 Republic of El Salvador 8.500% 07/25/2011 25,000 26,813 Republic of Peru 9.125% 02/21/2012 20,000 21,320 Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 30,000 30,043 Royal Caribbean Cruises 8.250% 04/01/2005 15,000 15,525 Russian Federation 5.000% 03/31/2030 50,000 48,438 Russian Federation 11.000% 07/24/2018 20,000 28,600 Ukraine Government Senior Notes 11.000% 03/15/2007 22,400 24,668 United Mexican States 8.300% 08/15/2031 45,000 51,818 United Mexican States 9.875% 02/01/2010 35,000 45,063 ----------- Total Yankee Bonds (Cost $539,229) 554,134 ----------- U.S. GOVERNMENT AGENCY -- 1.1% PASS THRU SECURITIES -- 1.1% FNMA 6.500% 09/01/2032 - 10/01/2032 111,945 116,740 FNMA (TBA)# 6.000% 07/01/2033 150,000 155,859 ----------- 272,599 ----------- Total U.S. Government Agency (Cost $271,863) 272,599 ----------- U.S. TREASURY OBLIGATIONS -- 0.0% TREASURY NOTES -- 0.0% U.S. Treasury Note 4.375% 05/15/2007 10,000 10,864 ----------- Total U.S. Treasury Obligations (Cost $10,772) 10,864 ----------- FOREIGN DENOMINATED -- 78.2% CANADA -- 0.3% Canadian Pacific Railway 144A 5.200% 06/20/2010 CAD 95,000 69,810 -----------
The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- DENMARK -- 5.8% Denmark Realkredit 4.000% 01/01/2006 DKK 735,000 $ 117,331 Denmark Realkredit 6.000% 10/01/2032 5,503,838 874,091 Kingdom of Denmark 4.000% 11/15/2004 3,080,000 487,626 ----------- 1,479,048 ----------- EURO -- 59.2% Allied Domecq PLC 5.875% 06/12/2009 EUR 20,000 24,919 Allied Irish Banks Ltd.(b) 7.500% 02/28/2011 20,000 26,980 Bank of Ireland Holdings(b) 7.400% 12/29/2049 20,000 27,081 Barclays Bank PLC(b) 7.500% 12/15/2010 20,000 27,180 British Telecom PLC 6.125% 02/15/2006 20,000 24,825 Bundes Obligation Series 135 5.000% 05/20/2005 110,000 132,742 Bundes Obligation Series 136 5.000% 08/19/2005 255,000 309,243 Bundes Obligation Series 140 4.500% 08/17/2007 695,000 850,073 Bundes Obligation Series 94 7.500% 11/11/2004 315,000 387,628 Buoni del Tesoro Poliennali 4.500% 03/01/2007 795,000 970,816 Daimlerchrysler International Finance 6.125% 03/21/2006 75,000 92,004 DePfa ACS Bank 144A 3.875% 07/15/2013 200,000 227,286 Deutsche Telekom International Finance BV 8.125% 05/29/2012 85,000 120,041 Deutschland Republic 4.000% 07/04/2009 655,000 783,858 Deutschland Republic 4.125% 07/04/2008 50,000 60,422 Deutschland Republic 4.750% 07/04/2028 1,010,000 1,167,952 Deutschland Republic 5.000% 07/04/2011 285,000 358,371 Deutschland Republic 5.000% 07/04/2012 115,000 144,089 Deutschland Republic 5.250% 01/04/2011 90,000 114,906 Deutschland Republic 5.625% 01/04/2028 60,000 78,045 Dexia Municipal Agency 5.375% 04/26/2007 185,000 231,360 Eurohypo AG 4.500% 01/21/2013 50,000 59,531 European Investment Bank 3.625% 10/15/2013 50,000 55,462 FBG Treasury BV 5.750% 03/17/2005 40,000 48,234 Fort James Corp. 4.750% 06/29/2004 165,000 186,530 France Telecom 7.250% 01/28/2013 90,000 120,698 France Telecom 8.250% 03/14/2008 45,000 59,626 France Telecom CDS CLN 5.549% 02/13/2004 105,000 121,955 French Government 3.150% 07/25/2032 187,560 233,517 French Treasury Note 5.000% 01/12/2006 675,000 821,428 General Motors Corp. 6.050% 07/01/2008 50,000 57,155 General Motors Corp. 7.250% 07/01/2013 50,000 57,081 HBOS PLC(b) 6.050% 11/23/2049 20,000 25,418 Heinz BV 5.125% 04/10/2006 50,000 60,900 Hilton Group Finance PLC 6.500% 07/17/2009 30,000 38,318 Honeywell Holding BV 5.250% 12/20/2006 20,000 24,044 Household Finance Corp. Senior Unsubordinated Notes 6.500% 05/05/2009 45,000 58,794 Inco, Ltd. 15.750% 07/15/2006 200,000 410,345 International Paper Co. 5.375% 08/11/2006 20,000 24,279 Italian Government 7.750% 11/01/2006 900,000 1,202,331 Kappa Beheer BV 10.625% 07/15/2009 20,000 24,676 Kingdom of Belgium Series 41 4.250% 09/28/2013 200,000 235,554 Lear Corp. Senior Notes 8.125% 04/01/2008 20,000 24,790
The accompanying notes are an integral part of the financial statements. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- EURO (CONTINUED) Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 EUR 20,000 $ 25,708 Morgan Stanley Dean Witter 5.750% 04/01/2009 30,000 37,801 National Westminister Bank(b) 6.625% 10/29/2049 25,000 32,488 Netherland Government Notes 5.500% 07/15/2010 720,000 931,868 NGG Finance PLC 5.250% 08/23/2006 115,000 140,042 Parker-Hannifin Corp. 6.250% 11/21/2005 10,000 12,205 Pemex Project Funding Master Trust 144A 6.625% 04/04/2010 20,000 24,130 Republic of Austria 5.500% 10/20/2007 180,000 227,971 Republic of Austria 5.750% 04/11/2007 710,000 896,987 Republic of Bulgaria 144A 7.500% 01/15/2013 30,000 37,930 Republic of South Africa 5.250% 05/16/2013 15,000 16,604 Sara Lee Corp. 6.125% 07/27/2007 30,000 38,169 Sogerim 7.000% 04/20/2011 30,000 39,544 Spanish Government 3.250% 01/31/2005 975,000 1,138,654 Spanish Government 4.250% 10/31/2007 780,000 943,697 Spanish Government 5.000% 07/30/2012 185,000 230,691 Telelfonica Europe BV 5.125% 02/14/2013 65,000 78,144 Telenor ASA 5.875% 12/05/2012 60,000 76,226 ThyssenKrupp 7.000% 03/19/2009 25,000 31,347 Tyco International Group SA 5.500% 11/19/2008 115,000 130,666 Vivendi Environnement Senior Notes 5.875% 06/27/2008 40,000 50,207 ----------- 15,251,566 ----------- JAPAN -- 2.1% GE Financial Assurance 1.600% 06/20/2011 JPY 65,000,000 538,162 ----------- NEW ZEALAND -- 3.4% New Zealand Government 7.000% 07/15/2009 NZD 750,000 481,342 New Zealand Government 8.000% 11/15/2006 600,000 384,528 ----------- 865,870 ----------- SINGAPORE -- 2.4% Singapore Government 3.500% 07/01/2012 SGD 1,000,000 631,076 ----------- SOUTH AFRICA -- 0.2% Republic of South Africa 13.000% 08/31/2010 ZAR 255,000 41,571 ----------- SWEDEN -- 1.9% Swedish Government Series 1037 8.000% 08/15/2007 SEK 3,300,000 482,928 ----------- UNITED KINGDOM -- 2.9% UK Treasury Gilt Stock 5.000% 03/07/2008 GBP 435,000 756,706 ----------- Total Foreign Denominated (Cost $18,100,082) 20,116,737 ----------- TOTAL BONDS AND NOTES (COST $19,567,450) 21,623,373 -----------
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
CONTRACT VALUE SECURITY SIZE (NOTE 1A) - ------------------------------------------------------------------------------------ PURCHASED OPTIONS -- 0.2% JPY Put/USD Call, Strike Price 119.35, 10/17/2003 (USD) 110,000 $ 2,092 JPY Put/USD Call, Strike Price 130.00, 05/13/2004 (USD) 220,000 1,069 JPY Put/USD Call, Strike Price 130.00, 09/23/2003 (USD) 1,050,000 335 USD Put/AUD Call, Strike Price 0.61, 10/21/2003 (USD) 200,000 16,660 USD Put/CAD Call, Strike Price 1.36, 11/19/2003 (USD) 500,000 9,450 USD Put/EUR Call, Strike Price 1.16, 08/13/2003 (USD) 215,000 1,892 USD Put/JPY Call, Strike Price 119.35, 10/17/2003 (USD) 110,000 1,952 USD Put/NZD Call, Strike Price 0.55, 07/21/2003 (USD) 430,000 27,821 ----------- TOTAL PURCHASED OPTIONS (COST $51,329) 61,271 ----------- PAR VALUE/ RATE MATURITY SHARES ------ ---------- ------------- SHORT-TERM INVESTMENTS -- 12.5% CASH EQUIVALENTS -- 0.1% Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 4,147 4,147 Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 4,552 4,552 Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 3,641 3,641 Goldman Sachs Financial Square Funds - Prime Obligations Fund(c) 4,551 4,551 Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 8,192 8,192 Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 8,192 8,192 ----------- 33,275 ----------- U.S. GOVERNMENT -- 3.7% U.S. Treasury Bill=/= 0.843% 09/25/2003 25,000 24,949 U.S. Treasury Bill=/= 1.025% 07/17/2003 391,000 390,822 U.S. Treasury Bill=/= 1.062% 07/10/2003 538,000 537,838 ----------- 953,609 ----------- U.S. GOVERNMENT AGENCY -- 4.0% FNMA Discount Note=/= 1.150% 07/14/2003 1,000,000 999,585 FNMA Discount Note=/= 4.770% 07/01/2003 25,000 25,000 ----------- 1,024,585 ----------- REPURCHASE AGREEMENTS -- 4.7% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $1,202,774 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $1,228,955. 1,202,749 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $3,214,237) 3,214,218 ----------- TOTAL INVESTMENTS -- 96.8% (COST $22,833,016) $ 24,898,862 OTHER ASSETS, LESS LIABILITIES -- 3.2% 814,296 ------------- NET ASSETS -- 100.0% $ 25,713,158 =============
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS: 144A - Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration to qualified buyers. AUD - Australian Dollar CAD - Canadian Dollar CDS - Credit Default Swap CLN - Credit-Linked Notes DKK - Danish Krone EUR - Euro FNMA - Federal National Mortgage Association GBP - Great British Pound JPY - Japanese Yen NZD - New Zealand Dollar SEK - Swedish Krona SGD - Singapore Dollar Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2003. Maturity date disclosed is the ultimate maturity. TBA - To Be Announced USD - United States Dollar ZAR - South African Rand (a) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. The maturity date shown is the ultimate maturity. (b) Variable Rate Security; rate indicated is as of 6/30/03. (c) Represents investments of security lending collateral (Note 7). # Delayed delivery contract. =/= Rate noted is yield to maturity. The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PERCENTAGE OF NET INDUSTRY SECTOR ASSETS - ------------------------------------------------------------------------ Foreign Government 61.6% Financial 22.2% U.S. Government 4.8% Communications 3.2% Basic Industry 1.6% Capital Goods 0.8% Consumer Cyclical 0.6% Consumer Noncyclical 0.6% Transportation 0.4% Banking 0.3% Technology 0.3% Energy 0.2% Public Utility 0.2% ------- 96.8%
PERCENTAGE OF NET TOP TEN COUNTRIES ASSETS - ------------------------------------------------------------------------ United States 18.2% Germany 17.4% Spain 9.0% Italy 8.5% France 6.6% Denmark 5.8% Netherlands 5.3% Austria 4.4% United Kingdom 4.3% New Zealand 3.5%
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon International Fixed Income Fund II (the "Fund") is a separate non-diversified investment series of the Trust. The objective of the Fund is to maximize total return while realizing a market level of income consistent with preserving principal and liquidity by investing, under normal circumstances, at least 80% of net assets in fixed income securities, and at least 65% of net assets in non-U.S. dollar denominated fixed income securities of foreign government and companies located in various countries, including emerging markets. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish International Fixed Income Fund II was changed to Standish Mellon International Fixed Income Fund II. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are primarily traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Fund are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Fund to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Fund and the counterparty. Additionally, procedures have been established by the Fund to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Realized gains and losses from securities sold are recorded on the identified cost basis. The Fund does not 12 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts usually received or paid. D. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. E. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. F. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless the shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, futures, amortization and/or accretion of premiums and discounts on certain securities, capital loss carryforwards, losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. G. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. 13 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- H. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory and administrative services, and general office facilities is paid monthly at the annual rate of 0.40% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit the Fund's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.55% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $45,227 of its investment advisory fee and reimbursed the Fund for $40,103 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. Effective January 28, 2003, the Fund began imposing a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. The redemption fee is applicable to shares of the Fund purchased on or after January 28, 3003. For the period ended June 30, 2003, the Fund received no redemption fees. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term investments, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ----------- ----------- U.S. Government Securities $ 4,006,588 $ 5,050,674 =========== =========== Investments (non-U.S.Government Securities) $19,683,555 $16,917,256 =========== ===========
14 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 249,329 633,471 Shares issued to shareholders in payment of distributions declared 17,382 -- Shares redeemed (145,061) (1,916,987) ------------ --------------- Net increase (decrease) 121,650 (1,283,516) ============ ===============
At June 30, 2003, two shareholders held of record approximately 73% and 12% of the total outstanding shares of the Fund. A significant portion of the Fund's shares are beneficially owned by fiduciary accounts over which Standish Mellon and its affiliates have either sole or joint investment discretion. Investment activity of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities at June 30, 2003 as computed on a federal income tax basis, were as follows: Aggregate Cost $22,857,940 ========== Gross unrealized appreciation 2,104,150 Gross unrealized depreciation (63,228) ---------- Net unrealized appreciation $2,040,922 ==========
(6) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Fund's Prospectus and Statement of Additional Information. The Fund trades the following instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Fund may use options to seek to hedge against risks of market exposure and changes in securities prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. Options, both held and written by the Fund, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face 15 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Fund is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. A summary of the written put options for the six months ended June 30, 2003 is as follows: WRITTEN PUT OPTION TRANSACTIONS ----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 185 Options expired (1) (185) ----------- ----- Outstanding, end of period 0 $ -- =========== =====
At June 30, 2003, the Fund held no written put option contracts. A summary of the written call options for the six months ended June 30, 2003 is as follows: WRITTEN CALL OPTION TRANSACTIONS -----------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- -------- Outstanding, beginning of period 1 $ 138 Options closed (1) (138) ----------- ----- Outstanding, end of period 0 $ -- =========== =====
At June 30, 2003, the Fund held no written call option contracts. A summary of the written currency options for the six months ended June 30, 2003 is as follows: WRITTEN CURRENCY OPTION TRANSACTIONS ---------------------------------------
NUMBER OF CONTRACTS PREMIUMS ------------------- --------------- Outstanding, beginning of period 2 $ 2,921 Options written 5 15,474 Options closed (5) (12,430) ----------- -------- Outstanding, end of period 2 $ 5,965 =========== ========
At June 30, 2003, the Fund held the following written currency option contracts: SECURITY 16 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- -------------
CONTRACTS VALUE --------- --------- CAD Put/USD Call, Strike Price 1.41, 11/19/2003 1 $3,400 USD Put/EUR Call, Strike Price 1.22, 08/13/2003 1 193 ------ Total (premiums received $5,965) $3,593 ======
FORWARD CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Fund primarily to protect the value of the Fund's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At June 30, 2003, the Fund held the following forward foreign currency exchange contracts. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT LOSS -------------------------------------------------------------------------------------------------------- British Pound Sterling 205,000 09/17/2003 $ 337,573 $ 339,746 $ (2,173) Canadian Dollar 870,000 09/17/2003 641,380 647,502 (6,122) Japanese Yen 918,120,000 09/17/2003 7,676,909 7,818,378 (141,469) --------------- --------------- -------------- TOTAL $ 8,655,862 $ 8,805,626 $ (149,764) =============== =============== ==============
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS) -------------------------------------------------------------------------------------------------------- Danish Krone 5,655,000 09/17/2003 $ 872,241 $ 886,864 $ 14,623 Euro 2,230,000 09/17/2003 2,553,674 2,633,560 79,886 New Zealand Dollar 1,235,000 09/17/2003 718,078 709,961 (8,117) Singapore Dollar 1,130,000 09/17/2003 642,685 655,054 12,369 South African Rand 320,000 08/29/2003 42,086 37,970 (4,116) Swedish Krona 3,660,000 09/17/2003 455,203 466,480 11,277 --------------- --------------- ------------- TOTAL $ 5,283,967 $ 5,389,889 $ 105,922 =============== =============== =============
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET MARKET CONTRACT UNREALIZED CONTRACTS TO DELIVER VALUE IN EXCHANGE FOR VALUE VALUE DATE GAIN ------------------------------------------------------------------------------------------------------ New Zealand Dollar $ 468,934 Australian Dollar $ 477,072 09/04/2003 $ 8,138 ------------- ------------- ----------- TOTAL $ 468,934 $ 477,072 $ 8,138 ============= ============= ===========
17 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- FUTURES CONTRACTS The Fund may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to the margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparties do not perform under the contract's terms. The Fund enters into financial futures transactions primarily to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At June 30, 2003, the Fund held the following futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN ----------------------------------------------------------------------------------------------- U.S. 5 Year Note (9 Contracts) Short 9/30/2003 $1,036,125 $ 2,886 U.S. 10 Year Note (6 Contracts) Short 9/30/2003 704,625 7,736 ------- $10,622 =======
INTEREST RATE SWAP CONTRACTS Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Credit and market risk exist with respect to these instruments. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or a counterparty to a transaction may not perform. The Fund expects to enter into these transactions primarily for hedging purposes including, but not limited to, preserving a return or spread on a particular investment or portion of its portfolio, protecting against currency fluctuations, as a duration management technique or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments made or received are included as part of interest income. Gains and losses are realized upon the expiration or closing of the swap contracts. The Fund entered into no such transactions during the six months ended June 30, 2003. (7) SECURITIES LENDING: The Fund may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay 18 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. At June 30, 2003, the Fund loaned securities having a market value of $32,405. The Fund received cash collateral of $33,275 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (8) DELAYED DELIVERY TRANSACTIONS: The Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. This Fund segregates securities having a value at least equal to the amount of the purchase commitment. The Fund may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of the decline in the value of the Fund's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Fund may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. See the Schedule of Investments for outstanding delayed delivery transactions. 19 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
20 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
21 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $562,852 (Note 7)) (identified cost, $5,499,115) $5,614,852 Cash 362 Receivable for Fund shares sold 254 Interest receivable 42,879 Prepaid expenses 12,893 ---------- Total assets 5,671,240 LIABILITIES Payable for investments purchased $91,246 Payable for Fund shares redeemed 362,750 Payable upon return of securities loaned (Note 7) 574,375 Accrued accounting, custody and transfer agent fees 4,953 Accrued trustees' fees and expenses (Note 2) 980 Accrued expenses and other liabilities 16,851 ------- Total liabilities 1,051,155 ---------- NET ASSETS $4,620,085 ========== NET ASSETS CONSIST OF: Paid-in capital $3,770,494 Accumulated net realized gain 649,629 Undistributed net investment income 84,225 Net unrealized appreciation 115,737 ---------- TOTAL NET ASSETS $4,620,085 ========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 233,136 ========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 19.82 ==========
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $1,314 (Note 7)) $368,911 EXPENSES Investment advisory fee (Note 2) $ 32,715 Accounting, custody, and transfer agent fees 36,050 Legal and audit services 16,263 Registration fees 9,310 Insurance expense 3,792 Trustees' fees and expenses (Note 2) 1,813 Miscellaneous 3,364 -------- Total expenses 103,307 Deduct: Waiver of investment advisory fee (Note 2) (32,715) Reimbursement of Fund operating expenses (Note 2) (37,876) -------- Total expense deductions (70,591) -------- Net expenses 32,716 -------- Net investment income 336,195 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain Investment security transactions 649,629 -------- Net realized gain 649,629 Change in unrealized appreciation (depreciation) Investment securities (496,284) -------- Change in net unrealized appreciation (depreciation) (496,284) -------- Net realized and unrealized gain 153,345 -------- NET INCREASE IN NET ASSETS FROM OPERATIONS $489,540 ========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 336,195 $ 1,450,458 Net realized gain 649,629 608,075 Change in net unrealized appreciation (depreciation) (496,284) (41,952) ------------ ------------ Net increase in net assets from investment operations 489,540 2,016,581 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D) From net investment income (245,622) (1,483,785) From net realized gains on investments (279,557) (107,413) ------------ ------------ Total distributions to shareholders (525,179) (1,591,198) ------------ ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 3,236,027 4,222,335 Value of shares issued to shareholders in payment of distributions declared 380,057 693,884 Cost of shares redeemed (21,226,985) (24,243,994) ------------ ------------ Net decrease in net assets from Fund share transactions (17,610,901) (19,327,775) ------------ ------------ TOTAL DECREASE IN NET ASSETS (17,646,540) (18,902,392) NET ASSETS At beginning of period 22,266,625 41,169,017 ------------ ------------ At end of period (including undistributed net investment income of $84,225 and distributions in excess of net investment income of $6,348, respectively) $ 4,620,085 $ 22,266,625 ============ ============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 2003 ----------------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ----------- --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $20.03 $ 19.86 $ 19.57 $ 19.36 $ 19.87 $ 19.95 ------ ------- ------- ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income(1)* 0.31 0.85 1.13 1.28 1.24 1.25 Net realized and unrealized gain (loss) on investments 0.11 0.38 0.34 0.21 (0.53) (0.16) ------ ------- ------- ------- ------- ------- Total from investment operations 0.42 1.23 1.47 1.49 0.71 1.09 ------ ------- ------- ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.40) (0.96) (1.18) (1.28) (1.22) (1.17) From net realized gain on investments (0.23) (0.10) -- -- -- -- ------ ------- ------- ------- ------- ------- Total distributions to shareholders (0.63) (1.06) (1.18) (1.28) (1.22) (1.17) ------ ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $19.82 $ 20.03 $ 19.86 $ 19.57 $ 19.36 $ 19.87 ====== ======= ======= ======= ======= ======= TOTAL RETURN+ 2.11%+++ 6.31% 7.66% 7.93% 3.67% 5.58% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.30%++ 0.30% 0.30% 0.30% 0.30% 0.30% Net Investment Income (to average daily net assets)* 3.10%++ 4.24% 5.64% 6.66% 6.27% 6.19% Portfolio Turnover 107%+++ 251% 149% 170% 147% 145% Net Assets, End of Period (000's omitted) $4,620 $22,267 $41,169 $45,232 $38,109 $26,579
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory fee and/or reimbursed the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share(1) $ 0.24 $ 0.75 $ 1.07 $ 1.21 $ 1.12 $ 1.15 Ratios (to average daily net assets): Expenses 0.95%++ 0.78% 0.60% 0.69% 0.89% 0.81% Net investment income 2.45%++ 3.76% 5.34% 6.27% 5.68% 5.68%
(a) The Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to increase net investment income per share by less than $0.001, decrease net realized and unrealized gains and losses per share by less than $0.001 and increase the ratio of net investment income to average net assets by less than 0.01%. Per share data and ratios/supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Total return would have been lower in the absense of expense waivers. ++ Computed on an annualized basis. +++ Not annualized. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 96.7% ASSET BACKED -- 13.3% Bank One Issuance Trust 2002-A4 A4 2.940% 06/16/2008 $ 100,000 $ 102,732 Capital Auto Receivables Asset Trust 2003-1 A3A 2.750% 04/16/2007 100,000 102,289 Capital One Master Trust 2001-7 A 3.850% 08/15/2007 100,000 102,906 Citibank Credit Card Issuance Trust 2003-A2 A2 2.700% 01/15/2008 100,000 102,084 Daimler Chrysler Auto Trust 2001-A A4 5.400% 03/06/2006 100,000 103,632 Nissan Auto Receivables Owner Trust 2002-C A3 2.600% 08/15/2006 100,000 101,467 ------------ Total Asset Backed (Cost $603,684) 615,110 ------------ CORPORATE -- 38.9% BANKING -- 16.6% Bank of America Corp. 7.875% 05/16/2005 150,000 167,433 Fifth Third Bank 6.750% 07/15/2005 150,000 164,566 FleetBoston Financial Corp. 7.250% 09/15/2005 100,000 111,120 National City Corp. 7.200% 05/15/2005 150,000 165,026 Northern Trust Co. 6.650% 11/09/2004 150,000 160,537 ------------ 768,682 ------------ CONSUMER CYCLICAL -- 2.3% Diageo PLC 7.125% 09/15/2004 100,000 106,657 ------------ FINANCIAL -- 17.7% Allstate Corp. Senior Notes 7.875% 05/01/2005 100,000 111,323 American International Group, Inc. 2.850% 12/01/2005 150,000 153,682 Associates Corp. Senior Notes 6.000% 07/15/2005 100,000 108,724 General Electric Capital Corp. 7.500% 05/15/2005 150,000 166,672 Goldman Sachs Group, Inc. 7.625% 08/17/2005 100,000 112,317 Morgan Stanley 6.100% 04/15/2006 150,000 165,620 ------------ 818,338 ------------ PUBLIC UTILITY -- 2.3% Alabama Power Co. Senior Notes 5.490% 11/01/2005 100,000 108,306 ------------ Total Corporate (Cost $1,726,471) 1,801,983 ------------ U.S. GOVERNMENT AGENCY -- 24.0% PASS THRU SECURITIES -- 24.0% FHLB 2.250% 05/15/2006 300,000 304,094 FHLMC Gold 5.000% 08/01/2007 148,701 153,367 FHLMC Gold 6.000% 07/01/2011 311,009 324,404 FNMA 2.250% 05/15/2006 300,000 304,011 Private Export Funding Corp. 6.860% 04/30/2004 20,000 20,822 ------------ 1,106,698 ------------ Total U.S. Government Agency (Cost $1,084,143) 1,106,698 ------------
The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE/SHARES (NOTE 1A) - --------------------------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 20.5% TREASURY NOTES -- 20.5% U.S. Treasury Note 1.750% 12/31/2004 $ 300,000 $ 302,602 U.S. Treasury Note 2.000% 05/15/2006 90,000 90,956 U.S. Treasury Note 5.625% 02/15/2006 500,000 552,832 ------------ 946,390 ------------ Total U.S. Treasury Obligations (Cost $940,146) 946,390 ------------ TOTAL BONDS AND NOTES (COST $4,354,444) 4,470,181 ------------ SHORT-TERM INVESTMENTS -- 24.8% CASH EQUIVALENTS -- 12.4% Bank of Montreal Eurodollar Time Deposit(a) 1.150% 07/09/2003 71,582 71,582 Credit Agricole Indosuez Eurodollar Time Deposit(a) 1.050% 08/26/2003 78,561 78,561 Den Danske Bank Eurodollar Time Deposit(a) 1.040% 07/24/2003 62,849 62,849 Goldman Sachs Financial Square Funds - Prime Obligations Fund(a) 78,561 78,561 Royal Bank of Canada Eurodollar Time Deposit(a) 1.300% 07/01/2003 141,411 141,411 Royal Bank of Scotland Eurodollar Time Deposit(a) 1.125% 07/01/2003 141,411 141,411 ------------ 574,375 ------------ COMMERCIAL PAPER -- 12.4% CBA Finance, Inc.=/= 1.320% 07/01/2003 170,000 170,000 Eureka Securitization, Inc.=/= 1.320% 07/01/2003 250,000 250,000 UBS Finance, Inc.=/= 1.310% 07/01/2003 150,000 150,000 ------------ 570,000 ------------ REPURCHASE AGREEMENTS -- 0.0% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $296 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $306. 296 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,144,671) 1,144,671 ------------ TOTAL INVESTMENTS -- 121.5% (COST $5,499,115) $ 5,614,852 OTHER ASSETS, LESS LIABILITIES -- (21.5%) (994,767) ------------- NET ASSETS -- 100.0% $ 4,620,085 =============
NOTES TO SCHEDULE OF INVESTMENTS: FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association (a) Represents investments of security lending collateral (Note 7). =/= Rate noted is yield to maturity. The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Short-Term Fixed Income Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to maximize total return, consistent with preserving principal and liquidity, while seeking a relatively high level of current income by investing, under normal circumstances, at least 80% of net assets in fixed income securities of U.S. companies and the U.S. government. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Short-Term Fixed Income Fund was changed to Standish Mellon Short-Term Fixed Income Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are primarily traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Fund are valued at amortized cost, which approximates market value. If the Fund acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Fund to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Fund and the counterparty. Additionally, procedures have been established by the Fund to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on debt securities. Realized gains and losses from securities sold are recorded on the identified cost basis. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- D. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments of amortization and/or accretion of premiums and discounts on certain securities and paydown gains and losses. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. E. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expenses and the relative size of the funds. F. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 0.30% of the Fund's average daily net assets. Standish Mellon voluntarily agreed to limit total Fund operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.30% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $32,715 of its investment advisory fee and reimbursed the Fund for $37,876 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ----------- ----------- U.S. Government Securities $17,816,626 $21,579,013 =========== =========== Investments (non-U.S.Government Securities) $ 3,443,118 $17,450,494 =========== ===========
(4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 161,931 210,440 Shares issued to shareholders in payment of distributions declared 19,175 34,932 Shares redeemed (1,059,547) (1,206,262) ------------- --------------- Net decrease (878,441) (960,890) ============= ===============
At June 30, 2003, three shareholders held of record approximately 54%, 14% and 13% of the total outstanding shares of the Fund. A significant portion of the Fund's shares are beneficially owned by fiduciary accounts over which Standish Mellon and its affiliates have either sole or joint investment discretion. Investment activity of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $5,499,049 ========= Gross unrealized appreciation 116,903 Gross unrealized depreciation (1,100) --------- Net unrealized appreciation $ 115,803 =========
(6) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Fund's Prospectus and Statement of Additional Information. 9 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- The Fund trades the following instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Fund may use options to seek to hedge against risks of market exposure and changes in securities prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. Options, both held and written by the Fund, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Fund is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Fund entered into no such transactions during the six months ended June 30, 2003. FUTURES CONTRACTS The Fund may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to the margin requirements, the Fund deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Fund. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Fund's exposure to the underlying instrument, while selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparties do not perform under the contract's terms. The Fund enters into financial futures transactions primarily to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The Fund entered into no such transactions during the six months ended June 30, 2003. (7) SECURITIES LENDING: The Fund may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at 10 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM FIXED INCOME FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Fund on the next business day. For the duration of a loan, the Fund receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Fund bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Fund. In the event of borrower default, the Fund generally has the right to use the collateral to offset losses incurred. The Fund may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Fund also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Fund's obligations due on the loans. At June 30, 2003, the Fund loaned securities having a market value of $562,852. The Fund received cash collateral of $574,375 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (8) DELAYED DELIVERY TRANSACTIONS: The Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis. This Fund segregates securities having a value at least equal to the amount of the purchase commitment. The Fund may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of the decline in the value of the Fund's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Fund may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is 'marked-to-market' daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. At June 30, 2003, the Fund did not have any delayed delivery transactions. 11 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
12 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None c/o Standish Mellon Asset President Mutual Fund Management, Operations since One Boston Place 2001; Shareholder Boston, MA 02108 Representative, 1/19/71 Standish Mellon Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
13 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in Standish Mellon Short-Term Asset Reserve Portfolio ("Portfolio"), at value (Note 1A) $190,036,693 Receivable for Fund shares sold 200,445 Prepaid expenses 6,076 ------------ Total assets 190,243,214 LIABILITIES Payable for Fund shares redeemed $53,496 Distributions payable 25,139 Accrued accounting, custody and transfer agent fees 3,937 Accrued trustees' fees and expenses (Note 2) 492 Accrued expenses and other liabilities 12,278 ------ Total liabilities 95,342 ------------ NET ASSETS $190,147,872 ============ NET ASSETS CONSIST OF: Paid-in capital $192,064,262 Accumulated net realized loss (2,739,825) Undistributed net investment income 102,882 Net unrealized appreciation 720,553 ------------ TOTAL NET ASSETS $190,147,872 ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING 9,722,957 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 19.56 ============
The accompanying notes are an integral part of the financial statements. 1 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Interest income allocated from Portfolio $2,014,177 Expenses allocated from Portfolio (318,330) ---------- Net investment income allocated from Portfolio 1,695,847 EXPENSES Accounting, custody, and transfer agent fees $ 20,125 Registration fees 8,678 Legal and audit services 8,506 Trustees' fees and expenses (Note 2) 991 Insurance expense 712 Miscellaneous 6,577 -------- Total expenses 45,589 Deduct: Reimbursement of Fund operating expenses (Note 2) (45,589) -------- Net expenses 0 ---------- Net investment income 1,695,847 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain allocated from Portfolio on: Investment security transactions 191,989 Financial futures contracts 186,795 -------- Net realized gain 378,784 Change in unrealized appreciation (depreciation) allocated from Portfolio on: Investment securities (110,661) Financial futures contracts (161,516) -------- Change in net unrealized appreciation (depreciation) (272,177) ---------- Net realized and unrealized gain on investments 106,607 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $1,802,454 ==========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 1,695,847 $ 4,382,028 Net realized gain 378,784 729,932 Change in net unrealized appreciation (depreciation) (272,177) (433,362) ------------ ------------- Net increase in net assets from investment operations 1,802,454 4,678,598 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C) From net investment income (1,694,569) (4,545,684) ------------ ------------- Total distributions to shareholders (1,694,569) (4,545,684) ------------ ------------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 102,189,946 147,542,518 Value of shares issued to shareholders in payment of distributions declared 1,518,426 3,926,750 Cost of shares redeemed (60,288,052) (138,921,633) ------------ ------------- Net increase in net assets from Fund share transactions 43,420,320 12,547,635 ------------ ------------- TOTAL INCREASE IN NET ASSETS 43,528,205 12,680,549 NET ASSETS At beginning of period 146,619,667 133,939,118 ------------ ------------- At end of period (including undistributed net investment income of $102,882 and $101,604) $190,147,872 $ 146,619,667 ============ =============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 ---------------------------------------------------------- (UNAUDITED) 2002 2001(A) 2000 1999 1998 ------------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, BEGINNING OF PERIOD $ 19.55 $ 19.55 $ 19.36 $ 19.23 $ 19.44 $ 19.48 -------- -------- -------- -------- -------- -------- FROM INVESTMENT OPERATIONS: Net investment income*(1) 0.18 0.58 0.95 1.15 1.08 1.13 Net realized and unrealized gain (loss) on investments 0.02 0.03 0.21 0.13 (0.21) (0.04) -------- -------- -------- -------- -------- -------- Total from investment operations 0.20 0.61 1.16 1.28 0.87 1.09 -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.19) (0.61) (0.97) (1.15) (1.08) (1.13) -------- -------- -------- -------- -------- -------- Total distributions to shareholders (0.19) (0.61) (0.97) (1.15) (1.08) (1.13) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 19.56 $ 19.55 $ 19.55 $ 19.36 $ 19.23 $ 19.44 ======== ======== ======== ======== ======== ======== TOTAL RETURN+++ 1.01%++ 3.14% 6.14% 6.94% 4.61% 5.75% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.36%+ 0.36% 0.36% 0.36% 0.35% 0.35% Net Investment Income (to average daily net assets)* 1.91%+ 2.99% 4.89% 6.07% 5.60% 5.81% Net Assets, End of Period (000's omitted) $190,148 $146,620 $133,939 $183,858 $301,965 $260,004
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed to reimburse the Fund for a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share(1) $ 0.18 $ 0.56 $ 0.94 $ 1.15 N/A N/A Ratios (to average daily net assets): Expenses 0.42%+ 0.46% 0.41% 0.38% N/A N/A Net investment income 1.85%+ 2.89% 4.84% 6.05% N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and began amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to increase net investment income per share by $0.001, decrease net realized and unrealized gains and losses per share by $0.001 and increase the ratio of net investment income to average net assets by less than 0.01%. Per share data and ratios/supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (1) Calculated based on average shares outstanding. + Computed on an annualized basis. ++ Not annualized. +++ Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Short-Term Asset Reserve Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve a high level of current income consistent with preserving principal and liquidity. The Fund invests all of its investable assets in an interest of the Standish Mellon Short-Term Asset Reserve Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust and which has the same investment objective as the Fund. The Portfolio Trust seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in dollar-denominated money market instruments, short-term fixed income securities and asset-backed securities of U.S. and foreign governments, banks and companies. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 100% at June 30, 2003). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Short-Term Asset Reserve Fund was changed to Standish Mellon Short-Term Asset Reserve Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust was changed to Mellon Institutional Funds Investment Trust. The name changes for the Fund and the Trust are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Currently, the Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income will be declared daily and distributed monthly. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for capital loss carryforwards and amortization and/or accretion of premiums and discounts on certain securities. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. E. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to Standish Mellon Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Standish Mellon voluntarily agreed to limit the total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.36% of the Fund's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily reimbursed the Fund for $45,589 of its operating expenses. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the six months ended June 30, 2003, aggregated $102,013,486 and $60,549,536, respectively. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET RESERVE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- -------------------- Shares sold 5,229,042 7,582,039 Shares issued to shareholders in payment of distributions declared 77,663 201,591 Shares redeemed (3,083,850) (7,133,587) ---------- ---------- Net increase 2,222,855 650,043 ========== ==========
At June 30, 2003, two shareholders held of record approximately 38% and 11% of the total outstanding shares of the Fund. Investment activity of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See coresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 7 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
EXPECTED PAR VALUE SECURITY RATE MATURITY MATURITY VALUE (NOTE 1A) - ------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 90.1% ASSET BACKED -- 34.8% American Express Master Trust 1996-1 A(a) 1.330% 09/19/2003 08/15/2004 $ 1,200,000 $ 1,200,158 American Express Master Trust 2001-1 A(a) 1.270% 10/15/2004 09/15/2005 680,000 680,283 American Express Master Trust 2002-1 A(a) 1.250% 01/14/2005 12/15/2005 2,735,000 2,735,922 Americredit Auto Receivable Trust 1999-B A4 5.960% 08/05/2004 03/12/2006 265,993 266,173 BMW Vehicle Owner Trust 2002-A A3 3.800% 12/25/2004 05/25/2006 3,479,000 3,552,939 Capital Auto Receivables Asset Trust 2002-2 A3 3.820% 12/15/2004 07/15/2005 4,100,000 4,173,221 Capital One Master Trust 2002-3A A(a) 1.450% 04/19/2005 02/15/2008 3,980,000 3,962,242 Centex Home Equity 2001-B A2 5.350% 08/25/2003 10/25/2022 304,546 304,336 Chase Credit Card Master Trust 2002-2 A(a) 1.230% 03/17/2005 07/16/2007 3,510,000 3,511,893 Chase Funding Mortgage Loan Asset Backed 2003-3 2A2(a) 1.590% 10/27/2006 04/25/2033 1,900,000 1,897,625 Chase Manhattan Auto Owner Trust 2001-A A3 4.550% 04/15/2004 08/15/2005 1,102,176 1,116,156 Chase Manhattan Auto Owner Trust 2002-A A3 3.490% 09/15/2004 03/15/2006 750,000 760,878 Chase Manhattan Auto Owner Trust 2002-B A3 3.580% 12/15/2004 05/15/2006 1,500,000 1,531,687 Citibank Credit Card Issuance Trust 2002-A5 A5(a) 1.159% 09/19/2005 09/17/2007 4,080,000 4,081,619 Daimler Chrysler Master Owner Trust 2002-A A(a) 1.240% 05/22/2005 05/17/2007 3,950,000 3,952,330 Discover Card Master Trust I 1995-1 A(a) 1.460% 08/20/2004 02/16/2007 3,000,000 3,005,539 Discover Card Master Trust I 2000-5 A(a) 1.360% 05/18/2005 11/15/2007 725,000 726,723 First USA Credit Card Master Trust 1997-2 A(a) 1.270% 05/21/2004 01/17/2007 2,440,000 2,440,348 Fleet Credit Card Master Trust II 2001-C A 3.860% 09/15/2004 03/15/2007 2,725,000 2,807,896 Ford Credit Auto Owner Trust 2002-A A3B(a) 1.300% 03/05/2004 01/15/2006 2,322,372 2,322,711 Gracechurch Card Funding PLC 4 A(a) 1.123% 12/15/2003 06/15/2008 2,000,000 2,000,000 Honda Auto Receivables Owner Trust 2002-1 A3 3.500% 10/15/2004 10/17/2005 3,289,455 3,329,845 MBNA Credit Card Master Trust 2001-A4 A(a) 1.310% 09/18/2004 02/15/2007 2,440,000 2,441,848 MBNA Master Credit Card Trust 1996-J A(a) 1.330% 09/19/2003 02/15/2006 160,000 160,021 MBNA Master Credit Card Trust 1999-H A(a) 1.499% 04/14/2004 09/15/2006 1,500,000 1,501,543 Nissan Auto Receivable Owner Trust 2002-A A3 3.580% 09/15/2004 09/15/2005 3,590,000 3,635,118 Residential Asset Securities Corp. 1998-KS3 AI6(a) 1.853% 12/03/2004 10/25/2029 595,381 597,936 Residential Asset Securities Corp. 2001-KS2 AI3 5.751% 03/25/2004 03/25/2027 1,533,766 1,550,514 SLMA Student Loan Trust 2002-4 A2(a) 1.440% 03/24/2005 12/15/2009 3,985,000 3,984,276 The Money Store Home Equity Trust 1998-B AF6 6.315% 09/15/2004 07/15/2026 490,605 500,224 Toyota Auto Receivables Owner Trust 2001-C A3(a) 1.250% 11/16/2003 12/15/2005 375,080 375,046 Toyota Auto Receivables Owner Trust 2002-A A3(a) 1.480% 09/15/2004 01/16/2006 800,000 799,822 USAA Auto Owner Trust 2001-1 A3 4.690% 10/15/2003 02/15/2005 332,065 334,126 ------------- Total Asset Backed (Cost $66,295,462) 66,240,998 ------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.1% Mound Financing PLC 3A A1-1(a) 1.429% 02/07/2006 02/08/2008 2,500,000 2,500,000 Permanent Financing PLC 1 3A(a) 1.332% 06/10/2007 1,490,000 1,488,923 ------------- Total Collateralized Mortgage Obligations (Cost $3,990,000) 3,988,923 ------------- CORPORATE -- 30.9% BANKING -- 8.9% CS First Boston (USA), Inc. Notes MTN(a) 1.368% 12/19/2003 06/19/2006 2,000,000 1,998,532 First Union Corp.(a) 1.410% 03/31/2005 1,550,000 1,553,875 FleetBoston Financial Corp. Senior Notes(a) 1.560% 12/03/2004 3,140,000 3,138,222 National City Bank of Indiana(a) 1.199% 09/16/2005 440,000 439,802 Northern Trust Co. 6.650% 11/09/2004 580,000 620,743
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
EXPECTED PAR VALUE SECURITY RATE MATURITY MATURITY VALUE (NOTE 1A) - ------------------------------------------------------------------------------------------------------- BANKING (CONTINUED) US Bancorp Notes MTN 2.625% 03/15/2006 $ 500,000 $ 501,784 US Bancorp Senior Notes 6.875% 12/01/2004 1,500,000 1,615,814 US Bank NA Senior Notes(a) 1.319% 06/14/2005 570,000 569,995 Union Planters Corp. Sub. Notes NCL 6.250% 11/01/2003 2,000,000 2,031,813 Wachovia Corp. Senior Notes(a) 1.709% 08/19/2004 1,680,000 1,680,011 Wells Fargo Financial Senior Notes(a) 1.280% 09/12/2005 2,700,000 2,700,303 ------------- 16,850,894 ------------- CONSUMER CYCLICAL -- 2.6% Daimler Chrysler NA Holding(a) 1.509% 08/21/2003 700,000 700,147 Diageo Capital PLC 6.125% 08/15/2005 2,000,000 2,186,486 Diageo PLC 7.125% 09/15/2004 830,000 885,253 Newell Rubbermaid, Inc. Senior Notes MTN 5.700% 09/22/2003 1,180,000 1,188,925 ------------- 4,960,811 ------------- CONSUMER NONCYCLICAL -- 0.3% Coca-Cola Enterprises 6.625% 08/01/2004 565,000 596,006 ------------- FINANCIAL -- 16.7% Allstate Corp. Senior Notes 7.875% 05/01/2005 1,500,000 1,669,850 Associates Corp. NA Senior Notes 6.200% 05/16/2005 2,350,000 2,548,044 Associates Corp. Senior Notes 6.000% 07/15/2005 2,700,000 2,935,551 Bear Stearns Co., Inc. Notes MTN(a) 1.500% 05/22/2006 2,000,000 1,995,851 Caterpillar Financial Service Corp. 6.875% 08/01/2004 820,000 865,822 Caterpillar Financial Service Corp.(a) 1.560% 11/04/2004 3,110,000 3,111,712 General Electric Capital Corp. 7.500% 05/15/2005 3,000,000 3,333,431 General Electric Capital Corp. MTN(a) 1.164% 12/15/2004 900,000 899,099 General Electric Capital Corp. MTN(a) 1.244% 03/15/2005 625,000 623,663 Goldman Sachs Group, Inc. 7.625% 08/17/2005 2,420,000 2,718,065 John Deere Capital Corp. Senior Notes MTN(a) 1.268% 09/17/2003 750,000 749,771 Merrill Lynch & Co. Notes MTN(a) 1.500% 04/28/2005 2,700,000 2,701,841 Morgan Stanley 6.100% 04/15/2006 1,400,000 1,545,788 Morgan Stanley Dean Witter 7.750% 06/15/2005 2,000,000 2,229,242 Morgan Stanley Dean Witter Senior Notes(a) 1.700% 01/31/2006 620,000 620,102 SLM Corp. Notes MTN(a) 1.520% 01/13/2006 700,000 700,500 SLM Corp. Notes MTN(a) 1.520% 01/25/2006 2,500,000 2,501,788 ------------- 31,750,120 ------------- PUBLIC UTILITY -- 2.4% Alabama Power Co. Senior Notes 4.875% 09/01/2004 560,000 581,102 Carolina Power & Light 5.875% 01/15/2004 1,750,000 1,785,533 Consolidated Natural Gas Notes 7.250% 10/01/2004 2,000,000 2,119,528 ------------- 4,486,163 ------------- Total Corporate (Cost $58,014,389) 58,643,994 ------------- YANKEE BONDS -- 0.5% Quebec Province MTN(a) 1.341% 07/02/2004 1,000,000 1,000,000 ------------- Total Yankee Bonds (Cost $1,000,243) 1,000,000 -------------
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
EXPECTED PAR VALUE SECURITY RATE MATURITY MATURITY VALUE/SHARES (NOTE 1A) - -------------------------------------------------------------------------------------------------------- PUBLIC UTILITY (CONTINUED) U.S. GOVERNMENT AGENCY -- 0.0% PASS THRU SECURITIES -- 0.0% FHLMC(a) 7.105% 02/01/2023 $ 22,380 $ 23,289 ------------- Total U.S. Government Agency (Cost $23,110) 23,289 ------------- U.S. TREASURY OBLIGATIONS -- 21.8% TREASURY NOTES -- 21.8% U.S. Treasury Note 1.625% 04/30/2005 3,800,000 3,824,936 U.S. Treasury Note 1.750% 12/31/2004 7,035,000 7,096,008 U.S. Treasury Note 2.000% 05/15/2006 4,250,000 4,295,156 U.S. Treasury Note 2.875% 06/30/2004 20,200,000 20,567,701 U.S. Treasury Note 3.375% 04/30/2004 5,500,000 5,608,064 ------------- 41,391,865 ------------- Total U.S. Treasury Obligations (Cost $41,226,799) 41,391,865 ------------- TOTAL BONDS AND NOTES (COST $170,550,003) 171,289,069 ------------- RATE ------ SHORT-TERM INVESTMENTS -- 25.0% CASH EQUIVALENTS -- 15.5% Bank of Montreal Eurodollar Time Deposit(b) 1.150% 07/09/2003 3,664,000 3,664,000 Credit Agricole Indosuez Eurodollar Time Deposit(b) 1.050% 08/26/2003 4,021,260 4,021,260 Den Danske Bank Eurodollar Time Deposit(b) 1.040% 07/24/2003 3,217,008 3,217,008 Goldman Sachs Financial Square Funds - Prime Obligations Fund(b) 4,021,260 4,021,260 Royal Bank of Canada Eurodollar Time Deposit(b) 1.300% 07/01/2003 7,238,267 7,238,267 Royal Bank of Scotland Eurodollar Time Deposit(b) 1.125% 07/01/2003 7,238,267 7,238,267 ------------- 29,400,062 ------------- COMMERCIAL PAPER -- 9.4% CBA Finance, Inc.=/= 1.320% 07/01/2003 5,000,000 5,000,000 Thunder Bay Fundng, Inc.=/= 1.320% 07/01/2003 8,000,000 8,000,000 UBS Finance, Inc.=/= 1.310% 07/01/2003 4,889,000 4,889,000 ------------- 17,889,000 ------------- U.S. GOVERNMENT -- 0.1% FNMA Discount Note=/= 1.014% 04/02/2004 200,000 198,467 -------------
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) - --------------------------------------------------------------------------------
EXPECTED PAR SECURITY RATE MATURITY MATURITY VALUE - --------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.0% Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity value of $818 and an effective yield of 0.75%, collateralized by a U.S. Government Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an aggregated market value of $919. $ 818 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $47,488,363) 47,488,347 ------------- TOTAL INVESTMENTS -- 115.1% (COST $218,038,366) $ 218,777,416 OTHER ASSETS, LESS LIABILITIES -- (15.1%) (28,740,218) ------------- NET ASSETS -- 100.0% $ 190,037,198 =============
NOTES TO SCHEDULE OF INVESTMENTS: FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association MTN - Medium Term Notes NCL - Non-callable SLMA - Student Loan Marketing Association (a) Variable Rate Security; rate indicated is as of 6/30/03. (b) Represents investments of security lending collateral (Note 6). =/= Rate noted is yield to maturity. The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (including securities on loan of $28,377,464 (Note 6)) (identified cost, $218,038,366) $218,777,416 Cash 1,606 Receivable for investments sold 46 Interest receivable 678,867 Receivable for variation margin on open financial futures contracts (Note 5) 8,337 Prepaid expenses 6,514 ------------ Total assets 219,472,786 LIABILITIES Payable upon return of securities loaned (Note 6) $29,400,062 Accrued accounting and custody fees 14,601 Accrued trustees' fees and expenses (Note 2) 4,999 Accrued expenses and other liabilities 15,926 ---------- Total liabilities 29,435,588 ------------ NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $190,037,198 ============
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Interest income (including securities lending income of $5,430 (Note 6)) $2,014,183 ---------- EXPENSES Investment advisory fee (Note 2) $222,213 Accounting and custody fees 66,853 Legal and audit services 17,825 Trustees' fees and expenses (Note 2) 9,739 Insurance expense 7,632 Amortization of organizational expenses (Note 1E) 10 -------- Total expenses 324,272 Deduct: Waiver of investment advisory fee (Note 2) (5,942) -------- Net expenses 318,330 ---------- Net investment income 1,695,853 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain Investment security transactions 191,989 Financial futures contracts 186,795 -------- Net realized gain 378,784 Change in unrealized appreciation (depreciation) Investment securities (110,661) Financial futures contracts (161,516) -------- Change in net unrealized appreciation (depreciation) (272,177) ---------- Net realized and unrealized gain 106,607 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $1,802,460 ==========
The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 1,695,853 $ 4,382,044 Net realized gain 378,784 729,933 Change in net unrealized appreciation (depreciation) (272,177) (433,364) ------------ ------------- Net increase in net assets from investment operations 1,802,460 4,678,613 ------------ ------------- CAPITAL TRANSACTIONS Contributions 102,013,486 147,731,049 Withdrawals (60,549,536) (139,693,946) ------------ ------------- Net increase in net assets from capital transactions 41,463,950 8,037,103 ------------ ------------- TOTAL INCREASE IN NET ASSETS 43,266,410 12,715,716 NET ASSETS At beginning of period 146,770,788 134,055,072 ------------ ------------- At end of period $190,037,198 $ 146,770,788 ============ =============
The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD SIX MONTHS JANUARY 2, 1998 ENDED (COMMENCEMENT OF JUNE 30, YEAR ENDED DECEMBER 31, OPERATIONS) 2003 ------------------------------------------ TO DECEMBER 31, (UNAUDITED) 2002 2001(A) 2000 1999 1998 ----------- --------- --------- --------- --------- ---------------- TOTAL RETURN+++ 1.01%++ 3.14% 6.15% 6.96% 4.64% 5.79%++ RATIOS: Expenses (to average daily net assets)* 0.36%+ 0.36% 0.35% 0.34% 0.32% 0.31%+ Net Investment Income (to average daily net assets)* 1.91%+ 2.99% 4.89% 6.07% 5.62% 5.83%+ Portfolio Turnover 57%++ 160% 174% 70% 86% 113%++ Net Assets, End of Period (000's omitted) $190,037 $146,771 $134,055 $180,548 $302,244 $261,738
- ----------------- * For the periods indicated, the investment adviser voluntarily agreed not to impose all or a portion of its investment advisory fee and/or reimbursed the Portfolio for a portion of its operating expenses. If this voluntary action had not been taken, the ratios would have been: Ratios (to average daily net assets): Expenses 0.37%+ 0.38% N/A N/A N/A N/A Net investment income 1.90%+ 2.97% N/A N/A N/A N/A
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies effective January 1, 2001 and begun amortizing premium and discount on all debt securities on an effective yield basis. The effect of this change for the year ended December 31, 2001 was to increase the ratio of the net investment income to average net assets by less than 0.01%. Ratios for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. + Computed on an annualized basis. ++ Not annualized. +++ Total return for the Portfolio has been calculated based on the total return for the invested Fund, assuming all distributions were reinvested, and adjusted for the difference in expenses as set out in the notes to the financial statements. Total return would have been lower in the absence of expense waivers. The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the State of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. Standish Mellon Short-Term Asset Reserve Portfolio (the "Portfolio") is a separate diversified investment series of the Portfolio Trust. At June 30, 2003 there was one fund, Standish Mellon Short-Term Asset Reserve Fund (the "Fund") invested in the Portfolio. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. The Fund's proportionate interest at June 30, 2003 was approximately 100%. The objective of the Portfolio is to achieve a high level of current income consistent with preserving principal and liquidity by investing, under normal circumstances, at least 80% of net assets in dollar-denominated money market instruments, short-term fixed income securities and asset-backed securities of U.S. and foreign governments, banks and companies. On June 21, 2003, by vote of the Board of Trustees, the name of the Standish Short-Term Asset Reserve Portfolio was changed to Standish Mellon Short-Term Asset Reserve Portfolio. In addition, the name of the Standish, Ayer & Wood Master Portfolio was changed to Mellon Institutional Funds Master Portfolio. The name changes for the Portfolio and the Master Portfolio are effective July 1, 2003. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price in the principal market in which such securities are normally traded. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by a pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the custodian bank to take possession of, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreement investments. Collateral for certain tri-party repurchase agreements is held at the custodian in a segregated account for the benefit of the Portfolio and the counterparty. Additionally, procedures have been established by the Portfolio to monitor on a daily basis, the market value and accrued interest of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- C. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Realized gains and losses from securities sold are recorded on the identified cost basis. D. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. E. DEFERRED ORGANIZATIONAL EXPENSES Costs incurred by the Portfolio in connection with its organization and initial registration are being amortized on a straight-line basis through January 2003. F. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to Standish Mellon Asset Management Company LLC ("Standish Mellon") for overall investment advisory and administrative services is paid monthly at the annual rate of 0.25% of the Portfolio's average daily net assets. Standish Mellon voluntarily agreed to limit the Portfolio's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.36% of the Portfolio's average daily net assets for the six months ended June 30, 2003. Pursuant to this agreement, for the six months ended June 30, 2003, Standish Mellon voluntarily did not impose $5,942 of its investment advisory fees. This agreement is voluntary and temporary and may be discontinued or revised by Standish Mellon at any time. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES ----------- ----------- U.S. Government Securities $63,310,317 $48,646,515 =========== =========== Investments (non-U.S.Government Securities) $67,123,654 $41,545,472 =========== ===========
(4) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 2003, as computed on a federal income tax basis, were as follows: Aggregate Cost $218,034,914 =========== Gross unrealized appreciation 893,833 Gross unrealized depreciation (151,331) ----------- Net unrealized appreciation $ 742,502 ===========
(5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in Parts A and B of the Portfolio Trust's registration statement. The Portfolio trades the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Portfolio entered into no such transactions during the six months ended June 30, 2003. INTEREST RATE FLOORS Interest rate floors purchased by the Portfolio entitle the Portfolio to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate amount. Credit and market risk exist with respect to these instruments. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or a counterparty to a transaction may not perform. The Portfolio expects to enter these transactions primarily for hedging purposes including, but not limited to, preserving a return or spread on a particular investment or portion of its portfolio, protecting against currency fluctuations, as a duration management technique or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate floors are "marked-to-market" daily based on quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statement of Operations. Periodic payments of interest, if any, are reported as additions to interest income in the Statement of Operations. Realized gains or losses from these agreements are disclosed in the Statement of Operations. At June 30, 2003, the Portfolio did not hold any open interest rate floor agreements. FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At June 30, 2003, the Portfolio held the following financials futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN (LOSS) --------------------------------------------------------------------------------------------- Euro Bond (22 Contracts) Long 3/15/2004 $ 5,432,075 $ (6,985) Euro Bond (49 Contracts) Long 9/15/2003 12,118,312 13,142 Euro Bond (46 Contracts) Long 12/15/2003 11,370,625 (23,231) -------- $(17,074) ========
At June 30, 2003, the Portfolio had segregated sufficient cash and/or securities to cover margin requirements on open futures contracts. 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (6) SECURITIES LENDING: The Portfolio may lend its securities, through its agent Investors Bank & Trust Co., to financial institutions which Standish Mellon deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. At June 30, 2003, the Portfolio loaned securities having a market value of $28,377,464. The Portfolio received cash collateral of $29,400,062 which is invested, together with collateral of other Mellon Institutional funds, in high-grade short-term investments. (7) DELAYED DELIVERY TRANSACTIONS: The Portfolio may purchase securities on a when-issued, delayed delivery or forward commitment basis. Payment and delivery may take place a month or more after the date of the transactions. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Income on the securities will not be earned until settlement date. The Portfolio instructs its custodian to segregate securities having value at least equal to the amount of the purchase commitment. The Portfolio may enter into to be announced ("TBA") purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 0.01% from the principal amount. The Portfolio holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the Portfolio may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of the decline in the value of the Portfolio's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Investment security valuations" above. The Portfolio may enter into TBA sale commitments to hedge its portfolio positions. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, an offsetting TBA purchase commitment deliverable is held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Investment security valuations" above. The contract is "marked-to- market" daily and the change in market value is recorded by the Portfolio as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Portfolio realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. At June 30, 2003, the Portfolio did not have any delayed delivery transactions. 20 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of July 1, 2003. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. INDEPENDENT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial c/o Decision 11/3/1986 Board and Chief Corp. Resources, Inc. Executive Officer, 1100 Winter Street Decision Resources, Waltham, MA 02154 Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex 29 None c/o Essex Street 11/3/1986 Street Associates Associates (family investment 400 Essex Street trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph 29 None c/o Harvard University 9/13/1986 Maier, Professor of Cambridge, MA 02138 Political Economy, 8/5/44 Harvard University John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None P.O. Box 233 11/3/1986 Foundation; Trustee, New London, NH 03257 Mertens House, Inc. 4/11/35 Richard S. Wood Trustee Trustee since Director and Vice 29 None c/o Standish Mellon Asset 4/26/1989 Chairman, President Management, and Chief Investment One Boston Place, Officer, Standish Boston, MA 02108 Mellon Asset 5/20/54 Management
21 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard President and Since 2003 Senior Vice 29 None c/o Standish Mellon Asset Chief Executive President and Chief Management Company LLC, Officer Operating Officer, One Boston Place Mellon Institutional Boston, MA 02108 Asset Management; 7/24/65 formerly Vice President and Chief Financial Officer, Mellon Institutional Asset Management Beverly E. Banfield Vice President and Vice President since Director and 29 None c/o Standish Mellon Asset Secretary 1996; Secretary Secretary; Management, since 2002 Compliance Officer, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 7/6/56 Steven M. Anderson Vice President and Vice President since Vice President and 29 None c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds Management, since 2002 Controller, Standish One Boston Place Mellon Asset Boston, MA 02108 Management 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Management, Funds Operations, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 8/19/51 Lisa Kane Assistant Vice Since 1999 Vice President and 29 None c/o Standish Mellon Asset President Client Service Management, Professional, One Boston Place Standish Mellon Boston, MA 02108 Asset Management 6/25/70 Assistant Vice Since 2001 Assistant Manager, 29 None Cara E. Hultgren, President Mutual Fund c/o Standish Mellon Asset Operations since Management, 2001; Shareholder One Boston Place Representative, Boston, MA 02108 Standish Mellon 1/19/71 Asset Management Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None c/o Standish Mellon Asset President Boston Partners; Management, Fund Accountant, One Boston Place Mellon Financial Boston, MA 02108 Corp. 8/17/60
22 Item 2. Code of Ethics. Not applicable to this filing. Item 3. Audit Committee Financial Expert. Not applicable to this filing. Item 4. Principal Accountant Fees and Services. Not applicable to this filing. Item 5. Audit Committee of Listed Registrants. Not applicable to this filing. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable to this filing. Item 8. [Reserved] Item 9. Controls and Procedures. (a) The Registrant's Principal Executive Officer and Principal Financial Officer concluded that the Registrant's disclosure controls and procedures are effective based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"). (b) There were no significant changes in the Registrant's internal controls or in other factors that could significantly affect internal controls subsequent to the Evaluation Date, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10. Exhibits. (a)(1) Code of Ethics Described in Item 2: Not applicable to this filing. (a)(2) Certifications of the Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a) are attached hereto as Exhibit 99CERT.302 (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99CERT.906. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Standish, Ayer & Wood Investment Trust By (Signature and Title): \s\Denise B. Kneeland By: Denise B. Kneeland Title: Assistant Vice President Date 9/3/03 ---------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities, and on the dates indicated. By (Signature and Title): \s\Patrick J. Sheppard By: Patrick J. Sheppard Title: President and Chief Executive Officer Date 9/3/03 ---------- By (Signature and Title): \s\Steven M. Anderson By: Steven M. Anderson Title: Vice President and Treasurer Date 9/3/03 ------ EX-99.CERT 3 ex99-cert.txt EX-99.CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002: I, Patrick J. Sheppard, certify that: 1. I have reviewed this report on Form N-CSR of Standish, Ayer & Wood Investment Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting; and 6. The Registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation; including any corrective actions with regard to significant deficiencies and material weaknesses. Date:_9/3/03 \s\Patrick J. Sheppard Patrick J. Sheppard President and Chief Executive Officer CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002: I, Steven M. Anderson , certify that: 1. I have reviewed this report on Form N-CSR of Standish, Ayer & Wood Investment Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting; and 6. The Registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation; including any corrective actions with regard to significant deficiencies and material weaknesses. Date:____9/3/03 \s\Steven M. Anderson Steven M. Anderson Vice President and Treasurer EX-99.906CERT 4 ex99906-cert.txt EX-99.906.CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Patrick J. Sheppard, President and Chief Executive Officer of Standish, Ayer & Wood Investment Trust (the "Registrant"), certifies to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended June 30, 2003 (the "Form N-CSR") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. \s\Patrick J. Sheppard - ---------------------- Patrick J. Sheppard President and Chief Executive Officer Date: _____9/3/03 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR with the Commission. EX-99.906.CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Steven M. Anderson, Treasurer and Principal Financial Officer of Standish, Ayer & Wood Investment Trust (the "Registrant"), certifies to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended June 30, 2003 (the "Form N-CSR") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. \s\Steven M. Anderson Steven M. Anderson Vice President and Treasurer Date: ________9/3/03 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----