-----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, CJdxt324V2Qn9ahKMzaLEsRVwslqZbGMeMSOPn5y2+qwvuLi1r3GDqiAVlSRRYqJ czVHtIprqgEVu8tHDmYqUg== 0001145443-04-000944.txt : 20040604 0001145443-04-000944.hdr.sgml : 20040604 20040604115010 ACCESSION NUMBER: 0001145443-04-000944 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040604 EFFECTIVENESS DATE: 20040604 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: 04849023 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 d14806.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07603 -------------------------------------------- Mellon Institutional Funds Master Portfolio _____ --------------------------------------------------------- (Exact name of registrant as specified in charter) One Boston Place, Boston, MA 02108 -------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Barbara A. McCann Vice President and Secretary One Boston Place, Boston, MA 02108 ------------------------------------------------- (Name and address of agent for service) with a copy to: Leonard Pierce Hale & Dorr Boston, MA ------------------------------------------------- Registrant's telephone number, including area code: 800-221-4795 -------------------- Date of fiscal year end: 09/30/2004 ---------------------------- Date of reporting period: 03/31/2004 ------------------- Item 1. Reports to Stockholders. (Semi-annual Report for the period 10/1/03 through 03/31/04 is filed herewith) [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds Financial Report - -------------------------------------------------------------------------------- For the Period Ended March 31, 2004 (Unaudited) THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND - -------------------------------------------------------------------------------- MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in The Boston Company International Core Equity Portfolio (Portfolio), at value (Note 1A) $107,170,893 Receivable for Fund shares sold 290,203 Prepaid expenses 15,669 ------------ Total assets 107,476,765 LIABILITIES Payable for Fund shares redeemed $16,229,344 Accrued accounting, custody, and transfer agent fees (Note 2) 4,976 Accrued trustees' fees and expenses (Note 2) 1,000 Accrued expense and other liabilities 7,569 ----------- Total liabilities 16,242,889 ------------ NET ASSETS $ 91,233,876 ============ NET ASSETS CONSIST OF: Paid-in capital $ 73,034,572 Accumulated net realized loss (2,061,731) Undistributed net investment income 55,148 Net unrealized appreciation 20,205,887 ------------ TOTAL NET ASSETS $ 91,233,876 ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,430,277 ============ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 26.60 ============
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Dividend income allocated from Portfolio (net of foreign withholding taxes of $100,368) $ 830,913 Interest income allocated from Portfolio (including securities lending income of $19,198) (Note 7) 24,039 Expenses allocated from Portfolio (478,395) ----------- Net investment income allocated from Portfolio 376,557 EXPENSES Accounting, custody, and transfer agent fees (Note 2) $ 337 Legal and audit services 15,205 Registration fees 10,312 Trustees' fees and expenses (Note 2) 889 Insurance expense 547 Miscellaneous 14,716 ---------- Total expenses 42,006 ----------- Net investment income 334,551 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions and financial futures contracts 6,552,510 Foreign currency transactions and forward foreign currency exchange contracts 175,804 ---------- Net realized gain 6,728,314 Change in unrealized appreciation (depreciation) allocated from portfolio on investments allocated from Portfolio 7,541,360 ----------- Net realized and unrealized gain on investments 14,269,674 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $14,604,225 ===========
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ----------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: FROM INVESTMENT OPERATIONS Net investment income $ 334,551 $ 747,952 Net realized gains (losses) 6,728,314 (763,919) Change in net unrealized appreciation 7,577,773 16,226,851 ------------ ------------ Net increase (decrease) in net assets from investment operations 14,306,087 16,210,884 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F) From net investment income (887,701) (847,624) ------------ ------------ Total distributions to shareholders (887,701) (847,624) ------------ ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 14,753,283 18,786,883 Value of shares issued to shareholders in payment of distributions declared 580,413 513,688 Cost of shares redeemed (15,245,505) (8,023,768) ------------ ------------ Net increase (decrease) in net assets from Fund share tranactions 88,191 11,276,803 ------------ ------------ Total Increase (Decrease) in Net Assets 13,506,577 26,640,063 NET ASSETS At beginning of period 77,727,299 51,087,236 ------------ ------------ At end of period (including undistributed net investment income of $55,148 and $608,298) $91,233,876 $77,727,299 ============ ===========
The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, ------------------------------------------------------------ 2004 2003 2002 2001 2000 1999 -------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 21.62 $ 17.10 $ 18.53 $ 23.45 $ 23.77 $ 20.17 -------- -------- -------- --------- -------- -------- FROM INVESTMENT OPERATIONS: Net investment income*(1) 0.09 0.23 0.25 0.24 0.24 0.27 Net realized and unrealized gains (loss) on investments 5.13 4.55 (1.48) (3.63) 1.42 3.98 -------- -------- -------- --------- -------- -------- Total from investment operations 5.22 4.78 (1.23) (3.39) 1.66 4.25 -------- -------- -------- --------- -------- -------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.24) (0.26) (0.20) (0.20) (0.43) (0.33) From net realized gains on investments -- -- -- (1.33) (1.55) (0.32) -------- -------- -------- --------- -------- -------- Total distributions to shareholders (0.24) (0.26) (0.20) (1.53) (1.98) (0.65) -------- -------- -------- --------- -------- -------- Net Asset Value, End of Year $ 26.60 $ 21.62 $ 17.10 $ 18.53 $ 23.45 $ 23.77 ======== ======== ========= ========= ======== ======== TOTAL RETURN(+) 24.25% 28.23% (6.77)% (15.40)% 7.07% 21.26% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 1.12%(++) 1.16% 1.00% 1.00% 1.00% 1.00% Net Investment Income (to average daily net assets)* 0.72%(++) 1.21% 1.29% 1.13% 0.98% 1.20% Portfolio Turnover(2) 17% 87% 74% 112% 195% Net Assets, End of Period (000's omitted) $ 91,234 $ 77,727 $ 51,087 $ 48,227 $ 39,230 $ 39,018
- ---------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share(1) N/A $0.19 $0.18 $0.16 $0.15 $0.18 Ratios (to average daily net assets): Expenses N/A 1.34% 1.33% 1.37% 1.36% 1.41% Net investment income N/A 1.03% 0.96% 0.76% 0.62% 0.79%
(1) Calculated based on average shares outstanding. (2) Portfolio turnover represents activity while the Fund was investing directly in securities until January 27, 2003. The portfolio turnover for the period since the Fund transferred substantially all of its investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report. (+) Total return would have been lower in the absense of expense waivers, returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company International Core Equity Fund (the "Fund") is a separate diversified investment series of the Trust. The Fund invests all of its investable assets in an interest of The Boston Company International Core Equity Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust, and has the same investment objective as the Fund. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies located in the foreign countries represented in the MSCI Europe, Australia, Far East Index and Canada. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 98.9% at March 31, 2004). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Currently, the Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. INVESTMENT RISK The Fund's investment in the Portfolio involves certain additional risks due to the fact that the Portfolio may invest in foreign securities that were not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may have been more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. D. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-dividend date. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, passive foreign investment companies (PFICs), post-October loss deferrals, wash sales and capital loss carryovers. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. E. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. F. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. The Boston Company Asset Management, LLC ("TBCAM") voluntarily agreed to limit the total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding commissions, taxes and extraordinary expenses) to 1.25% of the Fund's average daily net assets for the for the period ended March 31, 2004. Pursuant to this agreement, for this period ended March 31, 2004, TBCAM was not required to reimburse the Fund as the Fund operated below the agreed expense limit. This agreement is temporary and voluntary and may be discontinued or revised by TBCAM at any time. As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. Pursuant to this agreement the Fund was charged $121 during the period ended March 31, 2004. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. For the period ended March 31, 2004, the Fund received no redemption fees. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the period ended March 31, 2004, aggregated $14,753,283 and $15,543,643. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ Shares sold 570,483 1,283,041 Shares issued to shareholders in payment of distributions declared 24,615 15,660 Shares redeemed (759,395) (914,343) -------- --------- Net increase (164,297) 384,358 ======== =========
At March 31, 2004, two shareholders of record held approximately 24% and 20% of the total outstanding shares of the Fund, respectively. Investment activities of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- EQUITIES--79.8% AUSTRALIA--4.1% Boral Ltd. 202,300 $ 979,998 Caltex Australia Ltd. 49,000 269,294 Insurance Australia Group Ltd. 264,000 961,191 Oil Search Ltd. 342,400 301,817 QBE Insurance Group Ltd. 69,200 593,007 West Australian Newspaper Holdings Ltd. (a) 82,800 403,010 Westpac Banking Corp. 43,800 589,201 WMC Resources Ltd. 93,900 368,510 ---------- 4,466,028 ---------- AUSTRIA--1.3% Boehler-Uddeholm AG (a) 6,200 505,756 OMV AG (a) 4,900 929,139 ---------- 1,434,895 ---------- BELGIUM--0.4% Delhaize Group (a) 8,400 389,928 ---------- DENMARK--0.8% AP Moller--Maersk A/S (a) 66 471,631 TDC A/S (a) 11,300 413,091 ---------- 884,722 ---------- FINLAND--1.9% Fortum Oyj (a) 36,000 368,799 Kesko Oyj, Class B (a) 19,100 336,305 Nokia Oyj (a) 53,400 1,096,734 Rautaruukki Oyj (a) 30,600 246,412 ---------- 2,048,250 ---------- FRANCE--7.7% Aventis SA (a) 5,200 400,493 Banca Intesa Spa 240,120 795,325 Banque National De Paris (a) 13,300 814,393 Bouygues SA (a) 9,900 341,316 Essilor International SA 7,300 444,840 Groupe Danone (a) 2,400 394,213 Guyenne et Gascogne SA (a) 2,600 300,770 Imerys SA 1,100 262,353 Renault SA 10,200 707,714 Sagem SA 4,566 508,801 Societe Generale, Class A (a) 15,000 1,283,630 Total SA 7,455 1,371,394 Vinci SA 7,400 711,618 ---------- 8,336,860 ---------- GERMANY--5.5% Continental AG (a) 25,600 1,009,311 Deutsche Bank AG Registered Shares 3,400 283,211 Deutsche Telekom AG 34,600 622,856 E.ON AG (a) 13,800 910,768 Hannover Rueckversicherung AG (a) 13,000 435,708 The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- GERMANY (CONTINUED) Merck KGaA (a) 7,200 $ 336,352 Puma AG Rudolf Dassler Sport (a) 2,700 596,085 SAP AG (a) 3,500 554,424 Siemens AG 7,100 525,146 ThyssenKrupp AG 34,900 649,741 ----------- 5,923,602 ----------- GREECE--0.9% Alpha Bank AE 30,500 941,120 ----------- HONG KONG--1.0% China Unicom Ltd. 454,000 410,757 DAH Sing Financial 32,400 228,690 Esprit Holdings Ltd. 106,000 444,830 ----------- 1,084,277 ----------- IRELAND--1.2% Anglo Irish Bank Corp. PLC 47,600 761,928 CRH PLC 25,800 526,480 ----------- 1,288,408 ----------- ITALY--1.4% Tim Spa 83,800 474,642 Mediaset Spa 31,900 354,685 Ente Nazionale Idrocarburi Spa 34,000 684,898 ----------- 1,514,225 ----------- JAPAN--17.9% Asahi Breweries Ltd. 39,000 451,410 Bank of Yokohama Ltd. (a)* 48,000 281,703 Casino Computer Co., Ltd. (a) 50,000 593,594 Citizen Electronics Co., Ltd. 15,600 964,902 Daito Trust Construction Co., Ltd. 17,000 661,872 Eisai Co. Ltd. (a) 19,200 519,217 Fuji Soft ABC, Inc. 10,200 435,270 Hinos Motors Ltd. 60,000 432,106 Ito-Yokado Co. Ltd. 7,000 318,182 KDDI Corp. 129 726,151 Keyence Corp. 1,200 291,830 Kirin Beverage Corp. 13,400 296,835 Kobe Steel Ltd. 392,000 597,699 Kyushu Electric Power Co., Inc. (a) 12,900 237,267 Mitsubishi Corp. 51,000 601,554 Mitsubishi Tokyo Financial Group, Inc. 88 869,198 Nissan Motor Co. Ltd. 93,700 1,046,802 Nisshin Seifun Group, Inc. (a) 42,000 410,012 NOK Corp. 12,700 467,664 Nomura Holdings, Inc. 20,000 363,445 NSK Ltd. (a) 62,000 305,006 NTT Corp. 96 543,153 Ono Pharmaceutical Co. Ltd. 11,100 504,545 Ricoh Co. Ltd. 24,000 492,520 The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- JAPAN (CONTINUED) Sanyo Shinpan Finance Co., Ltd. 6,100 $ 327,580 Seiko Epson Corp. 12,400 499,425 Seino Transportation Co., Ltd. 68,000 697,085 Sharp Corp. (a) 30,000 534,810 Sumitomo Electric Industries Ltd. (a) 75,000 681,099 Sumitomo Mitsui Financial Group, Inc. (a) 124 915,612 Sumitomo Rubber Industries, Inc. 69,000 517,434 Takeda Chemical Industries Ltd. (a) 10,800 480,552 TDK Corp. 12,800 975,834 Tokyo Gas Corp., Ltd. (a) 158,000 596,970 Toyota Motor Corp. 18,600 692,058 ----------- 19,330,396 ----------- NETHERLANDS--3.6% ABN Amro Holding NV 41,400 925,211 ASM Lithography Holding NV* 17,900 328,620 Hunter Douglas NV 5,900 297,924 Ing Groep NV 38,900 856,409 Koninklijke Philips Electronics NV (a) 15,000 434,587 Royal KPN NV 58,200 455,052 Wereldhave NV 7,600 619,024 ----------- 3,916,827 ----------- NEW ZEALAND--0.4% Fletcher Building Ltd. 148,000 437,902 ----------- NORWAY--1.7% Norsk Hydro ASA (a) 10,000 631,173 Orkla ASA (a) 8,500 244,653 Storebrand ASA (a) 32,200 198,063 Telenor ASA (a) 95,800 666,250 Yara International ASA (a) 11,800 85,856 ----------- 1,825,995 ----------- SINGAPORE--1.9% Fraser and Neave Ltd. 50,930 444,245 Keppel Corp., Ltd. 160,900 701,739 Neptune Orient Lines Ltd. 289,000 378,128 Want Want Holdings Ltd. 384,000 487,680 ----------- 2,011,792 ----------- SPAIN--2.6% Actividades Construccion y Servicios SA (a) 11,300 553,765 Corp. Mapfre SA (a)* 43,000 517,811 Corp. Mapfre SA Rights (a) 50,900 20,055 Gamesa Corp. Tecnologica SA (a) 16,000 656,628 Iberdrola SA 12,700 262,710 Repsol YPF SA 39,800 826,237 ----------- 2,837,206 ----------- SWEDEN--1.1% Skandinaviska Enskilda Banken AB (a) 40,700 596,750 The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- SWEDEN (CONTINUED) Trelleborg AB, Class B 17,000 $ 309,033 Volvo AB, Class B (a) 7,600 250,598 ----------- 1,156,381 ----------- SWITZERLAND--5.0% Baloise Holdings Ltd. 5,600 234,993 Credit Suisse Group 26,300 912,415 Geberit AG (a) 870 478,521 Logitech International SA* 7,200 326,885 Micronas Semiconductor Holdings AG Registered Shares* 11,400 539,640 Novartis AG (a) 15,170 644,971 Saurer AG 9,500 418,919 Serono SA 750 463,490 Swiss Life Holding 1,900 293,544 UBS AG Registered Shares (a) 11,100 825,439 Zurich Financial Services AG 1,900 299,923 ----------- 5,438,740 ----------- UNITED KINGDOM--19.5% Aggregate Industries PLC 355,800 558,104 Alliance Unichem PLC 35,400 379,224 Anglo American PLC 18,600 445,188 AstraZeneca PLC 8,900 414,379 Atkins WS PLC 26,500 287,057 Aviva PLC 54,300 529,084 Balfour Beatty PLC 99,000 474,092 Barclays PLC 137,300 1,214,292 Barratt Developments PLC 51,700 593,433 BP PLC 164,400 1,383,430 British Airways PLC* 97,900 499,538 BT Group PLC 115,400 376,938 Cattles PLC 87,900 548,272 Centrica PLC 193,600 815,468 Dixons Group PLC 177,400 504,156 Galen Holdings PLC 49,500 754,072 George Wimpey PLC 95,700 772,646 HBOS PLC 42,300 576,086 Inchcape PLC 26,200 708,320 Johnston Press PLC 40,800 394,532 Kelda Group PLC 32,900 273,667 Northern Rock PLC 42,800 613,304 Reckitt Benckiser PLC 37,200 923,327 Royal Bank of Scotland Group PLC 53,008 1,621,872 Sage Group PLC 75,000 249,475 Shell Transport & Trading Co. PLC 64,700 424,458 Shire Pharmaceuticals Group PLC* 58,700 575,206 Tesco PLC 242,100 1,097,941 Vodafone Group PLC 943,800 2,242,424 Whitbread PLC 24,100 322,882 The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------ VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Wolseley PLC 32,400 $ 504,935 ------------ 21,077,802 ------------ TOTAL EQUITIES (Cost $66,204,434) 86,345,356 ------------ PREFERRED STOCKS--0.2% Unipol Spa 95,400 244,916 ------------ TOTAL PREFERRED STOCKS (Cost $189,899) 244,916 ------------ PAR RATE MATURITY VALUE ---- -------- ----- SHORT-TERM INVESTMENTS--0.8% U.S. GOVERNMENT--0.4% U.S. Treasury Bill (++) 0.91% 6/17/2004 420,000 419,183 ------------ INVESTMENT COMPANIES--0.4% Dreyfus Institutional Preferred Plus (+) 368,618 368,618 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $787,801) 787,801 ------------ INVESTMENT OF CASH COLLATERAL--20.9% Dreyfus Institutional Preferred Money Market Fund (cost $22,543,716)(+) 22,543,716 22,543,716 ------------ TOTAL INVESTMENTS--101.7% (COST $89,725,850) 109,921,789 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(1.7)% (1,861,074) ------------ NET ASSETS--100.0% $108,060,715 ============
NOTES TO SCHEDULE OF INVESTMENTS: * Non-income producing security (+) Affiliated fund that is available only to investment companies and other accounts managed by TBCAM or its affiliates. The effective yield is 0.98%. A complete listing of the fund's holdings as of its most recent fiscal year end is available. (++) Denotes all or part of security segregated as collateral. (a) Security, or a portion thereof, was on loan at March 31, 2004. The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- PERCENTAGE OF NET INDUSTRY SECTOR ASSETS - -------------------------------------------------------------------------------- Basic Materials 3.2% Communications 8.5% Consumer, Cyclical 10.4% Consumer, Non-cyclical 11.1% Diversified 0.6% Energy 6.9% Financial 20.6% Industrial 11.0% Technology 4.1% Utilities 3.6% Short-Term Investments 20.9% Security Lending Cash Collateral 0.8% ----- Total Investments 101.7% The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO STATEMENT OF ASSETS & LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (including securities on loan valued at $21,098,659 (Note 6)) (Note 1A) (identified cost, $66,813,516) $ 87,009,455 Affiliated investment (Note 1G) (identified cost, $22,912,334) 22,912,334 Foreign currency, at value (identified cost, $4,217,637) 4,228,625 Receivable for investments sold 16,101,865 Interest and dividends receivable 623,624 Prepaid expenses 403 ------------ Total assets 130,876,306 ------------ LIABILITIES Liability for securities on loan (Note 6) $ 22,543,716 Payable for investments purchased 218,153 Payable for variation margin on open financial futures contracts (Note 5) 7,830 Accrued accounting and custody fees (Note 2) 32,229 Accrued trustees' fees and expenses (Note 2) 1,867 Accrued expenses and other liabilities 11,796 ------------ Total liabilities 22,815,591 ------------ NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTEREST) $108,060,715 ============
The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Dividend income (net of foreign withholding taxes of $101,065) $ 836,621 Interest income (including securities lending income of $19,361 (Note 6)) 24,216 ----------- Total investment Income 860,837 EXPENSES Investment advisory fee (Note 2) $ 373,280 Accounting and custody fees (Note 2) 79,193 Legal and audit services 21,907 Trustees' fees and expenses (Note 2) 6,133 Insurance expense 4,936 Miscellaneous 1,104 ---------- Total expenses 486,553 ----------- Net investment income 374,284 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 6,567,736 Financial futures contracts 239,210 Foreign currency transactions and forward foreign currency exchange contracts (60,582) ---------- Net realized gain 6,746,364 Change in unrealized appreciation (depreciation) Investment securities, financial futures contracts, foreign currency and forward foreign currency exchange contracts 7,595,823 ----------- Net realized and unrealized gain 14,342,187 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $14,716,471 ===========
The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 28, 2003 SIX MONTHS ENDED (COMMENCEMENT OF MARCH 31, 2004 OPERATIONS) TO (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 374,284 $ 797,821 Net realized gains 6,746,364 1,041,685 Change in net unrealized appreciation 7,595,823 13,981,959 ------------ ----------- Net increase in net assets from investment operations 14,716,471 15,821,465 ------------ ----------- CAPITAL TRANSACTIONS Assets contributed by The Boston Company International Core Equity Fund (including unrealized appreciation of $0 and $1,307,052) -- 55,577,761 Contributions 15,550,036 10,906,317 In kind transfer into the Portfolio 4,430,220 -- Withdrawals (4,296,340) (4,645,215) ------------ ----------- Net increase (decrease) in net assets from capital tranactions 15,683,916 61,838,863 ------------ ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 30,400,387 77,660,328 NET ASSETS At beginning of period 77,660,328 -- ------------ ----------- At end of period $108,060,715 $77,660,328 ============ ===========
The accompanying notes are an integral part of the financial statements. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 28, 2003 SIX MONTHS ENDED (COMMENCEMENT OF MARCH 31, 2004 OPERATIONS) TO (UNAUDITED) SEPTEMBER 30, 2003 -------------------------------------------- TOTAL RETURN(+) 24.29% 22.46% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 1.04%(++) 1.17%(++) Net Investment Income (to average daily net assets)* 0.80%(++) 1.81%(++) Portfolio Turnover 46%(+++) 63% Net Assets, End of Period (000's omitted) $ 108,061 $ 77,660 - ---------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Ratios (to average daily net assets): Expenses N/A 1.20%(++) Net investment income N/A 1.78%(++)
(+) Total return would have been lower in the absense of expense waivers, returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. (+++) Not annualized. The accompanying notes are an integral part of the financial statements. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the State of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company International Core Equity Portfolio (the "Portfolio"), a separate diversified investment series of the Portfolio Trust, commenced operations on January 28, 2003. The objective of the Portfolio is to achieve long-term growth of capital. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies that are located in the foreign countries represented in the MSCI Europe, Australia, Far East Index and Canada. At March 31, 2004, there were two funds, The Boston Company International Core Equity Fund and Dreyfus Premier International Equity Fund invested in the Portfolio. The value of the funds' investment in the Portfolio reflects the funds' proportionate interests in the net assets of the Portfolio. At March 31, 2004, The Boston Company International Core Equity Fund and the Dreyfus Premier International Equity Fund held approximately 98.9% and 1.1% interests in the Portfolio, respectively. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price, or the NASDAQ official close if applicable, in the principal market in which such securities are normally traded. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the Portolio's shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect the events that occur after such close but before the close of the New York Stock Exchange. If market quotations are not readily available or do not accurately reflect fair value, or the value of a security has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), the Portfolio may value its assets by a method the Trustees believe accurately reflects the fair value. The Trustees have adopted fair value pricing procedures, which, among other things, require the Portfolio to fair value such secutities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices for foreign securities will be used by each fund to a significant extent. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. The Portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts usually received or paid. 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- C. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. D. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. E. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. F. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. G. AFFILIATED ISSUERS Issuers in which the fund held investments in other investment companies advised by The Boston Company Asset Management, LLC ("TBCAM") or its affiliates. (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The investment advisory fee paid to TBCAM for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 0.80% of the Portfolio's average daily net assets. The Portfolio compensates Mellon Bank, N.A. under a custody, administration and accounting services agreement for providing custody, fund administration and fund accounting services for the Portfolio. Pursuant to this agreement the Portfolio was charged $71,439 during the period ended March 31, 2004. 20 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the period ended March 31, 2004 were $40,321,218 and $47,552,772, respectively. For the period ended March 31, 2004, the Portfolio did not purchase or sell any long-term U.S. Government securities. (4) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The cost and unrealized appreciation (depreciation) in value of the investment securities owned at March 31, 2004, as computed on a federal income tax basis, were as follows: Aggregate Cost $67,468,473 =========== Gross unrealized appreciation $20,847,667 Gross unrealized depreciation (922,714) ----------- Net unrealized appreciation $19,924,953 =========== (5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Portfolio Trust's registration statement. The Portfolio may trade the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. 21 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- The Portfolio did not enter into option transactions during the period ended March 31, 2004. FORWARD CURRENCY EXCHANGE CONTRACTS The Portfolio may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Portfolio primarily to protect the value of the Portfolio's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At March 31, 2004, the Portfolio held the following forward foreign currency exchange contracts:
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT LOSS ----------------------------------------------------------------------------------------------------------------- Euro 59,000 3/17/2004 $ 74,092 $ 72,155 $(1,937) South African Rand 730,000 1/27/2004 108,792 103,620 (5,172) -------- -------- ------- Total $182,884 $175,775 $(7,109) ======== ======== =======
FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At March, 31, 2004, the Portfolio held the following futures contracts:
UNDERLYING FACE UNREALIZED CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE GAIN (LOSS) --------------------------------------------------------------------------------------------------------------------------- MSCI Pan-Euro (187 contracts) Long 6/17/2004 $3,730,100 $(16,119) Topix Futures (12 contracts) Long 6/17/2004 1,357,307 56,581 --------- $ 40,462 =========
22 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (6) SECURITY LENDING: The Portfolio may lend its securities to financial institutions which the Portfolio deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. The Portfolio loaned securities during the period ended March 31, 2004 resulting in security lending income. At March 31, 2004 the Portfolio had $21,098,659 worth of securities on loan. (7) LINE OF CREDIT: The Portfolio, and other subtrusts in the Portfolio Trust and funds in the Mellon Institutional Funds Investment Trust (the "Trust") are parties to a committed line of credit facility, which enables each portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is charged to each participating portfolio/fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment fee, computed at an annual rate of 0.060 of 1% on the daily unused portion of the facility, is allocated ratably among the participating portfolios/funds at the end of each quarter. For the period ended March 31, 2004, the commitment fee was $1,277 for the Portfolio. During the period ended March 31, 2004, the Portfolio had no borrowings under the credit facility. 23 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of March 31, 2004. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. Independent Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 None c/o Decision Resources, Inc. 11/3/1986 and Chief Executive 260 Charles Street Officer, Decision Waltham, MA 02453 Resources, Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None c/o Essex Street Associates 11/3/1986 Associates (family 400 Essex Street investment trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None c/o Harvard University 9/13/1986 Professor of Political Cambridge, MA 02138 Economy, Harvard 8/5/44 University John H. Hewitt Trustee Trustee since Trustee, Mertens 29 None P.O. Box 233 11/3/1986 House, Inc.; Trustee New London, NH 03257 and Chairman of the 4/11/35 Board, Visiting Nurse Alliance of Vermont & New Hampshire
Interested Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 29 None c/o Standish Mellon Asset and Chief and Chief Operating Management Company LLC, Executive Officer Officer, Mellon Institutional One Boston Place Asset Management; Boston, MA 02108 formerly Vice President 7/24/65 and Chief Financial Officer, Mellon Institutional Asset Management
24 Principal Officers who are Not Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann Secretary Secretary Senior Vice President 29 None c/o Standish Mellon Asset since 2003 and Head of Operations Management, Mellon Institutional Asset One Boston Place Management, formerly Boston, MA 02108 First Vice President, 2/20/61 Mellon Institutional Asset Management and Mellon Global Investments Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish Management, Treasurer since Mellon Asset Management One Boston Place 2002 Boston, MA 02108 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Funds Management, Operations, Standish One Boston Place Mellon Asset Management Boston, MA 02108 8/19/51 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None c/o Standish Mellon Asset President Fund Operations since Management, 1999; Shareholder One Boston Place Representative, Standish Boston, MA 02108 Mellon Asset Management 1/19/71
25 THIS PAGE INTENTIONALLY LEFT BLANK [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds One Boston Place Boston, MA 02108-4408 800.221.4795 www.standishmellon.com [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds THE BOSTON COMPANY Financial Report LARGE CAP CORE FUND - -------------------------------------------------------------------------------- For the Period Ended March 31, 2004 (Unaudited) MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY LARGE CAP CORE FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in The Boston Company Large Cap Core Portfolio (Portfolio), at value (Note 1A) $60,831,458 Receivable for Fund shares sold 1,817 Prepaid expenses 10,670 ----------- Total assets 60,843,945 LIABILITIES Payable for Fund shares redeemed $500,000 Accrued accounting, custody and transfer agent fees (Note 2) 3,165 Accrued Trustees' fees and expenses (Note 2) 962 Accrued expenses and other liabilities 10,126 -------- Total liabilities 514,253 ----------- NET ASSETS $60,329,692 =========== NET ASSETS CONSIST OF: Paid-in capital $56,703,146 Accumulated net realized loss (2,519,595) Undistributed net investment income 217,578 Net unrealized appreciation 5,928,563 ----------- TOTAL NET ASSETS $60,329,692 =========== SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,688,734 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 35.72 ===========
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY LARGE CAP CORE FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Dividend income allocated from Portfolio (net of foreign withholding taxes of $1,174) $ 463,145 Interest income allocated from Portfolio 5,670 Expenses allocated from Portfolio (217,684) ---------- Net investment income allocated from Portfolio 251,131 EXPENSES Accounting, custody, and transfer agent fees (Note 2) $ 4,357 Legal and audit services 7,961 Registration fees 10,376 Trustees' fees and expenses (Note 2) 961 Insurance expense 514 Miscellaneous 5,235 ---------- Total expenses 29,404 Deduct: Reimbursement of Fund operating expenses (Note 2) (6,986) ---------- Net expenses 22,418 ---------- Net investment income 228,713 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 3,920,220 Financial futures contracts 94,235 ---------- Net realized gain 4,014,455 Change in unrealized appreciation (depreciation) allocated from portfolio on investments allocated from Portfolio 4,060,741 ---------- Net realized and unrealized gain (loss) on investments 8,075,196 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $8,303,909 ==========
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY LARGE CAP CORE FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: FROM INVESTMENT OPERATIONS Net investment income $ 228,713 $ 679,484 Net realized gains (loss) 4,014,455 (3,244,390) Change in net unrealized appreciation 4,060,741 12,889,324 ----------- ------------ Net increase in net assets from investment operations 8,303,909 10,324,418 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C) From net investment income (320,238) (675,158) ----------- ------------ Total distributions to shareholders (320,238) (675,158) ----------- ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 4,882,010 11,259,233 Value of shares issued to shareholders in payment of distributions declared 224,551 566,287 Cost of shares redeemed (16,910,184) (12,354,505) ----------- ------------ Net decrease in net assets from Fund share tranactions (11,803,623) (528,985) ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (3,819,952) 9,120,275 NET ASSETS At beginning of period 64,149,644 55,029,369 ----------- ------------ At end of period (including undistributed net investment income of $217,578 and $309,103) $ 60,329,692 $ 64,149,644 ============ ============
The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY LARGE CAP CORE FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, 2004 -------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 31.43 $ 26.13 $ 34.00 $ 41.71 $ 37.79 $ 37.47 ------- ------- ------- ------- ------- -------- FROM INVESTMENT OPERATIONS: Net investment income* (1) 0.13 0.36 0.32 0.39 0.29 0.29 Net realized and unrealized gains (loss) on investments 4.35 5.30 (5.77)(2) (2.77) 5.73 4.49 ------- ------- ------- ------- ------- -------- Total from investment operations 4.48 5.66 (5.45) (2.38) 6.02 4.78 ------- ------- ------- ------- ------- -------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.19) (0.36) (0.21) (0.29) (0.23) (0.23) From net realized gains on investments -- -- (2.21) (5.04) (1.87) (4.23) ------- ------- ------- ------- ------- -------- Total distributions to shareholders (0.19) (0.36) (2.42) (5.33) (2.10) (4.46) ------- ------- ------- ------- ------- -------- NET ASSET VALUE, END OF PERIOD $ 35.72 $ 31.43 $ 26.13 $ 34.00 $ 41.71 $ 37.79 ======= ======= ======= ======= ======= ======== TOTAL RETURN(+) 14.29% 21.76% (17.70)% (7.18)% 16.52% 12.29% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets) 0.79%(++) 0.71% 0.71% 0.71% 0.71% 0.66% Net Investment Income (to average daily net assets) 0.75%(++) 1.23% 0.96% 1.00% 0.76% 0.74% Net Assets, End of Period (000's omitted) $60,330 $64,150 $55,029 $75,489 $93,315 $130,556 - ----------------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share (1) $ 0.12 $ 0.29 $ 0.27 $ 0.38 $ 0.28 N/A Ratios (to average daily net assets): Expenses 0.83%(++) 0.93% 0.83% 0.73% 0.73% N/A Net investment income 0.71%(++) 1.01% 0.84% 0.98% 0.74% N/A
(1) Calculated based on average shares outstanding. (2) Amount includes litigation proceeds received by the Fund of $0.02. (+) Total return would have been lower in the absense of expense waivers, returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY LARGE CAP CORE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Large Cap Core Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund invests all of its investable assets in an interest of The Boston Company Large Cap Core Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust, and which has the same investment objective as the Fund. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities in companies that appear to be undervalued relative to underlying business fundamentals. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 100% at March 31, 2004). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Currently, the Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-dividend date. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for wash sales, post-October losses and realized and unrealized gains or losses on futures. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY LARGE CAP CORE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- E. COMMITMENT AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE AND TRANSACTIONS WITH AFFILIATES: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to TBCAM for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Effective November 1, 2003, TBCAM voluntarily agreed to limit the total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding commissions, taxes and extraordinary expenses) to 0.90% of the Fund's average daily net assets for the period ended March 31, 2004. Prior to that the voluntary expense limitation was 0.71% of the Funds average daily net assets. Pursuant to this agreement, for the period ended March 31, 2004, TBCAM voluntarily reimbursed the Fund for $6,986 of its operating expenses. This agreement is temporary and voluntary and may be discontinued or revised by TBCAM at any time. As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. Pursuant to this agreement the Fund was charged $121 during the period ended March 31, 2004. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the period ended March 31, 2004, aggregated $5,105,140 and $16,769,763, respectively. (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
PERIOD ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, 2003 -------------- ------------------- Shares sold 140,483 358,946 Shares issued to shareholders in payment of distributions declared 6,711 19,336 Shares redeemed (499,809) (443,179) -------- -------- Net decrease (352,615) (64,897) ======== ========
At March 31, 2004, four shareholders of record held approximately 11%, 10%, 8% and 6% of the total outstanding shares of the Fund, respectively. Investment activities of these shareholders could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 7 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- EQUITIES--99.3% BASIC MATERIALS--2.6% Alcoa, Inc. 8,300 $ 287,927 Dow Chemical Co. 14,500 584,060 El Du Pont de Nemours & Co. 8,400 354,648 Sherwin-Williams Corp. 8,700 334,341 ---------- 1,560,976 ---------- COMMUNICATIONS--8.9% Cisco Systems, Inc.* 53,200 1,251,264 Comcast Corp.* 14,406 414,028 Qualcomm, Inc. 4,500 298,890 SBC Communications, Inc. 19,100 468,714 Symantec Corp.* 8,000 370,400 Tribune Company 5,700 287,508 Verizon Communications, Inc. 23,400 855,036 Viacom, Inc. Class B 14,000 548,940 Walt Disney Co 35,500 887,145 ---------- 5,381,925 ---------- CONSUMER CYCLICAL--10.6% BorgWarner, Inc. 4,700 398,701 Carnival Corp. 6,900 309,879 Coach, Inc.* 9,500 389,405 Costco Wholesale Corp.* 11,900 446,964 CVS Corp. 16,500 582,450 Lowe's Companies, Inc. 5,400 303,102 McDonalds Corp. 32,800 937,096 Paccar, Inc. 9,900 556,776 Petco Animal Supplies, Inc. 14,900 419,882 Staples, Inc. 22,600 573,814 Wal-Mart Stores, Inc. 19,700 1,175,893 Williams-Sonoma, Inc.* 9,500 324,900 ---------- 6,418,862 ---------- CONSUMER NONCYCLICAL--20.4% Amgen, Inc.* 9,600 558,432 Archer-Daniels-Midland Co. 26,600 448,742 Becton Dickinson & Co. 10,200 494,496 Boston Scientific Corp.* 8,400 355,992 Cendant Corp. 17,300 421,947 Coca-Cola Enterprises, Inc. 27,200 657,424 Davita, Inc.* 10,100 482,275 Dean Foods Corp.* 12,600 420,840 Hillenbrand Industries 7,800 529,542 Johnson & Johnson 8,500 431,120 Kellogg Co. 10,800 423,792 Kimberly-Clark Corp. 7,100 448,010 Millipore Corp.* 5,900 303,142 Mylan Laboratories, Inc. 12,900 293,217 Pepsico, Inc. 11,300 608,505 Pfizer, Inc. 56,320 1,974,016 The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- CONSUMER NONCYCLICAL (CONTINUED) Pharmaceutical Resources, Inc.* 5,100 $ 289,986 Procter & Gamble Co. 12,000 1,258,560 Steris Corp.* 11,400 294,120 Varian Medical Systems, Inc.* 4,700 405,657 Watson Pharmaceuticals, Inc.* 6,300 269,577 Wellpoint Health Networks, Inc.* 6,000 682,320 Wyeth 6,800 255,340 ---------- 12,307,052 ---------- ENERGY--6.9% Anadarko Petroleum Corp. 5,300 274,858 BP PLC Sponsored ADR 13,290 680,448 Chesapeake Energy Corp. 28,100 376,540 ChevronTexaco Corp. 2,966 260,355 ConocoPhillips 7,800 544,518 Devon Energy Corp. 6,000 348,900 Exxon Mobil Corp. 32,804 1,364,318 Pride International, Inc.* 18,600 317,316 ---------- 4,167,253 ---------- FINANCIAL--21.5% Ace Ltd. 14,500 618,570 Affiliated Managers Group* 7,800 425,724 American International Group 10,849 774,076 Axis Capital Holdings Ltd. 8,800 260,040 Bank of America Corp. 13,400 1,085,132 Boston Properties, Inc., REIT 5,700 309,567 Captial One Financial Corp. 8,700 656,241 Citigroup, Inc. 36,966 1,911,142 Fannie Mae 5,600 416,360 Franklin Resources, Inc. 10,400 579,072 Freddie Mac 4,500 265,770 Goldman Sachs Group, Inc 9,300 970,455 JP Morgan Chase & Co. 18,900 792,855 Lincoln National Corp. 14,500 686,140 Merrill Lynch & Co., Inc. 5,300 315,668 Morgan Stanley 5,700 326,610 New York Community Bancorp 13,688 469,225 Wachovia Corp. 32,200 1,513,400 Wells Fargo & Company 10,100 572,367 ---------- 12,948,414 ---------- INDUSTRIAL--11.8% Agilent Technologies, Inc. 11,600 366,908 Black & Decker Corp. 5,800 330,252 Caterpillar, Inc. 7,100 561,397 Deere & Co. 7,200 499,032 Eaton Corp. 11,800 663,042 Energizer Holdings, Inc.* 8,400 392,196 FedEx Corp. 3,600 270,576 Fisher Scientific International* 14,300 787,072 The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- INDUSTRIAL (CONTINUED) General Electric Corp. 46,000 $ 1,403,920 Ingersoll-Rand Co., Class A 8,600 581,790 Norfolk Sourthern Corp. 20,300 448,427 Textron, Inc. 5,200 276,380 United Technologies Corp. 6,200 535,060 ----------- 7,116,052 ----------- TECHNOLOGY--13.6% Analog Devices, Inc 4,900 235,249 Cognizant Technology Solutions Corp.* 9,000 407,250 Cypress Semiconductor Corp 18,900 386,883 Dell, Inc.* 30,200 1,015,324 EMC Corp./Massachusetts* 33,000 449,130 Fairchild Semiconductor International* 26,200 629,586 Intel Corp. 50,900 1,384,480 International Business Machines Corp 6,900 633,696 Lam Research Corp.* 10,200 257,142 Microsoft Corp. 62,200 1,553,134 National Semiconductor Corp.* 14,400 639,792 Peoplesoft, Inc.* 13,800 255,162 Texas Instruments, Inc. 11,800 344,796 ----------- 8,191,624 ----------- UTILITIES--3.0% Constellation Energy Group, Inc. 15,400 615,230 Entergy Corp. 8,300 493,850 Exelon Corp. 9,600 661,153 ----------- 1,770,233 ----------- TOTAL EQUITIES (Cost $52,703,351) 59,862,391 ----------- The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
PAR VALUE SECURITY RATE MATURITY VALUE (NOTE 1A) - --------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--1.8% U.S. GOVERNMENT--0.2% U.S. Treasury Bill (++) 0.91% 6/17/2004 150,000 $ 149,708 ----------- INVESTMENT COMPANIES--1.6% Dreyfus Institutional Preferred Plus(+) 964,362 964,362 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $1,114,070) 1,114,070 ----------- TOTAL INVESTMENTS--101.1% (COST $53,817,421) 60,976,461 OTHER ASSETS, LESS LIABILITIES--(1.1)% (145,003) ----------- NET ASSETS--100.0% $60,831,458 ===========
NOTES TO SCHEDULE OF INVESTMENTS: ADR--American Depository Receipt REIT--Real Estate Investment Trust * Non-income producing security (+) Affiliated fund that is available only to investment companies and other accounts managed by TBCAM or its affiliates. The effective yield is 0.98%. A complete listing of the fund's holdings as of its most recent fiscal year end is available. (++) Denotes all or part of security segregated as collateral. The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (identified cost $52,853,059) $60,012,099 Affiliated investment (Note 1E) (identified cost $964,362) 964,362 Cash 17 Interest and dividends receivable 39,603 Prepaid expenses 2,038 ----------- Total assets 61,018,119 ----------- LIABILITIES Payable for investments purchased $129,872 Payable for variation margin on open financial futures contracts (Note 5) 1,160 Accrued accounting and custody fees (Note 2) 15,263 Accrued Trustees' fees and expenses (Note 2) 2,434 Accrued expenses and other liabilities 37,932 -------- Total liabilities 186,661 ----------- NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $60,831,458 ===========
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Dividend income (net of foreign withholding taxes of $1,174) $ 463,145 Interest income 5,670 ---------- Total investment Income 468,815 EXPENSES Investment advisory fee (Note 2) $ 152,905 Accounting and custody fees (Note 2) 40,682 Legal and audit services 12,956 Trustees' fees and expenses (Note 2) 4,538 Insurance expense 4,635 Miscellaneous 6,042 ---------- Total expenses 221,758 ---------- Deduct: Waiver of investment advisory fee (Note 2) (3,826) ---------- Net expenses 217,932 ---------- Net investment income 250,883 ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions $3,920,220 Financial futures contracts 94,235 ---------- Net realized gain 4,014,455 Change in unrealized appreciation (depreciation) Investment securities and financial futures contracts 4,060,771 ---------- Net realized and unrealized gain 8,075,226 ---------- NET INCREASE IN NET ASSETS FROM OPERATIONS $8,326,109 ==========
The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 250,883 $ 679,488 Net realized gains (losses) 4,014,455 (3,244,400) Change in net unrealized appreciation (depreciation) 4,060,771 12,889,366 ------------ ------------ Net increase in net assets from investment operations 8,326,109 10,324,454 ------------ ------------ CAPITAL TRANSACTIONS Contributions 5,105,140 11,278,147 Withdrawls (16,769,763) (12,440,045) ------------ ------------ Net increase (decrease) in net assets from capital tranactions (11,664,623) (1,161,898) ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (3,338,514) 9,162,556 NET ASSETS At beginning of period 64,169,972 55,007,416 ------------ ------------ At end of period $ 60,831,458 $ 64,169,972 ============ ============
The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, 2004 ------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ---------------- --------- --------- -------- -------- -------- TOTAL RETURN (+) 14.33% 21.76% (17.69)% (7.11)% 16.59% 12.35% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 0.72%(++) 0.71% 0.70% 0.64% 0.64% 0.60% Net Investment Income (to average daily net assets)* 0.82%(++) 1.23% 0.97% 1.06% 0.83% 0.81% Portfolio Turnover 30%(+++) 104% 80% 62% 92% 90% Net Assets, End of Period (000's omitted) $ 60,831 $ 64,170 $ 55,007 $124,213 $146,105 $190,857 - ---------------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Ratios (to average daily net assets): Expenses 0.73%(++) 0.77% 0.72% N/A N/A N/A Net investment income 0.81%(++) 1.17% 0.95% N/A N/A N/A
(+) Total return for the Portfolio has been calculated based on the total return for the investor Fund, assuming all distributions were reinvested, and adjusted for the difference in expenses as as set out in the notes to the financial statements. Total return would have been lower in the absense of these waivers. Returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. (+++) Not annualized. The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the state of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Large Cap Core Portfolio (the "Portfolio") is a separate diversified investment series of the Portfolio Trust. At March 31, 2004, there was one fund, The Boston Company Large Cap Core Fund (the "Fund"), invested in the Portfolio. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. The Fund's proportionate interest at March 31, 2004 was approximately 100%. The objective of the Portfolio is long-term growth of capital. The Portfolio seeks to achieve its objective by investing, under normal circumstances, of at least 80% of net assets in equity and equity-related securities of companies which appear to be undervalued relative to current earnings growth. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price, or the NASDAQ official close if applicable, in the principal market in which such securities are normally traded. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. SECURITIES TRANSACTION AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. C. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. D. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- E. AFFILIATED ISSUERS Issuers in which the fund held investments in other investment companies advised by The Boston Company Asset Management, LLC ("TBCAM"). (2) INVESTMENT ADVISORY FEE AND TRANSACTIONS WITH AFFILIATES: The investment advisory fee paid to TBCAM for overall investment advisory and administrative services is paid monthly at the annual rate of 0.50% of the Portfolio's average daily net assets. Effective November 1, 2003, TBCAM voluntarily agreed to limit the Portfolio's total annual operating expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 0.90% of the Porfolio's average daily net assets for the period ended March 31, 2004. Prior to November 1, 2003 the voluntary expense limitation was 0.71% of the Portfolio's average daily net assets. Pursuant to this agreement, for the period ended March 31, 2004, TBCAM voluntarily waived $3,826 of its investment advisory fees. This agreement is voluntary and temporary and may be discontinued or revised by TBCAM at any time. The Portfolio compensates Mellon Bank, N.A. under a custody, administration and accounting services agreement for providing custody, fund administration and fund accounting services for the Portfolio. Pursuant to this agreement the Portfolio was charged $37,801 during the period ended March 31, 2004. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the period ended March 31, 2004, were $18,046,118 and $28,365,639, respectively. For the period ended March 31, 2004, the Portfolio did not purchase or sell any long-term U.S. Government securities. (4) FEDERAL TAXES: The cost and unrealized appreciation (depreciation) in value of the investment securities owned at March 31, 2004, as computed on a federal income tax basis, were as follows: Aggregate Cost $54,052,681 =========== Gross unrealized appreciation 7,670,640 Gross unrealized depreciation (757,420) ----------- Net unrealized appreciation $ 6,913,220 =========== (5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Portfolio Trust's registration statement. The Portfolio may trade the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Portfolio entered into no such transactions during the period ended March 31, 2004. FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At March 31, 2004, the Portfolio held the following financial futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED LOSS ---------------------------------------------------------------------------------------------------------------- S&P 500 (2 contracts) Long 6/17/2004 $573,000 $10,560 =======
(6) LINE OF CREDIT: The Portfolio, and other subtrusts in the Portfolio Trust and funds in the Mellon Institutional Funds Investment Trust (the "Trust") are parties to a committed line of credit facility, which enables each portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is charged to each participating portfolio/fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment fee, computed at an annual rate of 0.060 of 1% on the daily unused portion of the facility, is allocated ratably among the participating portfolios/funds at the end of each quarter. For the period ended March 31, 2004, the commitment fee was $1,070 for the Portfolio. During the period ended March 31, 2004, the Portfolio had no borrowings under the credit facility. 18 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of March 31, 2004. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. Independent Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 None c/o Decision Resources, Inc. 11/3/1986 and Chief Executive 260 Charles Street Officer, Decision Waltham, MA 02453 Resources, Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None c/o Essex Street Associates 11/3/1986 Associates (family 400 Essex Street investment trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None c/o Harvard University 9/13/1986 Professor of Political Cambridge, MA 02138 Economy, Harvard 8/5/44 University John H. Hewitt Trustee Trustee since Trustee, Mertens 29 None P.O. Box 233 11/3/1986 House, Inc.; Trustee New London, NH 03257 and Chairman of the 4/11/35 Board, Visiting Nurse Alliance of Vermont & New Hampshire
Interested Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 29 None c/o Standish Mellon Asset and Chief and Chief Operating Management Company LLC, Executive Officer Officer, Mellon Institutional One Boston Place Asset Management; Boston, MA 02108 formerly Vice President 7/24/65 and Chief Financial Officer, Mellon Institutional Asset Management
19 Principal Officers who are Not Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann Secretary Secretary Senior Vice President 29 None c/o Standish Mellon Asset since 2003 and Head of Operations Management, Mellon Institutional Asset One Boston Place Management, formerly Boston, MA 02108 First Vice President, 2/20/61 Mellon Institutional Asset Management and Mellon Global Investments Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish Management, Treasurer since Mellon Asset Management One Boston Place 2002 Boston, MA 02108 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Funds Management, Operations, Standish One Boston Place Mellon Asset Management Boston, MA 02108 8/19/51 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None c/o Standish Mellon Asset President Fund Operations since Management, 1999; Shareholder One Boston Place Representative, Standish Boston, MA 02108 Mellon Asset Management 1/19/71
20 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds One Boston Place Boston, MA 02108-4408 800.221.4795 www.standishmellon.com [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds THE BOSTON COMPANY INTERNATIONAL Financial Report SMALL CAP FUND - -------------------------------------------------------------------------------- For the Period Ended March 31, 2004 (Unaudited) MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in The Boston Company International Small Cap Portfolio (Portfolio), at value (Note 1A) $ 136,190,048 Receivable for Fund shares sold 3,008,081 Prepaid expenses 13,264 -------------- Total assets 139,211,393 LIABILITIES Accrued accounting, custody and transfer agent fees (Note 2) $ 3,379 Accrued Trustees' fees and expenses (Note 2) 1,000 Accrued expenses and other liabilities 8,600 ----------- Total liabilities 12,979 -------------- NET ASSETS $ 139,198,414 ============== NET ASSETS CONSIST OF: Paid-in capital $ 96,337,092 Accumulated net realized gain 3,466,335 Undistributed net investment income 112,379 Net unrealized appreciation 39,282,608 -------------- TOTAL NET ASSETS $ 139,198,414 ============== SHARES OF BENEFICIAL INTEREST OUTSTANDING 8,991,786 ============== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 15.48 ==============
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Dividend income allocated from Portfolio (net of foreign withholding taxes of $117,455) $ 913,733 Interest income allocated from Portfolio (including securities lending income of $56,262) 61,700 Expenses allocated from Portfolio (680,606) ------------- Net investment income allocated from Portfolio 294,827 EXPENSES Accounting, custody, and transfer agent fees (Note 2) $ 4,245 Legal and audit services 16,371 Registration fees 11,553 Trustees' fees and expenses (Note 2) 1,034 Insurance expense 516 Miscellaneous 6,226 ----------- Total expenses 39,945 ------------- Net investment income 254,882 ------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 5,482,470 Foreign currency transactions and forward foreign currency exchange contracts 155,773 ----------- Net realized gain 5,638,243 Change in unrealized appreciation (depreciation) allocated from portfolio on investments allocated from Portfolio 22,208,876 ------------- Net realized and unrealized gain on investments 27,847,119 ------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 28,102,001 =============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 254,882 $ 539,070 Net realized gains 5,638,243 1,815,495 Change in net unrealized appreciation 22,208,876 16,959,328 ------------ ----------- Net increase in net assets from investment operations 28,102,001 19,313,893 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F) From net investment income (567,711) (487,612) ------------ ----------- Total distributions to shareholders (567,711) (487,612) ------------ ----------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 23,202,559 44,415,601 Value of shares issued to shareholders in payment of distributions declared 443,772 370,146 Cost of shares redeemed (1,552,204) (7,812,410) ------------ ----------- Net increase (decrease) in net assets from Fund share tranactions 22,094,127 36,973,337 ------------ ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 49,628,417 55,799,618 NET ASSETS At beginning of period 89,569,997 33,770,379 ------------ ----------- At end of period (including undistributed net investment income of $112,379 and $425,208) $139,198,414 $89,569,997 ============ ===========
The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD FEBRUARY 1, 2000 SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, (COMMENCEMENT OF MARCH 31, 2004 -------------------------------------- OPERATIONS) TO UNAUDITED 2003 2002 2001 SEPTEMBER 30, 2000 ---------------- ------- ------- -------- ------------------ NET ASSET VALUE, BEGINNING OF YEAR $ 12.05 $ 8.91 $ 8.55 $ 10.65 $ 10.00 -------- ------- ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income *(1) 0.04 0.10 0.09 0.11 0.09 Net realized and unrealized gains (loss) on investments 3.46 3.13 0.38(2) (1.89) 0.63 -------- ------- ------- ------- ------- Total from investment operations 3.50 3.23 0.47 (1.78) 0.72 -------- ------- ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.07) (0.09) (0.11) (0.08) (0.07) From net realized gains on investments -- -- -- (0.24) -- -------- ------- ------- ------- ------- Total distributions to shareholders (0.07) (0.09) (0.11) (0.32) (0.07) -------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 15.48 $ 12.05 $ 8.91 $ 8.55 $ 10.65 ======== ======= ======= ======= ======= TOTAL RETURN (+) 29.18% 36.47% 5.39% (17.13)% 7.19% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 1.28%(++) 1.39% 1.25% 1.25% 1.25% Net Investment Income (to average daily net assets)* 0.45%(++) 1.01% 0.96% 1.10% 1.21% Portfolio Turnover(3) N/A 15%(+++) 69% 89% 70%(+++) Net Assets, End of Period (000's omitted) $139,199 $89,570 $33,770 $22,386 $17,092 - ---------------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Fund and Portfolio for a portion of its perating expenses. If this voluntary action had not been taken, the investment income per share and ratios would have been: Net investment income per share(1) N/A $ 0.08 $ 0.04 $ 0.04 $ 0.01 Ratios (to average daily net assets): Expenses N/A 1.65% 1.82% 1.98% 2.29% Net investment income N/A 0.75% 0.39% 0.37% 0.17%
(1) Calculated based on average shares outstadning. (2) The amount shown for a share outstanding does not corresond with the aggregate net realized and unrealized gain/loss for the period due to timimg of purchases and redemptions of Fund shares in relation to the flucuating market values of the fund. (3) Portfolio turnover represents activity while the Fund was investing directly in securities until January 28, 2003. The portfolio turnover for the period since the Fund transferrd substantially all of its investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report. (+) Total return would have been lower in the absence of expense waivers. Returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. (+++) Not annualized The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the Trust) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company International Small Cap Fund (the Fund) is a separate diversified investment series of the Trust. The Fund invests all of its investable assets in an interest of the The Boston Company International Small Cap Portfolio (the Portfolio), a subtrust of Mellon Institutional Funds Master Portfolio (the Portfolio Trust), which is organized as a New York trust, and has the same investment objective as the Fund. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities in companies that are located in foreign countries represented in the Citigroup Extended Market Ex-U.S. (EMI-U.S.) Index. The Portfolio may invest up to 25% of its assets in emerging market countries. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 99% at March 31, 2004). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. The Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-dividend date. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, passive foreign investment companies (PFICs) and capital loss carryovers. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to The Boston Company Asset Management, LLC (TBCAM) for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. Pursuant to this agreement the Fund was charged $121 during the period ended March 31, 2004. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. For the period ended March 31, 2004, the Fund received no redemption fees. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the period ended March 31, 2004, aggregated $23,646,331 and $1,552,204, respectively. (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
PERIOD ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 -------------- ------------------ Shares sold 1,637,764 4,394,538 Shares issued to shareholders in payment of distributions declared 33,773 36,828 Shares redeemed (110,951) (788,597) --------- --------- Net increase 1,560,586 3,642,769 ========= =========
At March 31, 2004, five shareholder of record held approximately 31%, 10%, 9%, 7% and 6% of the total outstanding shares of the Fund. Investment activities of this shareholder could have a material impact on the Fund. (5) FEDERAL TAXES: As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 7 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------- EQUITIES--92.9% AUSTRALIA--3.2% Australian Stock Exchange Ltd. 62,000 $ 786,981 Boral Ltd. 227,000 1,099,652 Oil Search Ltd. 660,500 587,277 Perpetual Trustees Australia Ltd. 14,200 479,453 Promina Group Ltd. 177,000 503,338 Southern Cross Broadcasting (Australia) Ltd. 55,600 457,711 West Australian Newspaper Holdings Ltd. (a) 125,700 611,816 ---------- 4,526,228 ---------- AUSTRIA--0.5% Boehler-Uddeholm AG 8,500 693,376 ---------- BELGIUM--1.8% Colruyt SA 5,124 570,350 Delhaize Group (a) 8,900 413,138 Mobistar SA* 14,700 966,546 Umicore (a) 8,700 531,331 ---------- 2,481,365 ---------- CANADA--5.6% Aber Diamond Corp.* 14,400 459,071 Astral Media, Inc. 25,400 557,031 CHC Helicopter Corp 19,400 534,330 Ensign Resource Service Group, Inc. 34,100 583,262 Home Capital Group, Inc. 59,800 1,141,570 Inmet Mining Corp.* 52,400 804,246 Penn West Petroleum Ltd. 10,400 486,805 QLT, Inc.* 27,700 703,922 Research in Motion Ltd.* 7,500 700,977 Rogers Wireless Communications, Inc.* 29,700 786,270 Tundra Semiconductor Corp. Ltd.* 23,000 456,628 Wheaton River Minerals Ltd.* 196,200 671,179 ---------- 7,885,291 ---------- DENMARK--1.0% Bryggerigruppen AS 7,000 466,636 GN Store Nord A/S (a) 61,000 445,992 Jyske Bank A/S* 8,600 458,067 ---------- 1,370,695 ---------- FINLAND--1.6% Kesko Oyj (a) 30,200 531,749 Nokian Renkaat Oyj (a) 8,700 701,228 Rautaruukki Oyj (a) 64,000 515,373 YIT-Yhtyma Oyj (a) 28,200 534,729 ---------- 2,283,079 ---------- FRANCE--7.5% Alten* 36,700 594,683 Ciments Francais 6,300 472,801 Clarins (a) 6,355 395,941 CNP Assurances 8,950 517,946
The accompanying notes are an integral part of the financial statements. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- FRANCE (CONTINUED) Eiffage 5,011 $ 773,107 Essilor International SA 8,600 524,059 Euler Hermes SA 11,800 650,914 Gecina SA 5,304 417,319 Guyenne et Gascogne SA (a) 3,400 393,314 Imerys SA 2,700 643,958 Legardere S.C.A 9,400 536,234 Natexis Banques Populaires (a) 4,900 574,980 Neopost SA 10,900 588,116 Oberthur Card Systems SA* 63,700 533,350 Pernod-Ricard SA 3,500 426,645 Pierre & Vacances 5,100 499,545 SEB SA 4,070 522,688 Trigano SA 8,700 449,917 Vallourec 4,020 361,337 Vinci SA 7,600 730,850 ----------- 10,607,704 ----------- GERMANY--4.7% Aareal Bank AG (a) 10,800 357,717 AWD Holding AG 12,300 400,736 Continental AG (a) 22,900 902,861 Hannover Rueckversicherung AG (a) 17,050 571,448 Mobilcom AG 36,600 746,737 Puma AG Rudolf Dassler Sport (a) 6,900 1,523,327 Stada Arzneimittel AG 8,830 449,790 ThyssenKrupp AG 34,100 634,848 United Internet AG Registered Shares 26,714 582,863 Vossloh AG 8,300 445,378 ----------- 6,615,705 ----------- GREECE--0.4% Germanos SA 21,900 577,061 ----------- HONG KONG--2.1% DAH Sing Financial 89,200 629,604 Golden Meditech Co., Ltd. 1,440,000 628,321 Skyworth Digital Holdings Ltd. 1,764,000 605,567 Wing Lung Bank 72,300 503,359 Xinao Gas Holdings Ltd.* 1,238,000 643,451 ----------- 3,010,302 ----------- IRELAND--1.3% Anglo Irish Bank Corp. PLC 60,000 960,414 Fyffes PLC* 253,800 487,506 Grafton Group PLC 56,600 400,727 ----------- 1,848,647 ----------- ITALY--2.7% Autostrada Torino-Milano Spa 35,900 499,501 Banco Popolare di Verona e Novara Scrl 38,100 621,122 Cassa di Risparmio di Firenze 219,300 394,235 Davide Campari-Milano Spa 8,400 378,034
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------- ITALY (CONTINUED) ERG Spa 90,100 $ 474,824 Fondiaria-Sai Spa 18,300 431,503 Merloni Elettrodomestici Spa 33,100 591,778 Milano Assicurazioni Spa 109,100 423,155 ----------- 3,814,152 ----------- JAPAN--19.2% Alpine Electronics, Inc. (a) 40,000 556,195 Arrk Corp (a) 24,200 1,072,152 Casino Computer Co., Ltd. (a) 72,000 854,776 Central Glass Co., Ltd. 120,000 945,915 Citizen Electronics Co., Ltd. 17,400 1,076,237 CMK Corp (a) 52,000 836,249 Don Quijote Co., Ltd. (a) 8,400 555,811 Doshisha Co., Ltd. 20,100 674,626 Fuji Soft ABC, Inc. 21,300 908,947 Fujirebio, Inc. (a) 39,000 483,573 Glory Ltd. (a) 32,000 553,893 Hitachi Construction Machinery Co., Ltd. 38,000 624,588 Index Corp. (a) 150 825,662 Kawasaki Kisen Kaisha Ltd. (a) 159,000 823,360 Kirin Beverage Corp 31,500 697,785 Kissei Pharmaceutical Co., Ltd. 31,000 671,845 Kobe Steel Ltd. 376,000 573,303 Koyo Seiko Co., Ltd. (a) 64,000 668,354 Kuroda Electric Co., Ltd. 12,600 518,354 Mitsui Trust Holdings, Inc. (a) 82,200 566,761 Nippon Shokubai Ltd. 114,000 892,060 Nissan Chemical Industries Ltd. (a) 77,000 671,203 Nissen Co., Ltd. 33,300 670,598 Nisshin Seifun Group, Inc. (a) 72,000 702,877 Nitori Co., Ltd. 9,000 605,006 Pentax Corp. (a) 126,000 738,262 Ricoh Leasing Co., Ltd. 34,700 961,671 Sanyo Shinpan Finance Co., Ltd. 12,200 655,159 Seino Transportation Co., Ltd. 86,000 881,607 Showa Corp. 47,000 489,921 Sodick Co., Ltd. (a) 67,000 603,951 Sumisho Lease Co., Ltd. 29,100 1,160,875 Sumitomo Rubber Industries, Inc. 114,000 854,891 Tamron Co., Ltd. 13,000 710,587 Toho Gas Co., Ltd. 117,000 426,352 Tokyo Tatemono Co., Ltd. 85,000 559,168 USS Co., Ltd. 10,800 896,891 ----------- 26,969,465 ----------- NETHERLANDS--3.6% ASM International NV* 25,300 556,684 Corio NV 21,100 934,256 Hunter Douglas NV 12,900 651,393 Koninklijke BAM Groep NV 19,500 633,873 Koninklijke Wessanen NV (a) 47,500 657,391
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - -------------------------------------------------------------------------------- NETHERLANDS (CONTINUED) Stork NV 32,000 $ 615,059 VNU NV 12,200 350,009 Wereldhave NV 7,800 635,315 ---------- 5,033,980 ---------- NEW ZEALAND--0.4% Fisher & Paykel Appliances Holdings Ltd. 176,000 508,993 ---------- NORWAY--0.9% Tandberg Television ASA (a) * 118,900 726,144 TGS Nopec Geophysical Co. ASA* 29,000 522,215 ---------- 1,248,359 ---------- PORTUGAL--0.4% Banco BPI SA Registered Shares (a) 150,000 589,177 ---------- SINGAPORE--2.7% First Engineering Ltd. 850,000 543,374 Fraser & Neave Ltd. 88,300 770,211 Jurong Technologies Industrial 790,000 660,772 Neptune Orient Lines Ltd. 512,000 669,901 Sembcorp Industries Ltd. 664,000 610,921 Want Want Holdings Ltd. 399,000 506,731 ---------- 3,761,910 ---------- SOUTH KOREA--1.8% Hanjin Shipping Co., Ltd. 24,800 437,583 Honam Petrochemical Corp. 11,600 472,329 Hyundai Mipo Dockyard 40,200 601,944 Korean Reinsurance Co. 12,100 482,093 You Eal Electronics Co., Ltd. 17,500 540,171 ---------- 2,534,120 ---------- SPAIN--4.2% ACS Actividades de Construccion y Servicios SA (a) 12,900 632,174 Bankinter SA (a) 8,200 323,800 Corp Mapfre SA (a) 40,300 485,297 Corp Mapfre SA Right (a) 40,300 15,879 Enagas 57,200 664,158 Gamesa Corp. Tecnologica SA (a) 24,800 1,017,773 Grupo Empresarial Ence SA (a) 16,600 455,803 Immobiliaria Urbis SA (a) 62,000 721,419 Indra Sistemas SA 38,000 496,903 Red Electrica de Espana (a) 33,400 565,475 TPI Telefonica Publicidad e Informacion SA 74,500 535,714 ---------- 5,914,395 ---------- SWEDEN--1.3% Billerud AB (a) 43,600 685,553 Elekta AB* 26,859 506,074 Getinge AB, Class B (a) 61,600 662,067 ---------- 1,853,694 ---------- SWITZERLAND--4.8% Actelion NV* 5,000 541,331
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------- SWITZERLAND (CONTINUED) Geberit AG (a) 1,520 $ 836,036 Lindt & Spruengli AG (a) 54 543,030 Logitech International SA* 9,810 445,381 Micronas Semiconductor Holdings AG Registered Shares* 18,400 870,997 Rieter Holding AG 2,500 632,211 Saurer AG 16,240 716,131 Sika AG (a) 1,440 705,548 Straumann Holding AG (a) 3,100 536,510 Verwalt & Privat-Bank AG (a) 3,700 584,795 Vontobel Holding AG (a) 16,700 356,330 ---------- 6,768,300 ---------- UNITED KINGDOM--21.2% Acambis PLC* 75,900 490,931 Aga Foodservice Group PLC 97,100 430,052 Aggregate Industries PLC 594,800 932,997 Alliance Unichem PLC 48,600 520,630 Atkins WS PLC 61,800 669,448 Balfour Beatty PLC 166,600 797,816 Barratt Developments PLC 45,200 518,823 BPB PLC 78,900 517,615 British Airways PLC* 139,300 710,783 Cairn Energy PLC* 63,900 1,035,347 Cattles PLC 139,800 871,996 Close Brothers Group PLC 46,600 687,965 Crest Nicholson 64,300 406,704 Dairy Crest Group PLC 60,900 447,292 DS Smith PLC 144,600 448,299 Eidos PLC* 193,700 568,352 EMAP PLC 31,400 502,388 Enterprise Inns PLC 83,400 941,137 FirstGroup PLC 126,300 625,221 Friends Provident PLC 203,300 544,934 Galen Holdings PLC 63,200 962,775 George Wimpey PLC 82,800 668,496 Hilton Group PLC 205,200 859,595 HMV Group PLC 166,400 678,635 ICAP PLC 142,000 746,833 Inchcape PLC 30,700 829,978 iSOFT Group PLC 93,206 605,017 Johnston Press PLC 67,600 653,685 Kelda Group PLC 42,900 356,848 Kensington Group PLC 132,300 1,149,930 Kidde PLC 291,800 551,950 Kier Group PLC 56,600 722,896 LogicaCMG PLC 94,200 445,456 Mcbride PLC 344,300 856,862 McCarthy & Stone PLC 68,000 752,296 Meggitt PLC 95,000 418,560 Mothercare PLC 86,200 544,031 Next PLC 26,500 699,314
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Northern Rock PLC 44,000 $ 630,499 Speedy Hire PLC 65,400 512,929 Taylor Nelson Sofres PLC 104,500 377,011 Travis Perkins PLC 21,200 543,802 Ultra Electronics Holdings PLC 42,300 458,215 United Business Media PLC 60,700 554,478 Viridian Group PLC 41,300 420,707 Whitbread PLC 35,900 480,974 Wolseley PLC 43,400 676,362 ------------ 29,826,864 ------------ TOTAL EQUITIES (Cost $91,726,803) 130,722,862 ------------ PREFERRED STOCKS--1.2% Krones AG 4,600 442,923 Porsche AG 1,150 695,282 Rhoen Klinikum AG 10,700 457,301 ------------ TOTAL PREFERRED STOCKS (Cost $1,162,762) 1,595,506 ------------ PAR RATE MATURITY VALUE ------ ---------- ------- SHORT-TERM INVESTMENTS--2.9% U.S. GOVERNMENT--0.1% U.S. Treasury Bill (++) 0.91% 6/17/2004 200,000 199,611 ------------ INVESTMENT COMPANIES--2.8% Dreyfus Institutional Preferred Plus (+) 3,946,475 3,946,475 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $4,146,086) 4,146,086 ------------ INVESTMENT OF CASH COLLATERAL--14.4% Dreyfus Institutional Preferred Money Market Fund (cost $19,996,699 19,996,699 19,996,699 ------------ TOTAL INVESTMENTS--111.4% (COST $117,032,350) 156,461,153 LIABILITIES IN EXCESS OF OTHER ASSETS--(11.4)% (17,485,601) ------------ NET ASSETS--100.0% $138,975,552 ============
NOTES TO SCHEDULE OF INVESTMENTS: * Non-income producing security (+) Affiliated fund that is available only to investment companies and other accounts managed by TBCAM or its affiliates. The effective yield is 0.98%. A complete listing of the fund's holdings as of its most recent fiscal year end is available. (++) Denotes all or part of security segregated as collateral. (a) Security, or a portion thereof, was on loan at March 31, 2004. The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- PERCENTAGE OF NET INDUSTRY SECTOR ASSETS - -------------------------------------------------------------------------------- Basic Materials 6.7% Communications 7.2% Consumer, Cyclical 16.9% Consumer, Non-cyclical 13.9% Energy 3.3% Financial 18.2% Industrial 20.2% Technology 5.5% Utilities 2.2% Short-Term Investments 2.9% Investment of Cash Collateral from Security Lending 14.4% ----- Total Investments 111.4% The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (including securities on loan valued at $18,525,201 (Note 6)) (Note 1A) (identified cost $93,089,176) $132,517,979 Affiliated investment (Note 1H) (identified cost $ 23,943,174) 23,943,174 Foreign currency, at value (identified cost, $3,604,041) 3,607,181 Receivable for investments sold 1,309,744 Interest and dividends receivable 477,036 Unrealized appreciation on foreign currency exchange contracts (Note 5) 2,718 Prepaid expenses 4,580 ------------ Total assets 161,862,412 LIABILITIES Liability for securities on loan (Note 6) $19,996,699 Payable for investments purchased 2,833,309 Payable for variation margin on open financial futures contracts (Note 5) 5,260 Accrued accounting and custody fees (Note 2) 31,995 Accrued Trustees' fees and expenses (Note 2) 3,485 Accrued expenses and other liabilities 16,112 ----------- Total liabilities 22,886,860 ------------ NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $138,975,552 ============
The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Dividend income (net of foreign withholding taxes of $118,691) $ 923,963 Interest income (including securities lending income of $56,505) 62,001 ----------- Total investment Income 985,964 EXPENSES Investment advisory fee (Note 2) $ 571,420 Accounting and custody fees (Note 2) 86,324 Legal and audit services 16,394 Trustees' fees and expenses (Note 2) 6,914 Insurance expense 4,516 Miscellaneous 1,053 ---------- Total expenses 686,621 ----------- Net investment income 299,343 ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions $5,541,550 Foreign currency transactions and forward foreign currency exchange contracts 157,346 ---------- Net realized gain 5,698,896 Change in unrealized appreciation (depreciation) Investment securities 22,362,151 ----------- Net realized and unrealized gain 28,061,047 ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $28,360,390 ===========
The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE PERIOD JANUARY 28, 2003 SIX MONTHS ENDED (COMMENCEMENT OF MARCH 31, 2004 OPERATIONS TO (UNAUDITED) SEPTEMBER 30, 2003 ------------------ -------------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income $ 299,343 $ 531,792 Net realized gains 5,698,896 2,795,189 Change in net unrealized appreciation 22,362,151 15,196,221 ------------ ----------- Net increase in net assets from investment operations 28,360,390 18,523,202 ------------ ----------- CAPITAL TRANSACTIONS Assets contributed by Standish International Small Cap Fund (including unrealized appreciation of $0 and $1,891,429) -- 39,701,792 Contributions 26,850,484 35,896,110 Withdrawals (5,780,213) (4,576,213) ------------ ----------- Net increase in net assets from capital tranactions 21,070,271 71,021,689 ------------ ----------- TOTAL INCREASE IN NET ASSETS 49,430,661 89,544,891 NET ASSETS At beginning of period 89,544,891 -- ------------ ----------- At end of period $138,975,552 $89,544,891 ============ ===========
The accompanying notes are an integral part of the financial statements. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD JANUARY 28, 2003 SIX MONTHS ENDED (COMMENCEMENT OF MARCH 31, 2004 OPERATIONS TO (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ TOTAL RETURN(+) 29.22%(+++) 36.44%(+++) RATIOS: Expenses (to average daily net assets)* 1.20%(++) 1.46%(++) Net Investment Income (to average daily net assets)* 0.53%(++) 1.29%(++) Portfolio Turnover 32%(+++) 46%(+++) Net Assets, End of Period (000's omitted) $138,976 $89,545.00 - ---------------------- * For the period indicated, the investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimbursed the Portfolio for a portion of its operating expenses. If this voluntary action had not been taken, the ratios would have been: Ratios (to average daily net assets): Expenses N/A 1.49%(++) Net investment income N/A 1.26%(++)
(+) Total return for the Portfolio includes performance of The Boston Compan International Small Cap Fund prior to its conversion to a master-feeder structure and contribution of its investments to the Portfolio. Total return would have been lower in the absence of expense waivers. (++) Computed on an annualized basis. (+++) Not annualized. The accompanying notes are an integral part of the financial statements. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the State of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company International Small Cap Portfolio (the "Portfolio"), a separate diversified investment series of the Portfolio Trust, commenced operations on January 28, 2003. The objective of the Portfolio is to achieve long-term growth of capital. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of companies that are located in foreign countries represented in the Citigroup Extended Market Ex-U.S. (EMI-U.S.) Index. The Portfolio may invest up to 25% of its assets in emerging market countries. At March 31, 2004, there were two funds, The Boston Company International Small Cap Fund and Dreyfus Premier International Small Cap Fund invested in the Portfolio. The value of the funds' investment in the Portfolio reflects the funds' proportionate interests in the net assets of the Portfolio. At March 31, 2004, The Boston Company International Small Cap Fund and the Dreyfus Premier International Small Cap Fund held approximately 99% and 1% interests in the Portfolio, respectively. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price, or the NASDAQ official close if applicable, in the principal market in which such securities are normally traded. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the Portolio's shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect the events that occur after such close but before the close of the New York Stock Exchange. If market quotations are not readily available or do not accurately reflect fair value, or the value of a security has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), the Portfolio may value its assets by a method the Trustees believe accurately reflects the fair value. The Trustees have adopted fair value pricing procedures, which, among other things, require the Portfolio to fair value such secutities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices for foreign securities will be used by each fund to a significant extent. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortization of premium using the yield-to-maturity method. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. The Portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of foreign currencies and forward foreign currency exchange contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts usually received or paid. 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- C. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. D. FOREIGN CURRENCY TRANSACTIONS Investment security valuations, other assets, and liabilities initially expressed in foreign currencies are converted into U.S. dollars based upon current currency exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Section 988 of the Internal Revenue Code provides that gains or losses on certain transactions attributable to fluctuations in foreign currency exchange rates must be treated as ordinary income or loss. For financial statement purposes, such amounts are included in net realized gains or losses. E. INVESTMENT RISK There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed foreign markets. F. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. G. AFFILIATED ISSUERS Issuers in which the fund held investments in other investment companies advised by the fund manager (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The investment advisory fee paid to The Boston Company Asset Management, LLC ("TBCAM") for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 1.00% of the Portfolio's average daily net assets. The Fund compensates Mellon Bank, N.A., under a custody, administration and accounting services agreement for providing custody, fund administration and fund accounting services for the fund. Pursuant to this agreement the Fund was charged $85,546 during the period ended March 31, 2004. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. 20 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the period ended March 31, 2004 were $52,835,465 and $35,279,651, respectively. For the period ended March 31, 2004, the Portfolio did not purchase or sell any long-term U.S. Government securities. (4) FEDERAL TAXES: The cost and unrealized appreciation (depreciation) in value of the investment securities owned at March 31, 2004, as computed on a federal income tax basis, were as follows: Aggregate Cost $97,160,937 =========== Gross unrealized appreciation 39,793,319 Gross unrealized depreciation (489,804) ----------- Net unrealized appreciation $39,303,515 =========== (5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Portfolio Trust's registration statement. The Portfolio may trade the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Portfolio did not enter into option transactions during the period ended March 31, 2004. 21 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- FORWARD CURRENCY EXCHANGE CONTRACTS The Portfolio may enter into forward foreign currency and cross currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar and other foreign currencies. The forward foreign currency and cross currency exchange contracts are marked to market using the forward foreign currency rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the contract settlement date or upon the closing of the contract. Forward currency exchange contracts are used by the Portfolio primarily to protect the value of the Portfolio's foreign securities from adverse currency movements. Unrealized appreciation and depreciation of forward currency exchange contracts is included in the Statement of Assets and Liabilities. At March 31, 2004, the Portfolio held the following forward foreign currency exchange contracts:
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN -------------------------------------------------------------------------------------------------------------------------- Danish Krone 2,791,300 4/2/2004 $ 461,105 $ 461,105 -- Hong Kong Dollar 1,425,000 4/1/2004 182,880 182,880 -- South Korean Won 625,091,614 4/1/2004 544,600 547,318 $2,718 Swedish Krona 1,018,500 4/2/2004 135,044 135,044 -- ---------- ---------- ------ $1,323,629 $1,326,347 $2,718 ========== ========== ======
FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At March 31, 2004, the Portfolio held the following futures contracts:
EXPIRATION UNDERLYING FACE UNREALIZED GAIN CONTRACT POSITION DATE AMOUNT AT VALUE (LOSS) --------------------------------------------------------------------------------------------------------------------------- MSCI Pan-Euro (126 contracts) Long 6/17/2004 $2,513,330 $(10,480) Topix Futures (6 contracts) Long 6/17/2004 678,654 35,401 $ 24,921 ========
22 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (6) SECURITY LENDING: The Portfolio may lend its securities to financial institutions which the Portfolio deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. The Portfolio loaned securities during the period ended March 31, 2004 resulting in security lending income. At March 31, 2004, the Portfolio had $18,525,201 worth of securities on loan. (7) LINE OF CREDIT: The Portfolio, and other subtrusts in the Portfolio Trust and funds in the Mellon Institutional Funds Investment Trust (the "Trust") are parties to a committed line of credit facility, which enables each portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is charged to each participating portfolio/fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment fee, computed at an annual rate of 0.060 of 1% on the daily unused portion of the facility, is allocated ratably among the participating portfolios/funds at the end of each quarter. For the period ended March 31, 2004, the commitment fee was $1,267 for the Portfolio. During the period ended March 31, 2004, the Portfolio had no borrowings under the credit facility. 23 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of March 31, 2004. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. Independent Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 None c/o Decision Resources, Inc. 11/3/1986 and Chief Executive 260 Charles Street Officer, Decision Waltham, MA 02453 Resources, Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None c/o Essex Street Associates 11/3/1986 Associates (family 400 Essex Street investment trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None c/o Harvard University 9/13/1986 Professor of Political Cambridge, MA 02138 Economy, Harvard 8/5/44 University John H. Hewitt Trustee Trustee since Trustee, Mertens 29 None P.O. Box 233 11/3/1986 House, Inc.; Trustee New London, NH 03257 and Chairman of the 4/11/35 Board, Visiting Nurse Alliance of Vermont & New Hampshire
Interested Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 29 None c/o Standish Mellon Asset and Chief and Chief Operating Management Company LLC, Executive Officer Officer, Mellon Institutional One Boston Place Asset Management; Boston, MA 02108 formerly Vice President 7/24/65 and Chief Financial Officer, Mellon Institutional Asset Management
24 Principal Officers who are Not Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann Secretary Secretary Senior Vice President 29 None c/o Standish Mellon Asset since 2003 and Head of Operations Management, Mellon Institutional Asset One Boston Place Management, formerly Boston, MA 02108 First Vice President, 2/20/61 Mellon Institutional Asset Management and Mellon Global Investments Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish Management, Treasurer since Mellon Asset Management One Boston Place 2002 Boston, MA 02108 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Funds Management, Operations, Standish One Boston Place Mellon Asset Management Boston, MA 02108 8/19/51 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None c/o Standish Mellon Asset President Fund Operations since Management, 1999; Shareholder One Boston Place Representative, Standish Boston, MA 02108 Mellon Asset Management 1/19/71
25 THIS PAGE INTENTIONALLY LEFT BLANK [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds One Boston Place Boston, MA 02108-4408 800.221.4795 www.standishmellon.com [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds THE BOSTON COMPANY SMALL CAP Financial Report GROWTH FUND - -------------------------------------------------------------------------------- For the Period Ended March 31, 2004 (Unaudited) MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in The Boston Company Small Cap Growth Portfolio (Portfolio), at value (Note 1A) $ 36,605,781 Receivable for Fund shares sold 21,681 Prepaid expenses 783 ------------ Total assets 36,628,245 LIABILITIES Accrued Trustees' fees and expenses (Note 2) $ 2,055 Accrued expenses and other liabilities 1,312 ------- Total liabilities 3,367 ------------ NET ASSETS $36,624,878 ============ NET ASSETS CONSIST OF: Paid-in capital $ 51,710,869 Accumulated net realized loss (20,764,765) Undistributed net investment loss (167,451) Net unrealized appreciation 5,846,225 ------------ TOTAL NET ASSETS $ 36,624,878 ============ NET ASSETS ATTRIBUTABLE TO: Institutional Class $ 22,183,317 ============ Service Class $ 14,441,561 ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING Institutional Class 555,447 ============ Service Class 364,915 ============ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) Institutional Class $ 39.94 ============ Service Class $ 39.58 ============
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Dividend income allocated from Portfolio $ 36,315 Interest income allocated from Portfolio 9,068 Expenses allocated from Portfolio (194,784) ----------- Net investment loss allocated from Portfolio (149,401) EXPENSES Accounting and custody fees (Note 2) $ 1,503 Legal and audit services 13,446 Registration fees 9,560 Service Fees--Service Class (Note 3) 15,016 Transfer agent fees--Institutional Class (Note 2) 3,913 Transfer agent fees--Service Class (Note 2) 3,833 Trustees' fees and expenses (Note 2) 1,002 Miscellaneous 7,859 ----------- Total expenses 56,132 Deduct: Reimbursement of Fund operating expenses--Institutional Class (Note 2) (23,049) Reimbursement of Fund operating expenses--Service Class (Note 2) (15,005) ----------- Total expense deductions (38,054) ----------- Net expenses 18,078 ------------ Net investment loss (167,479) ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 4,757,111 Financial futures contracts (40,244) ----------- Net realized gain 4,716,867 Change in unrealized appreciation (depreciation) allocated from portfolio on investments and financial futures contracts allocated from Portfolio 2,414,001 ------------ Net realized and unrealized gain (loss) on investments 7,130,868 ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,963,389 ============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: FROM INVESTMENT OPERATIONS Net investment loss $ (167,479) $ (127,333) Net realized gains 4,716,867 2,646,711 Change in net unrealized appreciation 2,414,001 4,670,966 ----------- ------------ Net increase in net assets from investment operations 6,963,389 7,190,344 ----------- ------------ FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5) Net proceeds from sale of shares Institutional Class 373,542 9,023,694 Service Class 4,850,927 2,573,894 Redemption fees credited to capital Institutional Class 10 -- Cost of shares redeemed Institutional Class (4,054,853) (11,987,346) Service Class (1,596,355) (1,209,938) ----------- ------------ Net decrease in net assets from Fund share tranactions (426,729) (1,599,696) ----------- ------------ TOTAL INCREASE IN NET ASSETS 6,536,660 5,590,648 NET ASSETS At beginning of period 30,088,218 24,497,570 ----------- ------------ At end of period (including undistributed net investment income of $0 and $28) $36,624,878 $ 30,088,218 =========== ============
The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS--INSTITUTIONAL CLASS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, 2004 ---------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 32.41 $ 24.78 $ 29.28 $ 60.87 $ 38.28 $ 22.22 ------- ------- ------- ------- ------- ------- FROM INVESTMENT OPERATIONS: Net investment income (loss)* (1) (0.16) (0.11) (0.16) (0.19) (0.43) (0.24) Net realized and unrealized gains (loss) on investments 7.69 7.74 (4.34) (25.66) 26.82 16.30 ------- ------- ------- ------- ------- ------- Total from investment operations 7.53 7.63 (4.5) (25.85) 26.39 16.06 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net realized gains on investments -- -- -- (5.74) (3.80) -- ------- ------- ------- ------- ------- ------- Total distributions to shareholders -- -- -- (5.74) (3.80) -- ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF YEAR $ 39.94 $ 32.41 $ 24.78 $ 29.28 $ 60.87 $ 38.28 ======= ======= ======= ======= ======= ======= TOTAL RETURN(+) 23.20% 30.79% (15.37)% (45.36)% 71.60% 72.14 RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 1.13%(++) 1.00% 1.00% 1.00% 0.98% 1.00 Net Investment Income (Loss) (to average daily net assets)* (0.87)%(++) (0.42)% (0.52)% (0.48)% (0.70)% (0.73)% Net Assets, End of Period (000's omitted) $22,183 $21,168 $18,780 $31,365 $82,840 $44,031 - ------------------ * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share(1) $ (0.20) $ (0.30) $ (0.25) $ (0.28) N/A $ (0.30) Ratios (to average daily net assets): Expenses 1.34%(++) 1.66% 1.29% 1.20% N/A 1.18% Net investment income (loss) (1.08)%(++) (1.08)% (0.81)% (0.68)% N/A (0.91)%
(1) Calculated based on average shares outstanding. (+) Total return would have been lower in the absense of expense waivers, returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS--SERVICE CLASS - --------------------------------------------------------------------------------
FOR THE FOR THE PERIOD SIX MONTHS MAY 8, 2000 ENDED YEAR ENDED SEPTEMBER 30, (COMMENCEMENT MARCH 31, 2004 ---------------------------- OF OPERATIONS) TO (UNAUDITED) 2003 2002 2001 SEPTEMBER 30, 2000 -------------- ------ ------ ------ ------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 32.16 $24.65 $29.19 $60.83 $59.04 ------- ------ ------ ------ ------ FROM INVESTMENT OPERATIONS: Net investment income (loss)* (1) (0.20) (0.19) (0.23) (0.29) (0.21) Net realized and unrealized gains (loss) on investments 7.62 7.70 (4.31) (25.63) 2.00 ------- ------ ------ ------ ------ Total from investment operations 7.42 7.51 (4.54) (25.92) 1.79 ------- ------ ------ ------ ------ LESS DISTRIBUTIONS TO SHAREHOLDERS: From net realized gains on investments -- -- -- (5.72) -- ------- ------ ------ ------ ------ Total distributions to shareholders -- -- -- (5.72) -- ------- ------ ------ ------ ------ NET ASSET VALUE, END OF YEAR $ 39.58 $32.16 $24.65 $29.19 $60.83 ======= ====== ====== ====== ====== TOTAL RETURN((+)) 23.06% 30.47% (15.55)% (45.49)% 3.03% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 1.38%(++) 1.25% 1.25% 1.25% 1.23% Net Investment Income (Loss) (to average daily net assets)* (1.12)%(++) (0.68)% (0.74)% (0.75)% (0.84)% Net Assets, End of Period (000's omitted) $14,442 $8,921 $5,718 $6,156 $8,031 - --------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income per share(1) $ (0.25) $(0.40) $(0.35) $(0.41) $(0.24) Ratios (to average daily net assets): Expenses 1.63%(++) 2.00% 1.66% 1.55% 1.36% Net investment income (loss) (1.37)%(++) (1.43)% (1.15)% (1.05)% (0.97)%
(1) Calculated based on average shares outstanding. (+) Total return would have been lower in the absense of expense waivers, returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. The accompanying notes are an integral part of the financial statements. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Growth Fund (the "Fund") is a separate diversified investment series of the Trust. The objective of the Fund is to achieve long-term growth of capital. The Fund invests all of its investable assets in an interest in The Boston Company Small Cap Growth Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust, and has the same investment objective as the Fund. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in equity securities of small cap U.S. companies. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 100% at March 31, 2004). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund currently offers two classes of shares: Institutional Class and Service Class. Expenses of the Fund are borne pro-rata by the holders of each class of shares, except for transfer agent fees and an account service fee of 0.25% of the average daily net assets of the Service Class of shares. Each class votes separately as a class only with respect to its own distribution plan (Service Class only) or other matters that relate only to that class. Shares of each class would receive their pro-rata share of the net assets of the Fund (after satisfaction of any class-specific expenses) if the Fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. Shares of the Service Class may be purchased by entities ("Account Administrators") that provide omnibus accounting services for groups of individuals who beneficially own Service Class shares ("Omnibus Accounts"). Omnibus Accounts include pension and retirement plans (such as 401(k) plans, 457 plans and 403(b) plans), and programs through which personal and or account maintenance services are provided to groups of individuals whether or not such individuals invest on a tax-deferred basis. Individual investors may only purchase Service Class shares through their Omnibus Account Administrators. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. The Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-dividend date. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for losses deferred due to wash sales, capital loss carryovers and realized and unrealized gains or losses on futures. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. The calculation of net investment income per share in the financial highlights table excludes these reclassifications. D. ALLOCATION OF OPERATING ACTIVITY The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated among the share classes of the Fund based on the relative net assets of each class. Transfer agent fees, which are directly attributable to a class of shares, are charged to that class' operations. Service fees, which are directly attributable to the Service Class shares, are charged to the Service Class operations. E. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to The Boston Company Asset Management, LLC ("TBCAM") for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. TBCAM voluntarily agreed to limit the total operating expenses of the Portfolio's expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.00% of the Institutional Class' average daily net assets for the period from October 1, 2003 through October 31, 2003, and to 1.20% for the period from November 1, 2003 through March 31, 2004. The total operating expenses of the Service Class and its pro rata share of the Portfolio's expenses (excluding brokerage commissions, taxes and extraordinary expenses) were limited so that the Service Class annual operating expenses do not exceed the total operating expenses of the Institutional Class (net of any expense limitation) for the comparable period plus 0.25% (the maximum Service Fee). Pursuant to this agreement, for the period ended March 31, 2004, TBCAM reimbursed the Institutional Class $23,049 and the Service Class $15,005 for class-specific and Fund operating expenses. This agreement was voluntary and temporary and may be discontinued or revised by TBCAM at any time. As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. Pursuant to this agreement the Fund was charged $242 during the period ended March 31, 2004. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. For the period ended March 31, 2004, the Fund received $10 in redemption fees. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. 8 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (3) SERVICE FEE: Pursuant to a service plan, the Service Class pays a service fee at an aggregate annual rate of up to 0.25% of the class' average daily net assets. The service fee is payable for the benefit of participants in the omnibus accounts that are shareholders in the Service Class and is intended to be compensation to Account Administrators for providing personal services and/or account maintenance services to participants in omnibus accounts that are the beneficial owners of Service Class shares. (4) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the period ended March 31, 2004 aggregated $5,224,469 and $5,509,798 respectively. (5) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
PERIOD ENDED YEAR ENDED Institutional Class: MARCH 31, 2004 SEPTEMBER 30, 2003 -------------- ------------------ Shares sold 9,904 337,618 Shares redeemed (107,521) (442,332) -------- -------- Net decrease (97,617) (104,714) ======== ======== PERIOD ENDED YEAR ENDED Service Class: MARCH 31, 2004 SEPTEMBER 30, 2003 -------------- ------------------ Shares sold 130,232 90,258 Shares redeemed (42,722) (44,827) -------- -------- Net increase 87,510 45,431 ======== ========
At March 31, 2004, three shareholders held of record approximately 17%, 12% and 5% of the total outstanding shares of the Institutional Class and one shareholder held of record approximately 100% of the total outstanding shares of the Service class. Investment activity of these shareholders could have a material impact on the Fund. (6) FEDERAL TAXES As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ----------------------------------------------------------------------------------------------------------------------------- EQUITIES-96.2% BASIC MATERIALS--1.3% Cabot Microelectronics Corp.* 6,400 $ 270,336 Glamis Gold Ltd.* 11,400 205,314 ------------- 475,650 ------------- COMMUNICATIONS--5.6% Entravision Communications Corp.* 23,900 214,383 Foundry Networks, Inc.* 6,150 105,596 Internet Security Systems* 16,900 298,116 Ipass, Inc.* 23,800 260,134 Network Associates, Inc. (a)* 26,400 475,200 SafeNet, Inc.* 4,800 180,192 Scientific-Atlanta, Inc 5,350 173,019 Verisign, Inc.* 21,700 360,003 ------------- 2,066,643 ------------- CONSUMER CYCLICAL--14.3% Aeropostale, Inc.* 7,100 257,446 Brookstone, Inc.* 13,150 361,757 Cache, Inc.* 9,200 303,324 Circuit City Stores, Inc. 20,200 228,260 Dick's Sporting Goods, Inc.* 4,200 244,188 Digital Theater Systems, Inc. 9,800 251,174 Ethan Allen Interiors, Inc. 6,600 272,316 Ingram Micro,Inc., Class A* 20,500 371,050 Linens N Things, Inc.* 13,400 474,494 Lions Gate Entertainment Corp.* 76,600 478,750 MSC Industrial Direct Co., Inc 23,800 712,810 99 Cents Only Stores* 10,800 263,736 Nu Skin Enterprises, Inc. 14,100 284,115 O'Reilly Automotive, Inc.* 4,900 196,196 Panera Bread Co.* 7,500 291,900 Rare Hospitality International, Inc.* 9,200 255,300 ------------- 5,246,816 ------------- CONSUMER NONCYCLICAL--38.0% Able Laboratories, Inc.* 17,800 347,634 Advanced Neuromodulation Systems, Inc.* 5,900 212,931 American Medical Systems Holdings, Inc.* 6,600 174,900 BearingPoint, Inc.* 18,200 195,104 Celgene Corp.* 6,900 328,785 Connetics Corp.* 17,600 390,192 Cooper Cos, Inc. 9,900 534,600 Covance, Inc.* 16,600 571,704 Coventry Health Care, Inc.* 4,450 188,369 Delta & Pine Land Co. 11,800 294,410 DeVry, Inc.* 13,700 413,055 Digene Corp.* 4,500 154,620 Discovery Laboratories, Inc.* 26,900 327,911 Dytax Corp.* 9,000 92,610 Elizabeth Arden, Inc.* 12,600 266,112
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------------------------ CONSUMER NONCYCLICAL (CONTINUED) Forrester Research, Inc.* 26,700 $ 505,965 Fossil, Inc.* 8,100 270,135 Hain Celestial Group, Inc.* 21,400 472,726 Heidrick & Struggles International* 7,900 189,047 Inveresk Research Group, Inc.* 7,100 201,782 Iron Mountain, Inc.* 4,650 207,530 Jarden Corp.* 8,700 308,937 John B. Sanfilippo & Son, Inc.* 3,800 139,460 Kroll Inc.* 14,800 397,380 K-V Pharmaceutical Co., Class A* 8,100 198,936 Matria Healthcare, Inc.* 11,300 286,116 Medarex, Inc.* 21,800 195,546 Medicines Co. (a)* 8,450 272,175 Nabi Biopharmaceuticals* 12,300 191,265 Navigant Consulting, Inc.* 17,700 358,071 NBTY, Inc.* 10,800 401,544 Nektar Therapeutics* 22,700 489,866 OraSure Technologies, Inc.* 22,200 229,992 Orthofix International NV* 10,650 526,536 Pharmaceutical Resources, Inc.* 4,600 261,556 Resmed, Inc.* 4,000 180,760 Respironics, Inc.* 7,400 399,748 Select Medical Corp. 11,900 198,730 Steris Corp.* 11,100 286,380 Sunopta, Inc.* 17,500 173,075 Sylvan Learning Systems, Inc.* 11,800 414,298 Telik, Inc.* 7,800 209,352 The Yankee Candle Co.* 21,300 587,454 Triad Hospitals* 5,650 174,133 VCA Antech, Inc.* 8,700 309,981 Vicuron Pharmaceuticals, Inc.* 8,300 188,825 VISX, Inc.* 9,700 189,344 ------------- 13,909,582 ------------- ENERGY--7.6% Arch Coal, Inc. 13,000 408,070 Consol Energy, Inc. (a) 14,600 391,280 FMC Technologies, Inc.* 17,400 470,322 Frontier Oil Corp. 18,100 350,778 Maverick Tube Corp.* 11,900 280,245 Patina Oil & Gas Corp. 8,200 215,250 Patterson-UTI Energy, Inc.* 13,300 470,953 Peabody Energy Corp. 4,600 213,946 ------------- 2,800,844 ------------- FINANCIAL--8.2% Affiliated Managers Group* 3,450 188,301 Bristol West Holdings, Inc. 6,900 140,760 Capital Lease Funding, Inc. REIT 10,580 135,636 Cathay General Bancorp 5,000 317,400
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL (CONTINUED) City National Corp., Class A 2,900 $ 173,710 Commerical Capital Bancorp, Inc.* 5,300 121,476 First Community Bancorp, Inc., Class A 5,300 198,167 First Midwest Bancorp, Inc. 6,400 218,496 Franklin Bank Corp. 9,810 182,368 Investors Financial Services Corp. (a) 4,600 190,072 Knight Trading Group* 15,500 196,230 Mercantile Bank Corp. 4,700 166,850 New York Community Bancorp 12,977 444,852 Southwest Bancorporation of Texas 3,700 139,601 Triad Guaranty, Inc.* 3,800 200,450 -------------- 3,014,369 -------------- INDUSTRIAL--8.8% Central Freight Lines, Inc. 13,800 181,470 CUNO, Inc.* 4,600 206,448 Cymer, Inc.* 9,600 370,656 Fisher Scientific International* 11,300 621,952 Kemet Corp.* 33,100 474,654 Old Dominion Frieght Line* 5,700 192,090 SCS Transportation, Inc.* 17,600 383,680 UTI Worldwide, Inc. 10,900 487,121 Waste Connections* 7,400 294,520 -------------- 3,212,591 -------------- TECHNOLOGY--12.4% Applied Micro Circuits Corp.* 33,800 194,350 Cypress Semiconductor Corp.* 19,460 398,346 Fairchild Semiconductor International* 22,800 547,884 Helix Technology Corp. 11,900 288,575 Hutchinson Technology, Inc.* 12,700 356,362 Lam Research Corp.* 10,900 274,789 Lawson Software, Inc.* 41,300 342,790 ManTech International Corp., Class A* 9,600 196,704 Manugistics Group, Inc.* 31,400 215,090 Mentor Graphics Corp.* 22,900 408,078 Packeteer, Inc.* 27,200 359,040 Quest Software, Inc.* 23,100 377,685 Zoran Corp.* 32,700 567,669 -------------- 4,527,362 -------------- TOTAL EQUITIES (Cost $29,414,227) 35,253,857 --------------
The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
PAR SECURITY RATE MATURITY VALUE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--2.9% U.S. GOVERNMENT--0.5% U.S. Treasury Bill (++) 0.91% 6/17/2004 190,000 $ 189,630 ----------- INVESTMENT COMPANIES--2.4% Dreyfus Institutional Preferred Plus (+) 865,798 865,798 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $1,055,428) 1,055,428 ----------- INVESTMENT OF CASH COLLATERAL--2.8% Dreyfus Institutional Preferred Money Market Fund (cost $1,005,930)(+) 1,005,930 1,005,930 ----------- TOTAL INVESTMENTS--101.9% (COST $31,475,585) 37,315,215 LIABILITIES IN EXCESS OF OTHER ASSETS--1.9% (709,434) ----------- NET ASSETS--100.0% $36,605,781 ===========
NOTES TO SCHEDULE OF INVESTMENTS: * Non-income producing security REIT Real Estate Investment Trust (+) Affiliated fund that is available only to investment companies and other accounts managed by TBCAM or it affiliates. The effective yield is 0.98%. A complete listing of the fund's holdings as of its most recent fiscal year end is available. (++) Denotes all or part of security segregated as collateral. (a) Security, or a portion thereof, was on loan at March 31, 2004. The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Note 1A) (identified cost $29,603,857) (including securities on loan valued at $979,164) (Note 6) $35,443,487 Affiliated investments (Note 1E) (identified cost $1,871,728) 1,871,728 Cash 119 Receivable for investments sold 952,096 Interest and dividends receivable 5,866 Receivable for variation margin on open financial futures contracts (Note 5) 1,945 Prepaid expenses 3,630 ----------- Total assets 38,278,871 LIABILITIES Liability for securities on loan (Note 6) $1,005,930 Payable for investments purchased 622,226 Accrued accounting and custody fees (Note 2) 8,836 Accrued Trustees' fees and expenses (Note 2) 804 Accrued expenses and other liabilities 35,294 ---------- Total liabilities 1,673,090 ----------- NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $36,605,781 ===========
The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1B) Dividend income $ 36,315 Interest income (including securities lending income of $2,715) (Note 6) 9,068 ---------- Total investment Income 45,383 ---------- EXPENSES Investment advisory fee (Note 2) $ 138,896 Accounting and custody fees (Note 2) 34,629 Legal and audit services 24,035 Trustees' fees and expenses (Note 2) 2,093 Insurance expense 3,476 Miscellaneous 1,671 ----------- 204,800 Total expenses Deduct: Waiver of investment advisory fee (Note 2) (10,016) ----------- Net expenses 194,784 ---------- Net investment income (149,401) ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 4,757,111 Financial futures contracts (40,244) ----------- Net realized gain (loss) 4,716,867 Change in unrealized appreciation (depreciation) Investment securities and futures variation margin 2,413,899 ---------- Net realized and unrealized gain (loss) 7,130,766 ---------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $6,981,365 ==========
The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment loss $ (149,401) $ (110,593) Net realized gains 4,716,867 2,646,730 Change in net unrealized appreciation 2,413,899 4,670,997 ----------- ----------- Net increase in net assets from investment operations 6,981,365 7,207,134 ----------- ----------- CAPITAL TRANSACTIONS Contributions 5,224,469 11,400,746 Withdrawals (5,509,798) (13,197,733) ----------- ----------- Net increase (decrease) in net assets from capital tranactions (285,329) (1,796,987) ----------- ----------- Total Increase in Net Assets 6,696,036 5,410,147 NET ASSETS At beginning of period 29,909,745 24,499,598 ----------- ----------- At end of period $36,605,781 $29,909,745 =========== ===========
The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, MARCH 31, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------- TOTAL RETURN(+) 23.21% 30.73% (15.37)% (45.36)% 71.67% 72.19% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)* 1.12%(++) 1.00% 1.00% 1.00% 0.91% 0.95% Net Investment Income (Loss) (to average daily net assets)* (0.86)%(++) (0.42)% (0.51)% (0.49)% (0.63)% (0.67)% Portfolio Turnover 85%(+++) 261% 239% 191% 305% 242% Net Assets, End of Period (000's omitted) $36,606 $29,910 $24,500 $37,590 $91,114 $43,932 - ----------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Ratios (to average daily net assets): Expenses** 1.18%(++) 1.28% 1.18% 1.08% N/A N/A Net investment income (loss)** (0.92)%(++) (0.70)% (0.69)% (0.57)% N/A N/A
(+) Total return would have been lower in the absence of expense waivers, returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. (+++) Not annualized. The accompanying notes are an integral part of the financial statements. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the State of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Growth Portfolio (the "Portfolio") is a separate diversified investment series of the Portfolio Trust. The objective of the Portfolio is to achieve long-term growth of capital. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of its net assets in equity securities of small cap U.S. companies. At March 31, 2004, there was one Fund, The Boston Company Small Cap Growth Fund (the "Fund") invested in the Portfolio. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. The Fund's proportionate interest at March 31, 2004 was approximately 100%. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price, or the NASDAQ official close if applicable, in the principal market in which such securities are normally traded. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. Interest income is determined on the basis of interest accrued, adjusted for accretion of discount or amortizaion of premium using the yield-to-maturity method on long-term debt securities. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. C. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. D. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- E. AFFILIATED ISSUERS Issuers in which the fund held investments in other investment companies advised by The Boston Company Asset Management, LLC ("TBCAM") or its affiliates are described as "affiliated" in the Act. (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The investment advisory fee paid to TBCAM, a wholly-owned subsidiary of Mellon Financial Corporation, for overall investment advisory and administrative services is paid monthly at the annual rate of 0.80% of the Portfolio's average daily net assets. TBCAM voluntarily agreed to limit the total operating expenses of the Portfolio (excluding brokerage commissions, taxes and extraordinary expenses) to 1.00% of the Portfolio's average daily net assets for the period from October 1, 2003 through October 31, 2003, and to 1.20% for the period from November 1, 2003 through March 31, 2004. Pursuant to this agreement, for the period ended March 31, 2004, TBCAM did not impose $10,016 of its investment advisory fee. This agreement was voluntary and temporary and may be discontinued or revised by TBCAM at any time. The Portfolio compensates Mellon Bank, N.A. under a custody, administration and accounting services agreement for providing custody, fund administration and fund accounting services for the Portfolio. Pursuant to this agreement the Portfolio was charged $43,403 during the period ended March 31, 2004. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the period ended March 31, 2004, were $27,770,048 and $27,885,914, respectively. For the period ended March 31, 2004, the Portfolio did not purchase or sell any long-term U.S. Government securities. (4) FEDERAL TAXES: The cost and unrealized appreciation (depreciation) in value of the investment securities owned at March 31, 2004, as computed on a federal income tax basis, were as follows: Aggregate Cost $30,535,161 =========== Gross unrealized appreciation 6,196,367 Gross unrealized depreciation (422,243) ----------- Net unrealized appreciation $ 5,774,124 =========== (5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Portfolio Trust's registration statement. The Portfolio may trade the following financial instruments with off-balance sheet risk: 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Portfolio did not enter into option transactions during the Period ended March 31, 2004. FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At March 31, 2004, the Portfolio held the following financial futures contracts:
UNDERLYING FACE CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN --------------------------------------------------------------------------------------------------------------------------- Russell 2000 Index (1 contracts) Long 6/17/2004 $288,700 $6,595
(6) SECURITY LENDING: The Portfolio may lend its securities to financial institutions which the Portfolio deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. 20 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. The Portfolio loaned securities during the period ended March 31, 2004 resulting in security lending income. At March 31, 2004, the Portfolio had $979,164 worth of securities on loan. (7) LINE OF CREDIT: The Portfolio, and other subtrusts in the Portfolio Trust and funds in the Mellon Institutional Funds Investment Trust (the "Trust") are parties to a committed line of credit facility, which enables each portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is charged to each participating portfolio/fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment fee, computed at an annual rate of .060 of 1% on the daily unused portion of the facility, is allocated ratably among the participating portfolios/funds at the end of each quarter. For the period ended March 31, 2004, the commitment fee was $499 for the Portfolio. During the period ended March 31, 2004, the Portfolio had borrowings under the credit facility. As a result of these borrowings the Portfolio incurred $30 of interest expense. 21 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of March 31, 2004. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. Independent Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 None c/o Decision Resources, Inc. 11/3/1986 and Chief Executive 260 Charles Street Officer, Decision Waltham, MA 02453 Resources, Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None c/o Essex Street Associates 11/3/1986 Associates (family 400 Essex Street investment trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None c/o Harvard University 9/13/1986 Professor of Political Cambridge, MA 02138 Economy, Harvard 8/5/44 University John H. Hewitt Trustee Trustee since Trustee, Mertens 29 None P.O. Box 233 11/3/1986 House, Inc.; Trustee New London, NH 03257 and Chairman of the 4/11/35 Board, Visiting Nurse Alliance of Vermont & New Hampshire
Interested Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 29 None c/o Standish Mellon Asset and Chief and Chief Operating Management Company LLC, Executive Officer Officer, Mellon Institutional One Boston Place Asset Management; Boston, MA 02108 formerly Vice President 7/24/65 and Chief Financial Officer, Mellon Institutional Asset Management
22 Principal Officers who are Not Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann Secretary Secretary Senior Vice President 29 None c/o Standish Mellon Asset since 2003 and Head of Operations Management, Mellon Institutional Asset One Boston Place Management, formerly Boston, MA 02108 First Vice President, 2/20/61 Mellon Institutional Asset Management and Mellon Global Investments Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish Management, Treasurer since Mellon Asset Management One Boston Place 2002 Boston, MA 02108 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Funds Management, Operations, Standish One Boston Place Mellon Asset Management Boston, MA 02108 8/19/51 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None c/o Standish Mellon Asset President Fund Operations since Management, 1999; Shareholder One Boston Place Representative, Standish Boston, MA 02108 Mellon Asset Management 1/19/71
23 [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds One Boston Place Boston, MA 02108-4408 800.221.4795 www.standishmellon.com [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds THE BOSTON COMPANY SMALL CAP Financial Report VALUE FUND - -------------------------------------------------------------------------------- For the Period Ended March 31, 2004 (Unaudited) MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investment in The Boston Company Small Cap Value Portfolio (Portfolio), at value (Note 1A) $ 54,722,036 Receivable for Fund shares sold 160,000 Prepaid expenses 12,414 ------------- Total assets 54,894,450 LIABILITIES Accrued accounting, custody and transfer agent fees (Note 2) $2,500 Accrued trustees' fees and expenses 1,000 Accrued expenses and other liabilities 7,828 ------ Total liabilities 11,328 ------------- NET ASSETS $ 54,883,122 ============= NET ASSETS CONSIST OF: Paid-in capital $ 36,734,782 Accumulated net realized gain (loss) 8,018,293 Undistributed net investment income (loss) (104,555) Net unrealized appreciation (depreciation) 10,234,602 ------------- TOTAL NET ASSETS $ 54,883,122 ============= SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,601,830 ============= NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (Net Assets/Shares outstanding) $ 21.09 =============
The accompanying notes are an integral part of the financial statements. 2 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Dividend income allocated from Portfolio $ 181,398 Interest income allocated from Portfolio (including securities lending income of $13,900) 18,457 Expenses allocated from Portfolio (275,496) ------------- Net investment income allocated from Portfolio (75,641) EXPENSES Accounting, custody, and transfer agent fees (Note 2) $ 4,390 Legal and audit services 11,629 Registration fees 10,243 Trustees' fees and expenses (Note 2) 43 Insurance expense 426 Miscellaneous 9,159 -------- Total expenses 35,890 ------------- Net investment income (loss) (111,531) ------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) allocated from Portfolio on: Investment security transactions 8,256,301 Change in unrealized appreciation (depreciation) allocated from portfolio on investments allocated from Portfolio 3,346,527 ------------- Net realized and unrealized gain (loss) on investments 11,602,828 ------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 11,491,297 =============
The accompanying notes are an integral part of the financial statements. 3 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: FROM INVESTMENT OPERATIONS Net investment loss $ (111,531) $ (18,579) Net realized gains 8,256,301 4,950,349 Change in net unrealized appreciation 3,346,527 5,875,996 ----------- ----------- Net increase in net assets from investment operations 11,491,297 10,807,766 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D) From net investment income -- (57,917) From net realized gains on investments (4,564,248) (43,792) ----------- ----------- Total distributions to shareholders (4,564,248) (101,709) ----------- ----------- FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4) Net proceeds from sale of shares 4,075,120 7,729,570 Value of shares issued to shareholders in payment of distributions declared 4,026,790 71,480 Cost of shares redeemed (5,450,888) (9,136,228) ----------- ----------- Net increase (decrease) in net assets from Fund share tranactions 2,651,022 (1,335,178) ----------- ----------- TOTAL INCREASE IN NET ASSETS 9,578,071 9,370,879 NET ASSETS At beginning of period 45,305,051 35,934,172 ----------- ----------- At end of period (including undistributed net investment income (loss) of ($104,555) and $6,976) $54,883,122 $45,305,051 =========== ===========
The accompanying notes are an integral part of the financial statements. 4 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD FEBRUARY 1, 2000 SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, (COMMENCEMENT MARCH 31, 2004 ------------------------------------ OF OPERATIONS) TO (UNAUDITED) 2003 2002 2001 SEPTEMBER 30, 2000 ---------------- ------- ------- ------- ------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 18.49 $ 14.30 $ 13.86 $ 14.01 $11.05 ------- ------- ------- ------- ------ FROM INVESTMENT OPERATIONS: Net investment income (loss)* (1) (0.04) (0.01) 0.05 0.10 0.04 Net realized and unrealized gains (loss) on investments 4.44 4.24 0.75 0.31 2.94 ------- ------- ------- ------- ------ Total from investment operations 4.40 4.23 0.80 0.41 2.98 ------- ------- ------- ------- ------ LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- (0.02) (0.04) (0.06) (0.02) From net realized gains on investments (1.80) (0.02) (0.32) (0.50) -- ------- ------- ------- ------- ------ Total distributions to shareholders (1.80) (0.04) (0.36) (0.56) (0.02) ------- ------- ------- ------- ------ NET ASSET VALUE, END OF YEAR $ 21.09 $ 18.49 $ 14.30 $ 13.86 $14.01 ======= ======= ======= ======= ====== TOTAL RETURN(+) 24.68% 29.64% 5.43% 3.12% 26.98% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)** 1.18% 1.15% 1.00% 1.00% 1.00% Net Investment Income (Loss) (to average daily net assets)** (0.42)% (0.05)% 0.32% (0.68)% 0.50% Portfolio Turnover(2) -- 51% 164% 149% 71% Net Assets, End of Period (000's omitted) $54,883 $45,305 $35,934 $28,532 $3,764 - ------------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Net investment income (loss) per share (1) N/A $ (0.03) $ 0.01 $ 0.05 $(0.26) Ratios (to average daily net assets): Expenses** N/A 1.28% 1.24% 1.37% 4.51% Net investment income (loss)** N/A (0.18)% 0.08% 0.31% (3.01)%
(1) Calculated based on average shares outstanding. (2) Portfolio turnover represents activity while the Fund was investing directly in securities until January 28, 2003. The portfolio turnover for the period since the Fund transferred substantially all of its investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report. (+) Total return would have been lower in the absense of expense waivers, returns for periods of less than one year have not been annualized. ** Annualized for periods less than 1 year. The accompanying notes are an integral part of the financial statements. 5 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Investment Trust (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Value Fund (the "Fund") is a separate diversified investment series of the Trust. The Fund invests all of its investable assets in an interest of the The Boston Company Small Cap Value Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which is organized as a New York trust, and has the same investment objective as the Fund. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of small cap U.S. companies. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (approximately 97% at March 31, 2004). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS The Fund records its investment in the Portfolio at value. The method by which the Portfolio values its securities is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of the trade date. The Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with accounting principles generally accepted in the United States of America. All realized and unrealized gains and losses of the Portfolio are allocated pro rata among the investors in the Portfolio. C. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-dividend date. The Fund's dividends from short-term and long-term capital gains, if any, after reduction of capital losses will be declared and distributed at least annually. In determining the amounts of its dividends, the Fund will take into account its share of the income, gains or losses, expenses, and any other tax items of the Portfolio. Dividends from net investment income and distributions from capital gains, if any, are reinvested in additional shares of the Fund unless a shareholder elects to receive them in cash. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for realized and unrealized gains or losses on futures contracts and wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications among undistributed net investment income, accumulated net realized gain (loss) and paid in capital. Undistributed net investment income and accumulated net realized gain (loss) on investments may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. D. EXPENSES The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. 6 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- E. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risks of loss to be remote. (2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES: The Fund does not directly pay any investment advisory fees, but indirectly bears its pro rata share of the compensation paid by the Portfolio to The Boston Company Asset Management, LLC ("TBCAM") for such services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. TBCAM voluntarily agreed to limit the Fund's total operating expenses of the Fund and its pro rata share of the Portfolio expenses (excluding brokerage commissions, taxes and extraordinary expenses) to 1.25% of the Fund's average daily net assets. For the period ended March 31, 2004 the Fund operated below the agreed upon expense limit. This agreement was voluntary and temporary and may be discontinued or revised by TBCAM at any time. As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. Pursuant to this agreement the Fund was charged $121 during the period ended March 31, 2004. The Fund imposes a redemption fee of 2% of the net asset value of the shares, with certain exceptions, which are redeemed or exchanged less than 90 days from the day of their purchase. The redemption fee is paid directly to the Fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The fee does not apply to shares that were acquired through reinvestment of distributions. For the period ended March 31, 2004, the Fund received no redemption fees. No director, officer or employee of TBCAM or its affiliates receives any compensation from the Trust or the Fund for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of TBCAM or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Trust pays the legal fees for the independent counsel of the Trustees. (3) INVESTMENT TRANSACTIONS: Increases and decreases in the Fund's investment in the Portfolio for the period ended March 31, 2004 aggregated $8,101,910 and $5,492,888, respectively. (4) SHARES OF BENEFICIAL INTEREST: The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest having a par value of one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ Shares sold 202,373 488,251 Shares issued to shareholders in payment of distributions declared 215,710 4,747 Shares redeemed (267,090) (555,316) -------- -------- Net increase (decrease) 150,993 (62,318) ======== ========
At March 31, 2004, three shareholders of record held approximately 17%, 12% and 5% of the total outstanding shares of the Fund, respectively. Investment activities of these shareholders could have a material impact on the Fund. 7 MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST THE BOSTON COMPANY SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (5) FEDERAL TAXES As a regulated investment company qualified under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. See corresponding master portfolio for tax basis unrealized appreciation/(depreciation) information. 8 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------------------------ EQUITIES-99.5% BASIC MATERIALS--4.9% Balchem Corp. 12,500 $ 328,750 Cabot Microelectronics Corp.* 9,300 392,832 Compass Minerals International, Inc.* 21,500 352,385 Hecla Mining Co.* 48,800 410,408 Louisana-Pacific Corp. 17,100 441,180 Octel Corp. 13,900 414,915 Reliance Steel & Aluminum Co. 11,400 400,710 ------------- 2,741,180 ------------- COMMUNICATIONS--6.7% Anaren, Inc.* 16,600 261,948 Courier Corp. 11,650 521,338 Gemstar-TV Guide International, Inc.* 84,200 564,982 Macromedia, Inc.* 19,200 385,344 Powerwave Technologies, Inc. (a) * 54,500 425,100 Primus Telecommunications GP* 37,200 312,852 Remec, Inc.* 52,700 400,520 Stratex Networks, Inc.* 57,800 274,550 Surewest Communications 8,500 227,800 Tollgrade Communications, Inc.* 22,600 360,696 ------------- 3,735,130 ------------- CONSUMER CYCLICAL--11.0% Atlantic Coast Airlines Holdings* 39,900 290,073 Big 5 Sporting Goods Corp.* 10,700 270,175 Charming Shoppes, Inc.* 46,100 359,119 Churchill Downs, Inc. 7,200 279,216 Circuit City Stores, Inc. 40,200 454,260 DEB Shops, Inc. 12,800 329,088 Interface, Inc.* 54,800 435,660 Longs Drug Stores Corp. 21,700 408,611 Regis Corp. 8,900 395,516 Rex Stores Corp.* 15,900 250,266 Saks, Inc 23,700 417,120 School Speciality, Inc.* 12,200 433,954 Stanley Furniture Co., Inc. 8,600 333,938 Too, Inc.* 13,100 274,445 Toro Co. 12,800 793,600 Tweeter Home Entertainment Group* 41,400 390,816 ------------- 6,115,857 ------------- CONSUMER NONCYCLICAL--17.9% Amedisys, Inc.* 17,800 434,498 American Italian Pasta Co. 7,300 291,489 Apria Healthcare Group, Inc.* 13,500 404,190 Discovery Partner International* 35,300 217,095 Dollar Thrifty Automotive Group* 32,600 823,802 Epix Medical, Inc.* 10,100 209,575 Green Mountain Coffee Roasters* 20,900 421,344 Hanger Orthopedic Group, Inc.* 17,600 317,680
The accompanying notes are an integral part of the financial statements. 9 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------------------------- CONSUMER NONCYCLICAL (CONTINUED) ICU Medical, Inc. (a)* 11,800 $ 358,366 Immunogen, Inc.* 40,500 272,160 Labor Ready, Inc.* 30,900 417,768 McGrath Rentcorp 11,100 338,439 Medicines Co.* 10,800 347,868 Medsource Technologies, Inc.* 73,000 432,160 Nutraceutical International Corp.* 13,500 291,600 Orthodontic Centers of America (a)* 50,500 398,950 Perrigo Co. 20,600 413,030 Polymedia Corp. 13,800 370,116 Ralcorp Holdings, Inc.* 36,100 1,098,523 Sierra Health Services* 13,220 481,208 United Therapeutics Corp.* 14,700 350,301 VCA Antech, Inc.* 10,500 374,115 Vical, Inc.* 40,300 245,830 Yankee Candle Co., Inc.* 22,400 617,792 ------------- 9,927,899 ------------- ENERGY--7.8% Arch Coal, Inc. 15,500 486,545 Consol Energy, Inc. (a) 11,500 308,200 Dril-Quip, Inc.* 18,800 309,072 FMC Technologies, Inc.* 36,800 994,704 Grant Prideco, Inc.* 27,000 418,500 Hydril* 10,600 277,720 Input/Output, Inc.* 24,800 192,200 Key Energy Services, Inc.* 36,000 396,000 Massey Energy Co. 17,300 381,811 Tetra Technologies, Inc.* 21,150 552,650 ------------- 4,317,402 ------------- FINANCIAL--18.2% Alexandria Real Estate Equities, Inc., REIT 8,600 541,800 American Home Mortgage Investment Corp., REIT 17,800 512,640 Bank of Hawaii Corp. 8,900 412,337 Capital Automotive REIT 8,100 286,011 First Republic Bank 12,200 470,432 Horace Mann Educators Corp. 26,500 416,580 Innkeepers USA Trust, REIT 38,400 350,976 Investment Technology Group, Inc.* 26,900 411,570 Jones Lang Lasalle, Inc.* 14,600 375,366 Knight Trading Group, Inc.* 30,100 381,066 Lasalle Hotel Properties, REIT 17,000 401,200 Meristar Hospitality Corp., REIT* 39,500 274,525 Metris Cos, Inc.* 70,400 566,016 Newcastle Investment Corp., REIT 15,200 512,240 Phoenix Companies, Inc. (a) 30,600 410,346 Piper Jaffray Companies, Inc.* 4,900 265,335 Provident Bancorp, Inc. 23,100 273,735 Provident Financial Services, Inc. 16,700 312,123 Santander BanCorp. 25,400 698,500
The accompanying notes are an integral part of the financial statements. 10 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL (CONTINUED) Scottish Annuity & Life Holding 18,300 $ 442,677 SL Green Realty Corp., REIT (a) 10,800 515,160 Southwest Bancorporation of Texas 12,300 464,079 Sterling Bancshares, Inc. 61,200 819,468 ------------- 10,114,182 ------------- INDUSTRIAL--21.0% Apogee Enterprises, Inc. 31,700 390,861 C&D Technologties, Inc. 25,400 424,434 Celadon Group, Inc. (a)* 28,700 477,281 CIRCOR International, Inc. 13,400 302,840 Concord Camera Corp.* 35,600 223,568 Cubic Corp. 12,000 312,000 Dycom Industries, Inc.* 19,900 527,748 Esterline Technologies Corp.* 22,000 546,700 Florida Rock Industries, Inc. 9,900 417,285 Heico Corp. 18,300 287,127 Herley Industries, Inc.* 23,100 436,128 Insituform Technologies, Inc.* 26,600 415,758 Invision Technologies, Inc. 17,500 869,225 Itron, Inc.* 21,600 401,976 Laidlaw International, Inc.* 37,600 547,080 Landstar System, Inc.* 12,400 507,656 Matthews International Corp., Class A 10,500 348,600 NN, Inc. 24,500 285,915 Paxar Corp.* 27,800 410,050 Simpson Manufacturing Co., Inc. 7,700 376,915 Sypris Solutions, Inc. 21,400 363,800 The Brink's Co. 37,700 1,039,766 Trinity Industries, Inc. 15,200 422,560 Waste Connections, Inc. (a)* 24,700 983,060 Worthington Industries 17,500 335,475 ------------- 11,653,808 ------------- TECHNOLOGY--10.3% Borland Software Corp.* 43,600 395,888 Cray, Inc.* 42,600 282,438 Credence Systems Corp. (a)* 24,500 291,060 Digi International, Inc.* 26,700 263,529 eFunds Corp.* 17,300 283,720 EPIQ Systems, Inc.* 16,900 276,822 Mentor Graphics Corp.* 19,100 340,362 Midway Games, Inc. (a)* 54,600 397,488 NetIQ Corp.* 29,500 411,820 Perot Systems Corp., Class A* 73,100 972,230 Richardson Electronics Ltd. 26,900 325,759 Seachange International, Inc.* 15,000 229,500 Sybase, Inc.* 28,300 594,017 THQ, Inc.* 19,400 392,462 Zoran Corp.* 15,000 260,400 ------------- 5,717,495 -------------
The accompanying notes are an integral part of the financial statements. 11 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE SECURITY SHARES (NOTE 1A) - ------------------------------------------------------------------------------------------------------------------------------ UTILITIES--1.6% Cleco Corp. 26,300 $ 500,489 UGI Corp. 11,630 382,858 ------------- 883,347 ------------- TOTAL EQUITIES (Cost $44,950,135) 55,206,300 ------------- INVESTMENT OF CASH COLLATERAL--7.1% Dreyfus Institutional Preferred Money Market Fund (cost $3,940,100)(+) 3,940,100 3,940,100 ------------- TOTAL INVESTMENTS--106.6% (COST $48,890,235) 59,146,400 LIABILITIES IN EXCESS OF OTHER ASSETS--(6.6)% (3,664,642) ------------- NET ASSETS--100.0% $ 55,481,758 =============
NOTES TO SCHEDULE OF INVESTMENTS: REIT Real Estate Investment Trust * Non-income producing security. (a) Security, or a portion thereof, was on loan at March 31, 2004. (+) Affiliated fund that is available only to investment companies and other accounts managed by TBCAM or its affiliates. The effective yield is 0.98%. A complete listing of the fund's holdings as of its most recent fiscal year end is available. The accompanying notes are an integral part of the financial statements. 12 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (including securities on loan valued at $3,120,266 (Note 6)) (Note 1A) (identified cost $44,950,135) $ 55,206,300 Affiliated investment (Note 1F) (cost--$3,940,100) 3,940,100 Receivable for investments sold 3,110,241 Interest and dividends receivable 28,906 Prepaid expenses 3,435 ------------- Total assets 62,288,982 LIABILITIES Liability for security lending collateral (Note 6) $3,940,100 Payable for investments purchased 2,625,192 Due to Custodian 210,581 Accrued accounting and custody fees (Note 2) 16,876 Accrued Trustee fees and expenses (Note 2) 1,260 Accrued expenses and other liabilities 13,215 ---------- Total liabilities 6,807,224 ------------- NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $ 55,481,758 =============
The accompanying notes are an integral part of the financial statements. 13 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (NOTE 1C) Dividend income $ 184,616 Interest income (including securities lending income of $14,336) 18,541 ------------- Total investment Income 203,157 EXPENSES Investment advisory fee (Note 2) $214,071 Accounting and custody fees (Note 2) 41,171 Legal and audit services 14,280 Trustees' fees and expenses (Note 2) 3,798 Insurance expense 3,751 Miscellaneous 734 -------- Total expenses 277,805 ------------- Net investment income (74,648) ------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Investment security transactions 8,321,333 Change in unrealized appreciation (depreciation) Investment securities 3,369,995 ------------- Net realized and unrealized gain (loss) 11,691,328 ------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 11,616,680 =============
The accompanying notes are an integral part of the financial statements. 14 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2003 ---------------- ------------------ INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS Net investment income (loss) $ (74,648) $ (19,540) Net realized gains (losses) 8,321,333 4,435,792 Change in net unrealized appreciation (depreciation) 3,369,995 7,419,673 ------------ ----------- Net increase (decrease) in net assets from investment operations 11,616,680 11,835,925 ------------ ----------- CAPITAL TRANSACTIONS Assets contributed by Standish Small Cap Value Fund (including unrealized appreciation/depreciation of $533,503) -- 36,721,319 Contributions 8,587,599 5,115,275 Withdrawals $(10,095,393) (8,299,647) ------------ ----------- Net increase (decrease) in net assets from capital transactions (1,507,794) 33,536,947 ------------ ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 10,108,886 45,372,872 NET ASSETS At beginning of period 45,372,872 -- ------------ ----------- At end of period $ 55,481,758 $45,372,872 ============ ===========
The accompanying notes are an integral part of the financial statements. 15 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD JANUARY 28, 2003 SIX MONTHS ENDED (COMMENCEMENT OF MARCH 31, 2004 OPERATIONS TO (UNAUDITED) SEPTEMBER 30,2003 ---------------- ------------------ TOTAL RETURN (+) 24.75% 29.85% RATIOS/SUPPLEMENTAL DATA: Expenses (to average daily net assets)*(++) 1.04% 1.10% Net Investment Loss (to average daily net assets)*(++) (0.28)% (0.07)% Portfolio Turnover 83%(+++) 102%(+++) Net Assets, End of Period (000's omitted) $55,482 $45,373 - ---------------------- * For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per share and the ratios would have been: Ratios (to average daily net assets): Expenses (+)(+) N/A 1.10% Net investment loss (+)(+) N/A (0.07)%
(+) Total return for the Portfolio has been calculated based on the total return for the investor Fund, assuming all distributions were reinvested, and adjusted for the difference in expenses as set out in the notes to the financial statements. Total return would have been lower in the absense of expense waivers. Returns for periods of less than one year have not been annualized. (++) Computed on an annualized basis. (+++) Not annualized. The accompanying notes are an integral part of the financial statements. 16 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES: Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was organized as a master trust fund under the laws of the State of New York on January 18, 1996 and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Boston Company Small Cap Value Portfolio (the "Portfolio"), a separate diversified investment series of the Portfolio Trust, commenced operations on January 28, 2003. The objective of the Portfolio is to achieve long-term growth of capital. The Portfolio seeks to achieve its objective by investing, under normal circumstances, at least 80% of net assets in equity securities of small cap U.S. companies. At March 31, 2004, there were two funds, The Boston Company Small Cap Value Fund and Dreyfus Premier Small Cap Equity Fund invested in the Portfolio. The value of the funds' investment in the Portfolio reflects the funds' proportionate interests in the net assets of the Portfolio. At March 31, 2004, The Boston Company Small Cap Value Fund and the Dreyfus Premier Small Cap Equity Fund held approximately 97% and 3% interests in the Portfolio, respectively. The following is a summary of significant accounting policies followed by the Portfolio in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. INVESTMENT SECURITY VALUATIONS Securities for which quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price, or the NASDAQ official close if applicable, in the principal market in which such securities are normally traded. Securities (including illiquid securities) for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Trustees. Short-term instruments with less than sixty-one days remaining to maturity when acquired by the Portfolio are valued at amortized cost, which approximates market value. If the Portfolio acquires a short-term instrument with more than sixty days remaining to its maturity, it is valued at current market value until the sixtieth day prior to maturity and will then be valued at amortized value based upon the value on such date unless the Trustees determine during such sixty-day period that amortized value does not represent fair value. B. SECURITIES TRANSACTIONS AND INCOME Securities transactions are recorded as of trade date. Interest income is determined on the basis of interest accrued, adjusted for amortization of premium or discount on long-term debt securities when required for federal income tax purposes. Dividend income is recorded on the ex-dividend date. Realized gains and losses from securities sold are recorded on the identified cost basis. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of return of capital is conclusively determined. C. INCOME TAXES The Portfolio is treated as a partnership for federal tax purposes. No provision is made by the Portfolio for federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is ultimately responsible for the payment of any taxes. Since at least one of the Portfolio's investors is a regulated investment company that invests all or substantially all of its assets in the Portfolio, the Portfolio normally must satisfy the source of income and diversification requirements applicable to regulated investment companies (under the Internal Revenue Code) in order for its investors to satisfy them. The Portfolio allocates at least annually among its investors each investor's distributive share of the Portfolio's net investment income, net realized capital gains, and any other items of income, gain, loss deduction or credit. D. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Portfolio may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Portfolio under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, based on experience, the Portfolio expects the risks of loss to be remote. 17 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- E. AFFILIATED ISSUERS Issuers in which the fund held investments in other investment companies advised by The Boston Company Asset Management, LLC ("TBCAM") or its affiliates. (2) INVESTMENT ADVISORY FEE: The investment advisory fee paid to TBCAM for overall investment advisory, administrative services, and general office facilities, is paid monthly at the annual rate of 0.80% of the Portfolio's average daily net assets. The Portfolio compensates Mellon Bank, N.A. under a custody, administration and accounting services agreement for providing custody, fund administration and fund accounting services for the Portfolio. Pursuant to this agreement the Portfolio was charged $37,566 during the period ended March 31, 2004. No director, officer or employee of Standish Mellon or its affiliates receives any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust. The Trust pays each Trustee who is not a director, officer or employee of Standish Mellon or its affiliates an annual fee and a per meeting fee as well as reimbursement for travel and out of pocket expenses. In addition, the Portfolio Trust pays the legal fees for the independent counsel of the Trustees. (3) PURCHASES AND SALES OF INVESTMENTS: Purchases and proceeds from sales of investments, other than short-term obligations, for the period ended March 31, 2004 were $27,770,048 and $27,885,914, respectively. For the period ended March 31, 2004, the Portfolio did not purchase or sell any long-term U.S. Government securities. (4) FEDERAL TAXES: The cost and unrealized appreciation (depreciation) in value of the investment securities owned at March 31, 2004, as computed on a federal income tax basis, were as follows: Aggregate Cost $44,974,005 =========== Gross unrealized appreciation 10,658,694 Gross unrealized depreciation (426,399) ----------- Net unrealized appreciation $10,232,295 =========== (5) FINANCIAL INSTRUMENTS: In general, the following instruments are used for hedging purposes as described below. However, these instruments may also be used to seek to enhance potential gain in circumstances where hedging is not involved. The nature, risks and objectives of these instruments are set forth more fully in the Portfolio Trust's registration statement. The Portfolio may trade the following financial instruments with off-balance sheet risk: OPTIONS Call and put options give the holder the right to purchase or sell a security or currency or enter into a swap arrangement on a future date at a specified price. The Portfolio may use options to seek to hedge against risks of market exposure and changes in security prices and foreign currencies, as well as to seek to enhance returns. Writing puts and buying calls tend to increase the Portfolio's exposure to the underlying instrument. Buying puts and writing calls tend to decrease the Portfolio's exposure to the underlying instrument, or hedge other Portfolio investments. Options, both held and written by the Portfolio, are reflected in the accompanying Statement of Assets and Liabilities at market value. The underlying face amount at value of any open purchased options is shown in the Schedule of Investments. This amount reflects each 18 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contract or if the counterparty does not perform under the contract's terms. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. Realized gains and losses on purchased options are included in realized gains and losses on investment securities, except purchased options on foreign currency which are included in realized gains and losses on foreign currency transactions. If a put option written by the Portfolio is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio, as a writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by the dealers. The Portfolio did not enter into option transactions during the period ended March 31, 2004. FUTURES CONTRACTS The Portfolio may enter into financial futures contracts for the delayed sale or delivery of securities or contracts based on financial indices at a fixed price on a future date. Pursuant to margin requirements the Portfolio deposits either cash or securities in an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments or indices, which may not correlate with changes in the value of hedged investments. Buying futures tends to increase the Portfolio's exposure to the underlying instrument, while selling futures tends to decrease the Portfolio's exposure to the underlying instrument or hedge other investments. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Losses may arise if there is an illiquid secondary market or if the counterparty does not perform under the contract's terms. The Portfolio enters into financial futures transactions primarily to seek to manage its exposure to certain markets and to changes in securities prices and foreign currencies. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. At March 31, 2004, the Portfolio held no outstanding financial futures contracts. (6) SECURITY LENDING: The Portfolio may lend its securities to financial institutions which the Portfolio deems to be creditworthy. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is allocated to the Portfolio on the next business day. For the duration of a loan, the Portfolio receives the equivalent of the interest or dividends paid by the issuer on the securities loaned and also receives compensation from the investment of the collateral. As with other extensions of credit, the Portfolio bears the risk of delay in recovery or even loss of rights in its securities on loan should the borrower of the securities fail financially or default on its obligations to the Portfolio. In the event of borrower default, the Portfolio generally has the right to use the collateral to offset losses incurred. The Portfolio may incur a loss in the event it was delayed or prevented from exercising its rights to dispose of the collateral. The Portfolio also bears the risk in the event that the interest and/or dividends received on invested collateral is not sufficient to meet the Portfolio's obligations due on the loans. The Portfolio loaned securities during the period ended March 31, 2004 resulting in security lending income. At March 31, 2004, the Portfolio had $3,120,266 worth of securities on loan. 19 MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- (7) LINE OF CREDIT: The Portfolio, and other subtrusts in the Portfolio Trust and funds in the Mellon Institutional Funds Investment Trust (the "Trust") are parties to a committed line of credit facility, which enables each portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is charged to each participating portfolio/fund based on its borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment fee, computed at an annual rate of 0.060 of 1% on the daily unused portion of the facility, is allocated ratably among the participating portfolios/funds at the end of each quarter. For the period ended March 31, 2004, the commitment fee was $767 for the Portfolio. During the period ended March 31, 2004, the Portfolio had borrowed under the credit facility and incurred $30 of interest expense. 20 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers; their address and date of birth; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies as of March 31, 2004. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795. The same persons serve as trustees and officers of the Portfolio Trust in the same capacities. Independent Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 None c/o Decision Resources, Inc. 11/3/1986 and Chief Executive 260 Charles Street Officer, Decision Waltham, MA 02453 Resources, Inc. 9/30/40 Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None c/o Essex Street Associates 11/3/1986 Associates (family 400 Essex Street investment trust office) Beverly, MA 01915 11/14/43 Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None c/o Harvard University 9/13/1986 Professor of Political Cambridge, MA 02138 Economy, Harvard 8/5/44 University John H. Hewitt Trustee Trustee since Trustee, Mertens 29 None P.O. Box 233 11/3/1986 House, Inc.; Trustee New London, NH 03257 and Chairman of the 4/11/35 Board, Visiting Nurse Alliance of Vermont & New Hampshire
Interested Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 29 None c/o Standish Mellon Asset and Chief and Chief Operating Management Company LLC, Executive Officer Officer, Mellon Institutional One Boston Place Asset Management; Boston, MA 02108 formerly Vice President 7/24/65 and Chief Financial Officer, Mellon Institutional Asset Management
21 Principal Officers who are Not Trustees
NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ Barbara A. McCann Secretary Secretary Senior Vice President 29 None c/o Standish Mellon Asset since 2003 and Head of Operations Management, Mellon Institutional Asset One Boston Place Management, formerly Boston, MA 02108 First Vice President, 2/20/61 Mellon Institutional Asset Management and Mellon Global Investments Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish Management, Treasurer since Mellon Asset Management One Boston Place 2002 Boston, MA 02108 7/14/65 Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None c/o Standish Mellon Asset President Manager, Mutual Funds Management, Operations, Standish One Boston Place Mellon Asset Management Boston, MA 02108 8/19/51 Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None c/o Standish Mellon Asset President Fund Operations since Management, 1999; Shareholder One Boston Place Representative, Standish Boston, MA 02108 Mellon Asset Management 1/19/71
22 23 [MELLON LOGO] Mellon -------------------------- Mellon Institutional Funds One Boston Place Boston, MA 02108-4408 800.221.4795 www.standishmellon.com Item 2. Code of Ethics. Not applicable to this filing. Item 3. Audit Committee Financial Expert. Not applicable to this filing. Item 4. Principal Accountant Fees and Services. Not applicable to this filing. Item 5. Audit Committee of Listed Registrants. Not applicable to this filing. Item 6. Schedule of Investments Filed under Item 1 of this Form. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable to this filing. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable to this filing. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable to this filing. Item 10. Controls and Procedures. (a) The Registrant's Principal Executive Officer and Principal Financial Officer concluded that the Registrant's disclosure controls and procedures are effective based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"). (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal half-year (the Registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 11. Exhibits. (a)(1) Not applicable to this filing. (a)(2) Certifications of the Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a) are attached hereto as Exhibit 99CERT.302 (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99CERT.906. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Mellon Institutional Funds Master Portfolio By (Signature and Title):_____________________________________________________ Barbara A. McCann, Vice President and Secretary Date ____________ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities, and on the dates indicated. By (Signature and Title): _____________________________________________________ Patrick J. Sheppard, President and Chief Executive Officer Date ____________ By (Signature and Title): _____________________________________________________ Steven M. Anderson, Vice President and Treasurer Date ____________ EX-99.CERT 2 ex99_cert.txt 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 Mellon Institutional Funds Master Portfolio; 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) 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 based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 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. Date:_____________________ _____________________________________ Patrick J. Sheppard President and Chief Executive Officer EX-99.CERT2 3 ex99_cert2.txt 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 Mellon Institutional Funds Master Portfolio; 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) 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 based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 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. Date:_____________________ _____________________________________ Steven M. Anderson Vice President and Treasurer EX-99.CERT906 4 ex99_cert906.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Patrick J. Sheppard, President and Chief Executive Officer and Steven M. Anderson, Vice President and Treasurer of Mellon Institutional Funds Master Portfolio (the "Registrant"), each certify to the best of their knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended March 31, 2004 (the "Form N-CSR") fully complies with the requirements of section 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. Patrick J. Sheppard President and Chief Executive Officer Date: ____________ __, 2004 Steven M. Anderson Vice President and Treasurer Date: ____________ __, 2004 This certification is being furnished to the Securities and Exchange Commission solely pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, as amended, and 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-----