UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4813
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MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
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(Exact name of registrant as specified in charter)
Mellon Financial Center, One Boston Place, Boston, Massachusetts 02108
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(Address of principal executive offices) (Zip code)
Barbara A. McCann
Vice President and Secretary
One Boston Place, Boston, MA 02108
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(Name and address of agent for service)
with a copy to:
Christopher P. Harvey, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Registrant's telephone number, including area code: (617) 248-6000
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Date of fiscal year end: September 30
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Date of reporting period: March 31, 2006
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Item 1. Reports to Stockholders.
[LOGO] Mellon
--------------------------------
Mellon Institutional Funds
Semiannual Report
The Boston Company World ex-U.S. Value Fund
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- -----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,130.50 $4.78
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.44 $4.53
- ---------------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.90%, multiplied
by the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- ----------------------------------------------------------------------------------------------------
Total SA France Energy 1.7%
Royal Bank of Scotland Group PLC United Kingdom Financial 1.6
Carrefour SA France Consumer Staples 1.6
GlaxoSmithkline PLC United Kingdom Healthcare 1.5
DBS Group Holdings, Ltd. Singapore Financial 1.4
Vodafone Group PLC United Kingdom Telecommunication 1.4
services
Nippon Express Co., Ltd. Japan Industrial 1.4
Bank Of Ireland Ireland Financial 1.3
BP PLC United Kingdom Energy 1.3
Sumitomo Mitsui Financial Group Japan Financial 1.3
---
14.5%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- -------------------------------------------------------------------------------
Europe ex U.K. 36.2%
U.K. 16.4
Asia ex Japan 15.8
Japan 23.7
Americas ex U.S. 6.5
Middle East/Africa 1.4
-----
100.0%
* Excludes short-term securities and investment of cash collateral.
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
EQUITIES--96.7%
Australia--1.8%
Amcor Ltd 65,568 $ 347,211
Insurance Australia Group Ltd 28,890 113,085
National Australia Bank Ltd 14,135 381,336
TABCORP Holdings, Ltd 13,400 148,342
---------
989,974
---------
Belgium--0.8%
Fortis 12,540 447,185
---------
Brazil--1.3%
Petroleo Brasileiro SA ADR 4,460 386,548
Tele Norte Leste Participacoes SA ADR (a) 17,340 289,231
---------
675,779
---------
Canada--3.8%
Alcan, Inc 1,800 82,314
Canadian Imperial Bank of Commerce 4,440 326,974
EnCana Corp 9,660 451,412
Loblaw Companies Ltd 5,180 246,846
Petro--Canada 6,850 324,844
Quebecor World, Inc 32,430 318,246
Sobeys, Inc 3,460 111,847
Torstar Corp 10,770 210,733
---------
2,073,216
---------
China--0.4%
China Telecom Corp., Ltd 665,000 235,691
---------
Finland--1.2%
M-real Oyj 32,800 217,327
Nokia Oyj 10,040 207,718
UPM-Kymmene Oyj 10,060 237,621
---------
662,666
---------
France--8.8%
Banque Nationale De Paris 5,150 478,158
Carrefour SA 15,450 821,570
Credit Agricole SA 10,220 397,505
France Telecom SA 29,318 659,119
Lafarge SA 2,080 235,574
PSA Peugeot Citroen 1,300 81,884
Sanofi-Synthelabo SA 5,190 493,502
Thomson 11,770 232,247
Total SA 3,430 904,491
Valeo SA 10,567 441,721
BNP Paribas Rights (a) 5,350 7,291
---------
4,753,062
---------
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Germany--7.5%
Allianz AG 1,710 $ 285,387
Deutsche Bank AG Registered Shares 4,149 473,671
Deutsche Lufthansa AG 21,220 379,645
Deutsche Post AG 25,080 628,550
Deutsche Telekom AG 20,930 352,907
E.ON AG 2,270 249,696
Hannover Rueckversicherung AG (a) 9,980 370,037
Infineon Technologies AG (a) 38,760 399,544
Medion AG 4,450 57,892
Metro AG 5,040 258,301
Siemens AG 3,330 310,751
Volkswagen AG 4,000 301,904
---------
4,068,285
---------
Greece--0.5%
Public Power Corp 11,210 263,426
---------
Hong Kong--2.0%
Bank of East Asia Ltd 109,129 394,513
Citic Pacific Ltd 56,600 169,966
Denway Motors Ltd 768,000 299,416
Huadian Power International Co 818,000 218,756
---------
1,082,651
---------
Hungary--0.4%
Magyar Telekom 47,140 211,094
---------
India--1.8%
Hindalco Industries Ltd. 144A/Reg--GDR 63,100 258,685
Hindalco Rights (b) 11,925 26,181
Mahanagar Telephone Nigam Ltd.--ADR 25,350 210,405
Reliance Industries Ltd. 144A--GDR 9,010 317,603
Reliance Industries Conversion (b) 9,210 170,941
---------
983,815
---------
Indonesia--0.4%
PT Gudang Garam Tbk 175,180 202,755
---------
Ireland--1.3%
Bank of Ireland 36,590 678,118
Kerry Group PLC 1,000 24,008
---------
702,126
---------
Italy--2.8%
Benetton Group Spa 4,450 66,408
Compagnia Assicuratrice Unipol Spa 63,370 205,525
Eni Spa 18,800 534,697
Mediaset Spa 17,700 208,397
UniCredito Italiano Spa 72,020 520,374
---------
1,535,401
---------
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Japan--23.0%
Aeon Co., Ltd 11,500 $ 279,046
Aiful Corp 7,320 484,640
Ajinomoto Co., Inc 19,200 205,120
Astellas Pharma, Inc 5,600 212,749
Canon, Inc 8,900 589,249
Dentsu, Inc 106 384,685
Fuji Heavy Industries Ltd 16,800 98,807
Fuji Photo Film Co., Ltd 17,500 584,523
Funao Electric Co., Ltd 3,400 336,359
Hinos Motors Ltd 25,500 160,377
JS Group Corp 15,200 326,840
Kao Corp 14,100 371,494
KDDI Corp 97 518,553
Kuraray Co., Ltd 22,900 269,366
Mabuchi Motor Co., Ltd 5,300 272,973
Matsumotokiyoshi Co., Ltd 7,200 206,221
Minebea Co., Ltd 18,400 127,139
Mitsubishi UFJ Financial Group, Inc 21 321,265
Nippon Express Co., Ltd 125,900 714,782
Nippon Paper Group, Inc 36 155,737
Nissan Motor Co., Ltd 52,500 623,789
Orix Corp 270 84,103
Ricoh Co., Ltd 22,800 445,691
Rinnai Corp 8,800 264,015
Rohm Co., Ltd 5,200 550,229
Sekisui Chemical Co., Ltd 52,200 442,320
Sekisui House Ltd 27,000 402,958
SFCG Co., Ltd 447 101,170
Shin-Etsu Chemical Co., Ltd 1,900 103,187
Shinsei Bank Ltd 62,000 434,200
Skylark Co., Ltd 16,700 298,772
Sohgo Security Services Co., Ltd 5,800 93,019
Sumitomo Mitsui Financial Group 60 662,927
Takefuji Corp 7,640 481,152
TDK Corp 4,400 331,702
The 77 Bank Ltd 39,200 302,179
Toyoda Gosei Co., Ltd 8,400 184,192
----------
12,425,530
----------
Malaysia--0.4%
Sime Darby Berhad 139,400 230,939
----------
Mexico--1.2%
Coca-Cola Femsa, S.A. de C.V.--ADR 9,650 320,380
Telefonos de Mexico SA de CV--ADR 13,660 307,077
----------
627,457
----------
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Netherlands--3.9%
ABN Amro Holding NV 14,504 $ 434,650
Aegon NV 19,910 368,266
Heineken NV 13,930 528,475
Koninklijke Philips Electronics NV 16,660 562,827
VNU NV 2,700 87,748
Wolters Kluwer NV 5,740 143,090
---------
2,125,056
---------
Portugal--0.3%
EDP-Energias de Portugal SA 36,270 142,346
---------
Singapore--2.2%
DBS Group Holdings, Ltd 71,710 723,492
United Overseas Bank Ltd 45,550 439,824
---------
1,163,316
---------
South Africa--1.4%
Nampak Ltd 80,950 220,653
Nedbank Group, Ltd 13,936 291,307
Sappi, Ltd 16,040 240,195
---------
752,155
---------
South Korea--4.2%
Hyundai Motor Co 3,590 301,970
Kookmin Bank--ADR 4,280 366,026
Korea Electric Power Corp 6,220 261,275
KT Corp.--ADR 14,430 307,359
Lotte Shopping Co., Ltd. GDR 144A (a) 9,600 193,728
POSCO 840 216,638
POSCO--ADR 300 19,140
Samsung Electronics Co., Ltd 534 346,361
SK Telecom Co., Ltd.--ADR 12,040 284,024
---------
2,296,521
---------
Spain--1.9%
Banco Popular Espanol SA 6,430 94,710
Banco Santander Central Hispano SA 12,410 181,138
Gamesa Corp Tecnological 10,690 205,497
Iberdrola SA 3,000 96,807
Repsol YPF SA 16,100 457,125
---------
1,035,277
---------
Sweden--0.4%
Svenska Cellulosa AB (SCA), Class B 5,150 226,260
---------
Switzerland--5.2%
CIBA Specialty Chemicals AG 8,068 482,212
Clariant AG (a) 13,550 209,868
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Switzerland (continued)
Nestle SA 1,731 $ 513,646
Novartis AG 9,470 526,434
Swiss Re 6,860 479,180
UBS AG Registered Shares 5,550 609,385
---------
2,820,725
---------
Taiwan--1.8%
Compal Electronics, Inc 297,327 304,031
SinoPac Financial Holdings Co., Ltd 584,000 296,332
United Microelectronics Corp 545,208 344,760
---------
945,123
---------
Thailand--0.2%
Kasikornbank Public Company Ltd 68,800 121,261
---------
United Kingdom--15.8%
Anglo American PLC 14,394 554,457
Barclays PLC 43,139 504,583
Boots Group PLC 20,889 261,020
BP PLC 58,425 670,695
BT Group PLC 57,201 220,537
Centrica PLC 97,780 478,028
Diageo PLC 28,556 449,562
GKN PLC 26,137 150,929
GlaxoSmithKline PLC 29,283 765,380
HSBC Holdings PLC 26,360 441,771
Old Mutual PLC 85,740 299,671
Reed Elsevier PLC 28,420 272,451
Royal Bank of Scotland Group PLC 25,477 828,726
Royal Dutch Shell PLC 18,648 583,230
Royal Dutch Shell PLC 3,350 104,607
Sainsbury (J) PLC 40,113 231,634
Smiths Group PLC 11,100 189,497
Travis Perkins PLC 3,200 92,754
Trinity Mirror PLC 26,310 260,448
Unilever PLC 46,942 480,177
Vodafone Group PLC 342,943 717,685
----------
8,557,842
----------
TOTAL EQUITIES (Cost $46,828,392) 52,356,934
----------
TOTAL INVESTMENTS--96.7% (Cost $46,828,392) 52,356,934
----------
OTHER ASSETS, LESS LIABILITIES--3.3% 1,761,924
----------
NET ASSETS--100% $54,118,858
===========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Notes to Schedule of Investments:
ADR--American Depository Receipt
GDR--Global Depository Receipt
144A--Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $770,016 or 1.4% of net
assets.
(a) Non-income producing security.
(b) Security valued at fair value using methods determined in good faith by or
under the direction of the Board of Trustees.
The fund held the following forward foreign currency exchange contracts at March
31, 2006:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date March 31, 2006 to Deliver Gain/(Loss)
- -----------------------------------------------------------------------------------------------------------------------------
Australian Dollar 6,974 4/3/2006 $ 4,990 $ 4,979 $ 11
Singapore Dollar 32,498 4/3/2006 20,115 20,090 25
Thai Bat 316,373 4/3/2006 8,140 8,171 (31)
Thai Bat 948,951 4/4/2006 24,417 24,445 (28)
-------- -------- ------
$ 57,662 $ 57,685 $ (23)
======== ======== =======
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Deliver Amount Value Date March 31, 2006 to Receive Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------
Australian Dollar 36,855 4/4/2006 $ 26,373 $ 26,325 $ (48)
British Pound 92,127 4/4/2006 159,997 160,117 120
Canadian Dollar 120,994 4/3/2006 103,608 104,144 536
Euro 574,755 4/4/2006 696,201 696,545 344
Hong Kong Dollar 326,528 4/3/2006 42,083 42,079 (4)
Hungary Forint 1,753,596 4/4/2006 8,054 8,050 (4)
Japanese Yen 15,670,656 4/3/2006 133,186 133,583 397
Japanese Yen 50,957,379 4/4/2006 433,090 432,869 (221)
Singapore Dollar 16,177 4/4/2006 10,013 10,006 (7)
Swedish Krona 67,046 4/4/2006 8,613 8,612 (1)
Swiss Franc 29,053 4/4/2006 22,276 22,281 5
---------- ---------- -------
$1,643,494 $1,644,611 $ 1,117
========== ========== =======
Percentage of
Economic Sector Allocation Net Assets
- ----------------------------------------------------------------------------------------------
Consumer Discretionary 13.3%
Consumer Staples 10.5
Energy 8.2
Financials 26.7
Health Care 3.7
Industrials 7.1
Information Technology 7.6
Materials 8.5
Telecommunication Services 8.0
Utilities 3.2
Short-term and other assets 3.2
------
100.0%
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (cost $46,828,392) $52,356,934
Cash 1,295
Foreign currency, at value (cost $1,050,978) 1,045,955
Receivable for investments sold 2,067,285
Interest and dividends receivable 228,294
Receivable from administrator 11,678
Unrealized appreciation on forward currency exchange contracts (Note 6) 1,438
Prepaid expenses 3,785
----------
Total assets 55,716,664
Liabilities
Payable for investments purchased $ 209,173
Loan payable 1,308,000
Accrued professional fees 21,231
Accrued accounting, custody, administration and transfer agent fees (Note 2) 53,921
Accrued trustees' fees (Note 2) 351
Unrealized depreciation on forward currency exchange contracts (Note 6) 344
Accrued chief compliance officer fee (Note 2) 278
Other accrued expenses and liabilities 4,508
-----
Total liabilities 1,597,806
-----------
Net Assets $54,118,858
===========
Net Assets consist of:
Paid-in capital $46,134,979
Accumulated net realized gain 2,204,122
Undistributed net investment income 242,912
Net unrealized appreciation 5,536,845
------------
Total Net Assets $ 54,118,858
============
Shares of beneficial interest outstanding 2,194,564
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 24.66
============
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Statements of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net foreign witholding taxes of $6,625): $ 494,859
Dividend income from affiliated investments (Note 1H) 18,547
Interest income 3,876
-------
Total investment income 517,282
Expenses
Investment advisory fee (Note 2) $ 170,335
Accounting, custody, administration and transfer agent fees (Note 2) 104,648
Registration fees 17,120
Professional fees 21,525
Trustees' fees and expenses (Note 2) 2,319
Insurance expense 1,107
Miscellaneous expenses 10,824
-------
Total expenses 327,878
Deduct:
Waiver of investment advisory fee (Note 2) (123,476)
---------
Net expenses 204,402
-------
Net investment income 312,880
-------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 2,373,088
Foreign currency transactions and forward currency exchange transactions (47,772)
---------
Net realized gain (loss) 2,325,316
Change in unrealized appreciation (depreciation) on:
Investments 3,759,996
Foreign currency translations and forward currency exchange contracts 33,187
---------
Change in net unrealized appreciation (depreciation) 3,793,183
----------
Net realized and unrealized gain (loss) 6,118,499
----------
Net Increase in Net Assets from Operations $6,431,379
==========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
For the Period
For the November 15, 2004
Six Months Ended (commencement of
March 31, 2006 operations) to
(Unaudited) September 30, 2005
----------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 312,880 $ 253,574
Net realized gain (loss) 2,325,316 690,169
Change in net unrealized appreciation (depreciation) 3,793,183 1,743,662
Net increase from payments by affiliates -- 5,514
----------- ---------
Net increase (decrease) in net assets from investment operations 6,431,379 2,692,919
----------- ---------
Distributions to Shareholders (Note 1C)
From net investment income (320,130) (58,146)
From net realized gains on investments (756,714) --
----------- ---------
Total distributions to shareholders (1,076,844) (58,146)
----------- ---------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 19,972,126 28,528,386
Value of shares issued to shareholders in reinvestment of 1,061,992 57,745
distributions
Cost of shares redeemed (3,240,750) (249,949)
----------- ---------
Net increase (decrease) in net assets from Fund share transactions 17,793,368 28,336,182
----------- ---------
Total Increase (Decrease) in Net Assets 23,147,903 30,970,955
Net Assets
At beginning of period 30,970,955 --
----------- ---------
At end of period (including undistributed net investment
investment income of $242,912 and $250,162, respectively) $54,118,858 $30,970,955
=========== ===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
For the November 15, 2004
Six Months Ended (commencement of
March 31, 2006 operations) to
(Unaudited) September 30, 2005
----------------- ------------------
Net Asset Value, Beginning of Period $ 22.29 $ 20.00
--------- ----------
From Operations:
Net investment income* (a) 0.16 0.32
Net realized and unrealized gains (loss) on investments 2.70 2.02
Net increase from payments by affiliated (c) -- --(b)(c)
Total from operations 2.86 2.34
--------- ----------
Less Distributions to Shareholders:
From net investment income (0.14) (0.05)
From net realized gain on investments (0.35) --
--------- ----------
Total distributions to shareholders (0.49) (0.05)
--------- ----------
Net Asset Value, End of Period $ 24.66 $ 22.29
========= ==========
Total Return (d) 13.05% 11.72%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.90%(e) 0.90%(e)
Net Investment Income (to average daily net assets)* 1.37%(e) 1.76%(e)
Portfolio Turnover 34%(f) 34%(f)
Net Assets, End of Period (000's omitted) $ 54,119 $ 30,971
* The investment advisor voluntarily agreed not to impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary action had not been taken, the investment income per
share and the ratios would have been:
Net investment income per share (a) $ 0.10 $ 0.12
Ratios (to average daily net assets):
Expenses 1.44(e) 2.02(e)
Net investment (loss) 0.83(e) 0.64(e)
(a) Calculated based on average shares outstanding.
(b) For the period from November 15, 2004 (commencement of operations) to
September 30, 2005, 0.05% of the Fund's total return consists of a
voluntary payment by the advisor to compensate the Fund for a trading
error. Excluding this payment, total return would have been 11.67%.
(c) Amount represents less than $0.01.
(d) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(e) Computed on an annualized basis.
(f) Not annualized.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized
as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. The Boston Company World ex-U.S. Fund (the "Fund"), which
commenced operation on November 15, 2004, is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of
companies that are located in foreign countries represented in the
Morgan Stanley Capital International All Country World Index ex-United
States Free Index. The Funds may invest up to 35% of its assets in
emerging market countries.
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which
such securities are normally traded. 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.
Because foreign markets may be open at different times than the New York
Stock Exchange, the value of the Fund's shares may change on days when
shareholders are not able to buy or sell them. Many securities markets
and exchanges outside the U.S. close prior to the close of the New York
Stock Exchange and therefore the closing prices for securities in such
markets or on such exchanges may not fully reflect the events that occur
after such close but before the close of the New York Stock Exchange.
If market quotations are not readily available or do not accurately
reflect fair value, or the value of a security has been materially
affected by events occurring after the close of the exchange or market
on which the security is principally traded (for example, a foreign
exchange or market), the Fund may value its assets by a method the
Trustees believe accurately reflects the fair value. The Trustees have
adopted fair value pricing procedures, which, among other things,
require the Fund to fair value such securities if there has been a
movement in the U.S. market that exceeds a specified threshold. Although
the threshold may be revised by the Trustees from time to time and the
number of days on which fair value prices will be used will depend on
market activity, it is possible that fair value prices for foreign
securities will be used by the Fund to a significant extent.
Short-term instruments with less than sixty days remaining to maturity
are valued at amortized cost, which approximates market value. If the
Fund acquires a short-term instrument with more than sixty days
remaining to its maturity, it is valued at current market value until
the sixtieth day prior to maturity and will then be valued at amortized
cost based upon the value on such date unless the Trustees determine
during such sixty-day period that amortized cost does not represent fair
value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income
is determined on the basis of coupon interest accrued, adjusted for
accretion of discount or amortization of premium using the yield - to -
maturity method on debt securities with greater than sixty days to
maturity 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.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments. Net realized gains and losses on foreign
currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement
dates on securities transactions, and the difference between the amount
of investment income and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or
paid.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of
capital losses will be declared and distributed at least annually.
Dividends from net investment income and distributions from capital
gains, if any, are reinvested in additional shares of the Fund unless
the shareholder elects to receive them in cash.
15
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in reclassifications, are primarily due to differing
treatments for wash sales and realized and unrealized gains or losses on
futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid
in capital. Undistributed net investment income (loss) 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.
Section 988 of the Internal Revenue Code provides that gains or losses
on certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund are allocated among funds of the Trust taking into
consideration, among other things, the nature and type of expense and
the relative size of the funds.
E. Foreign currency transactions
The Fund maintains its books and records in U.S. dollars. Investment
security valuations and other assets and liabilities initially expressed
in foreign currencies are converted into U.S. dollars based upon current
currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
F. Investment risk
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times
may be more volatile than securities of comparable U.S. companies and
U.S. securities markets. The risks described above apply to an even
greater extent to investments in emerging markets. The securities
markets of emerging countries are generally smaller, less developed,
less liquid, and more volatile than the securities markets of the U.S.
and developed foreign markets.
G. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the Fund
under these arrangements is unknown, as this would involve future claims
that may be made against the Fund that have not yet occurred. However,
based on experience, the Fund expects the risks of loss to be remote.
H. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston
Company Asset Management, LLC (TBCAM), a wholly-owned subsidiary of
Mellon Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to TBCAM for overall investment
advisory and administrative services, and general office facilities, is
paid monthly at the annual rate of 0.75% of the Fund's average daily net
assets. TBCAM voluntarily agreed to limit the Fund's total annual
operating expenses (excluding brokerage commissions, taxes and
extraordinary expenses) to 0.90% of the Fund's average daily net assets
for the six months ended March 31, 2006. Pursuant to this arrangement,
for the six months ended March 31, 2006, TBCAM voluntarily waived its
investment advisory fee in the amount of $123,476. This arrangement is
voluntary and temporary and may be discontinued or revised by TBCAM at
any time.
16
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services the Fund pays
Dreyfus Transfer, Inc. a fixed fee plus per account and transaction
based fees, as well as, out-of-pocket expenses. Pursuant to this
agreement the Fund was charged $2,965 for the six months ended March 31,
2006.
The Fund entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of TBCAM, to provide custody, administration and accounting
services for the Fund. For these services the Fund pays Mellon Bank a
fixed fee plus asset and transaction based fees, as well as
out-of-pocket expenses. Pursuant to this agreement the Fund was charged
$101,683 for the six months ended March 31, 2006.
The Fund also entered into an agreement with Mellon Bank, to perform
certain securities lending activities and to act as the Fund's lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. For the six months ended March 31, 2006, the Fund did loan any
securities through the program.
The Trust reimburses Mellon Asset Management for a portion of the salary
of the Trust's Chief Compliance Officer. For the six months ended March
31, 2006, the Fund was charged $2,084. No other 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
Fund pays the legal fees for the independent counsel of the Trustees.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and
platform administrators and other entities ("Plan Administrators") that
provide record keeping and/or other administrative support services to
retirement plans and their participants. As compensation for such
services, the Fund may pay each Plan Administrator an administrative
service fee in an amount of up to 0.15% (on an annualized basis) of the
Fund's average daily net assets attributable to Fund shares that are
held in accounts serviced by such Plan Administrator. The Fund's adviser
or its affiliates may pay additional compensation from their own
resources to Plan Administrators and other entities for administrative
services, as well as in consideration of marketing or other
distribution-related services. These payments may provide an incentive
for these entities to actively promote the Fund or cooperate with the
distributor's promotional efforts.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
--------- -----
Investments (non-U.S. Government Securities) $30,838,347 $14,418,588
=========== ===========
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a par
value of one cent per share. Transactions in Fund shares were as
follows:
For the period
November 15, 2004
For the (commencement of
Six Months Ended operations) to
March 31, 2006 September 30, 2005
--------------- ------------------
Shares sold 894,529 1,398,390
Shares issued to shareholders in reinvestment of distributions 47,033 2,813
Shares redeemed (136,477) (11,724)
-------- ---------
Net increase (decrease) 805,085 1,389,479
======== =========
17
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2006, four shareholders of record held approximately 88% of
the total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund. For the six
months ended March 31, 2006, the Fund did not collect any redemption
fees.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less
than 30 days from the day of their purchase. The redemption fee is paid
directly to the Fund, and is designed to offset brokerage commissions,
market impact, and other costs associated with short-term trading in the
Fund. The fee does not apply to shares that were acquired through
reinvestment of distributions. For the six months ended March 31, 2006,
the Fund did not collect any redemption fees.
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $46,828,392
===========
Unrealized appreciation $ 6,217,833
Unrealized depreciation (689,291)
===========
Net unrealized appreciation (depreciation) $ 5,528,542
===========
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Forward Currency Exchange Contracts
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign
currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar and other
foreign currencies. The forward foreign currency and cross currency
exchange contracts are marked to market using the forward foreign
currency rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the
contract settlement date or upon the closing of the contract. Forward
currency exchange contracts are used by the Fund primarily to protect
the value of the Fund's foreign securities from adverse currency
movements. Unrealized appreciation and depreciation of forward currency
exchange contracts is included in the Statement of Assets and
Liabilities.
During the six months ended March 31, 2006, the Fund held foreign
currency exchange contracts. See schedule of investments for further
details.
18
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(7) Security Lending:
The Fund may lend its securities to financial institutions which the
Fund deems to be creditworthy. The loans are collateralized at all times
with cash or securities with a market value at least equal to the market
value of the securities on loan. The market value of securities loaned
is determined daily and any additional required collateral is allocated
to the Fund on the next business day. For the duration of a loan, the
Fund receives the equivalent of the interest or dividends paid by the
issuer on the securities loaned and also receives compensation from the
investment of the collateral. As with other extensions of credit, the
Fund bears the risk of delay in recovery or even loss of rights in its
securities on loan should the borrower of the securities fail
financially or default on its obligations to the Fund. In the event of
borrower default, the Fund generally has the right to use the collateral
to offset losses incurred. The Fund may incur a loss in the event it was
delayed or prevented from exercising its rights to dispose of the
collateral. The Fund also bears the risk in the event that the interest
and/or dividends received on invested collateral is not sufficient to
meet the Fund's obligations due on the loans.
For the the six months ended March 31, 2006, the Fund did not lend any
securities.
(8) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust") are parties
to a committed line of credit facility, which enables each
fund/portfolio to borrow, in the aggregate, up to $35 million. Interest
is charged to each participating fund/portfolio based on its borrowings
at a rate equal to the Federal Funds effective rate plus 1/2 of 1%. In
addition, a facility fee, computed at an annual rate of 0.060 of 1% on
the committed amount, is allocated ratably among the participating
funds/portfolios at the end of each quarter. For the six months ended
March 31, 2006, the expense allocated to the Fund was $339.
During the six months ended March 31, 2006, the Fund had average
borrowings outstanding of $766,083 on a total of 12 days and incurred
$1,293 of interest expense.
19
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- -------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of its
Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the Fund's
advisory agreement and the related fees on an annual basis. In their most recent
deliberations concerning their decision to approve the continuation of the
investment advisory agreement, the Board of Trustees conducted the review and
made the determinations that are described below. In conducting this review and
in making such determinations, the Independent Trustees received from the Fund's
investment adviser, The Boston Company Asset Management, LLC ("the Adviser"), a
broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 22, 2005 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. Representatives of the Adviser attended a portion of the September
meeting to provide an overview of its organization, personnel, resources and
strategic plans, and to respond to questions and comments arising from the
Independent Trustees' review of the materials and their deliberations. The
entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and income
statements, as well as a profitability analysis of the Adviser, including a
separate presentation of the Adviser's profitability relative to that of several
publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and the Adviser's separate account
advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the Fund's
performance and any material portfolio manager and strategy changes that may
have affected the Fund in the prior year, as well as the Fund's "fact sheets"
prepared by the Adviser providing salient data about the Fund and the Adviser's
views concerning the issues of breakpoints in the management fee schedule of the
Fund and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board of
Trustees, including the Independent Trustees, did not identify any single factor
as all-important or controlling, and individual Trustees did not necessarily
attribute the same weight or importance to each factor. The Trustees determined
that the terms and conditions of the Fund's advisory agreement and the
compensation to the Adviser provided therein were fair and reasonable in light
of the services performed, expenses incurred and such other matters as the
Trustees considered relevant in the exercise of their reasonable judgment. The
following summary does not detail all the matters that were considered. Some of
the factors that figured prominently in the Trustees' determination are
described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Fund by the Adviser. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also mindful of
the fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust the Adviser, under the supervision of the Board, to manage the
portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment management,
administrative, compliance and related services provided by the Adviser. The
Board determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees reviewed the background and experience of the Fund's two portfolio
managers and also met with senior management of the Adviser to receive an
overview of its organization, personnel, resources and strategic plans. Among
other things, the Trustees considered the size, education and experience of the
Adviser's investment staff, technological infrastructure and overall
responsiveness to changes in market conditions. The Board determined that the
Adviser had the expertise and resources to manage the Fund effectively.
Investment Performance
The Board considered the investment performance of the Fund against a peer group
of investment companies selected by the Adviser with input from the Trustees.
The Board also compared the Fund's investment performance against the average
performance of a larger universe of funds regarded by Lipper as having similar
investment objectives and considered the Fund's performance rankings against
that universe. In addition to the information received by the Board for at the
September 22, 2005 Board meeting, the Trustees received similar detailed
comparative performance information for the Fund at each regular Board meeting
during the year.
20
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Board considered the Fund's performance for the three- and seven-month
periods ended July 31, 2005 based on the Lipper materials provided to the Board
at the September 22, 2005 meeting. The Board found that the Fund slightly
underperformed its peer group average returns for the three-month period (3.64%
vs. 4.94%) and seven-month period (1.50% vs. 2.37%). The Board noted that the
Fund recently commenced operations and had a very short performance history and
that the other funds in its peer group were substantially larger than the Fund.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser. The
Lipper data presenting the Fund's "net advisory fees" included fees paid by the
Fund, as calculated by Lipper, for administrative services provided by Mellon
Bank, N.A., the Trust's custodian. Such reporting was necessary, according to
Lipper, to allow the Board to compare the Fund's advisory fees to those peers
that include administrative fees within a blended advisory fee.
The Fund's contractual advisory fee was 0.750%, lowest in that entire peer
group, the median fee of which was 0.975%. The Fund's actual advisory fee, after
giving effect to expense limitations, was 0.142%, lowest in its entire peer
group of funds, and well below the median, which was 0.955%. Based on the Lipper
data, as well as other factors discussed at the September 22, 2005 meeting, the
Board determined that the Fund's advisory fee is reasonable relative to its peer
group averages, both with and without giving effect to expense limitations.
The Board also compared the fees payable by the Fund relative to those payable
by separate account clients of the Adviser. Based on the additional scope and
complexity of the services provided and responsibilities assumed by the Adviser
with respect to the Fund relative to these other types of clients, the Board
concluded that the fees payable under the advisory agreement were reasonable.
The Board also considered the Fund's total expense ratio and compared it to that
of its peer group of similar funds. The Board found that the actual total
expense ratio of 0.894% (after giving effect to expense limitations) was lower
than the median total expense ratio of the peer group of 1.123% notwithstanding
the fact that all of the other funds in the peer group were larger than the
Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Fund and the
Mellon Institutional Funds as a group, as well as the methodology used to
compute such profitability, and the various direct and indirect expenses
incurred by the Adviser or its affiliated investment adviser, Standish Mellon
Asset Management Company LLC ("Standish Mellon") in managing the Fund and other
funds in the Mellon Institutional Funds family of funds. The Independent
Trustees had observed that, based on the profitability information submitted to
them by the Adviser, the Adviser incurred losses in managing many of the
investment companies in the Mellon Institutional Funds family of funds,
including the Fund, and that among those funds that were profitable to the
Adviser, several generated only marginal profitability for the firm. The
Trustees observed that the Adviser had incurred losses in operating the Fund in
2004 its first year of operation.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed Income
Portfolio, the largest fund in the complex, already had breakpoints in its fee
arrangement that reflected economies resulting from its size. The Board
concluded that, at existing asset levels and considering current assets growth
projections, the implementation of fee breakpoints or other fee reductions with
respect to the Fund was not necessary at this time. They requested, however,
that management consider the issue of future breakpoints across the Mellon
Institutional Funds complex and respond to the Independent Trustees and to
present a proposal for such breakpoints or, in each case as applicable,
management's rationale as to why such future breakpoints are not necessary or
appropriate for a particular Fund.
In response, the Adviser has subsequently proposed for the Independent Trustees'
consideration, forward-looking fee schedules for various types of funds across
the Mellon Institutional Funds complex. These schedules contain asset-based
breakpoints which vary based on the investment strategy of fund and other
factors considered by the Adviser to be relevant to the issue of potential
future economies of scale. The Independent Trustees and their counsel have taken
this proposal under advisement.
21
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Mellon Institutional Funds as a group, including
revenues received by Mellon affiliates in consideration of custodial,
administrative, transfer agency and securities lending services provided by such
affiliates to the Funds. In each case, such affiliates were selected by the
Board on the basis of a comparative analysis of their capabilities and fees
relative to those of unaffiliated competitors. In addition, the Board, including
a majority of the Independent Trustees, conduct an examination annually of each
such arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Funds; (iii) the nature and quality of the services provided
by the affiliate pursuant to the agreement are at least equal to those provided
by other, unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for its
services are fair and reasonable in light of the usual and customary charges
imposed by other, unaffiliated firms for services of the same nature and
quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Funds and
the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Fund's advisory agreement and the
compensation to the Adviser provided therein are fair and reasonable and, thus,
in approving the continuation of the agreement for one-year period.
22
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, Decision 34 None $369
c/o Decision Resources, Inc. since Resources, Inc. ("DRI")
260 Charles Street 11/3/1986 (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 34 None $398
c/o Essex Street Associates since Associates (family
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph Maier, 34 None $369
c/o Harvard University since Professor of Political
Littauer Center 127 9/13/1989 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee Trustee, Mertens House, 34 None $369
P.O. Box 2333 since Inc. (hospice)
New London, NH 03257 11/3/1986
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 34 None $0
The Boston Company President and Operating Officer of The
Asset Management, LLC Chief Executive Boston Company Asset
One Boston Place Officer Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief
Financial Officer, MAM
23
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management, LLC
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of Compliance,
Mellon Asset Management President Mellon Asset Management ("MAM"); formerly Manager
One Boston Place of Shareholder Services, MAM, and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds Distributor
One Boston Place Officer and Mellon Optima L/S Strategy Fund, LLC; formerly
Boston, MA 02108 Director, Blackrock, Inc., Senior Vice President,
4/8/57 State Street Research & Management Company
("SSRM"), and Vice President, SSRM
24
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[LOGO] Mellon
--------------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6612SA0306
[LOGO] Mellon
---------------------------
Mellon Institutional Funds
Semiannual Report
Mellon Institutional
Market Neutral Fund
- --------------------------------------------------------------------------------
December 21, 2005 (commencement of
operations) to March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (December 21, 2005 (commencement of
operations) to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid During
Beginning Account Value Ending Account Value Period+ December 21,
December 21, 2005 March 31, 2006 2005 to March 31, 2006
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,010.00 $ 6.72
Hypothetical (5% return
per year before expenses) $1,000.00 $1,012.76 $12.24
- --------------------
+ The "Actual" expense calculation is equal to the Fund's annualized expense
ratio of 2.44%, multiplied by the average account value over the period,
multiplied by 100/365 (to reflect the number of days from commencement of
operations to March 31, 2006). The "Hypothetical" expense calculation is
equal to the Fund's annualized expense ratio of 2.44% multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
number of days from commencement to March 31, 2006).
3
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Long Holdings* Sector Investments
- -----------------------------------------------------------------------------------------------------------
Ohio Casualty Corp. Financial 1.8%
XTO Energy, Inc. Energy 1.7
Louisana-Pacific Basic Materials 1.7
International Business Machines Corp. Information Technology 1.6
Thomas & Betts Corp. Industrial 1.6
SAFECO Corp. Financial 1.6
Molex, Inc. Industrial 1.6
Pepsi Bottling Group, Inc. Consumer Noncyclical 1.6
Dade Behring Holdings, Inc. Health Care 1.6
Valspar Corp. Basic Materials 1.5
-----
16.3%
* Excluding short-term investments and investment of cash
Percentage of
Top Ten Short Holdings* Sector Net Assets
- ----------------------------------------------------------------------------------------------------------
Eastman Kodak Co. Consumer Services 2.0%
Cytec Industries, Inc. Basic Materials 1.9
Dow Jones & Co., Inc. Consumer Services 1.9
Forest City Enterprises, Inc. Consumer Cyclical 1.9
American Power Conversion Corp. Industrial 1.8
DPL, Inc. Utilities 1.8
Plains Exploration & Production Co. (a) Energy 1.7
Monsanto Co. Basic Materials 1.7
El Paso Corp. Energy 1.7
Scientific Games Corp. (a) Consumer Services 1.7
----
18.1%
* Excluding short-term investments and investment of cash collateral.
Net Equity
Economic Sector Allocation* Long% Short% Exposure%
- -------------------------------------------------------------------------------------------------------
Basic Materials 8.2 (8.8) (0.6)
Commerical Services 5.7 (6.3) (0.6)
Consumer Cyclical 11.3 (11.9) (0.6)
Consumer Noncyclical 5.0 (4.6) 0.4
Consumer Services 5.4 (6.5) (1.1)
Energy 8.7 (9.8) (1.1)
Financial 10.3 (9.8) 0.5
Health Care 8.9 (8.2) 0.7
Industrial 8.9 (9.3) (0.4)
Information Technology 3.5 0.0 3.5
Technology 10.5 (12.3) (1.8)
Telecommunication Services 2.0 (2.1) (0.1)
Transportation 3.9 (3.7) 0.2
Utilities 5.8 (4.6) 1.2
----- ------ ----
98.1% (97.9)% 0.2%
* Excluding short-term investments and investment of cash collateral.
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
EQUITIES--98.1%
Basic Materials--8.2%
3M Co. (a) 200 $ 15,138
Avery Dennison Corp. (a) 600 35,088
Bemis Co. (a) 400 12,632
Louisana-Pacific (a) 1,600 43,520
Nucor Corp. (a) 200 20,958
Phelps Dodge Corp. (a) 300 24,159
Rohm & Haas Co. (a) 200 9,774
Steel Dynamics, Inc. (a) 100 5,673
Valspar Corp. (a) 1,400 39,018
--------
205,960
--------
Commercial Services--5.7%
Career Education Corp. (a)(b) 300 11,319
CSG Systems International , Inc. (a)(b) 1,400 32,564
DST Systems, Inc. (a)(b) 300 17,382
Fair Issac Corp. (a) 200 7,924
Fiserv, Inc. (a)(b) 400 17,020
Korn/Ferry International (a)(b) 700 14,273
Manpower, Inc. (a) 100 5,718
MPS Group, Inc. (a)(b) 500 7,650
Robert Half International, Inc. (a) 500 19,305
The Corporate Executive Board Co. (a) 100 10,090
--------
143,245
--------
Consumer Cyclical--11.3%
Autonation, Inc. (a)(b) 1,100 23,705
Barnes & Noble, Inc. (a) 800 37,000
Claire's Stores, Inc. (a) 100 3,631
Cummins, Inc. (a) 200 21,020
Family Dollar Stores, Inc. (a) 400 10,640
Furniture Brands International, Inc. (a) 300 7,353
Goodyear Tire & Rubber Co/The (a)(b) 2,500 36,200
Herman Miller, Inc. (a) 200 6,482
KB Home (a) 200 12,996
Lowe's Companies, Inc. (a) 600 38,664
Paccar, Inc. (a) 100 7,048
Pacific Sunware of California (a)(b) 200 4,432
Payless Shoesource, Inc. (a)(b) 700 16,023
Sotheby's Holdings, Inc., Class A (a)(b) 500 14,520
Target Corp. (a) 100 5,201
Tempur-Pedic International, Inc. (a)(b) 700 9,905
Thor Industries, Inc. (a) 100 5,336
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Consumer Cyclical (continued)
Tiffany & Co. (a) 200 $ 7,508
Toll Brothers, Inc. (a)(b) 500 17,315
--------
284,979
--------
Consumer Noncyclical--5.0%
Del Monte Foods Co. (a) 1,200 14,232
Estee Lauder Companies, Class A (a) 500 18,595
Hormel Foods Corp. (a) 1,100 37,180
McCormick & Co., Inc. (a) 100 3,386
Pepsi Bottling Group, Inc. (a) 1,300 39,507
Pilgrim's Pride Corp. (a) 1 300 6,501
Safeway, Inc. (a) 300 7,536
--------
126,937
--------
Consumer Services--5.4%
Aramark Corp., Class B Shares (a) 900 26,586
Brinker International, Inc. (a) 200 8,450
Darden Restaurants, Inc. (a) 300 12,309
Entercom Communications Corp. (a) 100 2,792
Harley-Davidson, Inc. (a) 400 20,752
Hilton Hotels Corp. (a) 500 12,730
International Game Technology (a) 200 7,044
Mattel, Inc. (a) 500 9,065
Media General, Inc., Class A (a) 200 9,324
Meredith Corp. (a) 500 27,895
--------
136,947
--------
Energy--8.7%
Apache Corp. (a) 300 19,653
BJ Services Co. (a) 200 6,920
Chesapeake Energy Corp. (a) 400 12,564
ConocoPhillips (a) 300 18,945
Exxon Mobil Corp. (a) 200 12,172
Nabors Industries Ltd. (a)(b) 500 35,790
Patterson-UTI Energy, Inc. (a) 1,000 31,960
Sunoco, Inc. (a) 200 15,514
Tidewater, Inc. (a) 200 11,046
Unit Corp. (a)(b) 200 11,150
XTO Energy, Inc. (a) 1,000 43,570
--------
219,284
--------
Financial--10.3%
Cincinnati Financial Corp. (a) 500 21,035
CIT Group, Inc. (a) 200 10,704
Countrywide Financial Corp. (a) 400 14,680
Fidelity National Financial, Inc. (a) 300 10,659
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Financial (continued)
First American Corp. (a) 200 $ 7,832
IndyMac Bancorp, Inc. (a) 300 12,279
Lehman Brothers Holdings, Inc. (a) 200 28,906
MGIC Investment Corp. (a) 100 6,663
Nationwide Financial Services (a) 300 12,906
Ohio Casualty Corp. (a) 1,400 44,380
Old Republic International Corp. (a) 1,000 21,820
Prudential Financial, Inc. (a) 200 15,162
SAFECO Corp. (a) 800 40,168
The Bear Stearns Companies, Inc. (a) 100 13,870
--------
261,064
--------
Health Care--8.9%
Aetna, Inc. (a) 700 34,398
Amerisourcebergen Corp. (a) 600 28,962
Barr Pharmaceuticals, Inc. (a)(b) 100 6,298
Community Health Systems, Inc. (a)(b) 600 21,690
Dade Behring Holdings, Inc. (a) 1,100 39,281
Endo Pharmaceuticals Holdings, Inc. (a)(b) 1,000 32,810
Health Management Associates, Inc. (a) 500 10,785
Kinetic Concepts, Inc. (a)(b) 200 8,234
King Pharmaceuticals, Inc. (a)(b) 600 10,350
Mylan Laboratories, Inc. (a) 700 16,380
Stryker Corp. (a) 200 8,868
Wellpoint, Inc. (a)(b) 100 7,743
--------
225,799
--------
Industrial--8.9%
Alliant Techsystems, Inc. (a)(b) 100 7,717
Allied Waste Industries, Inc. (a)(b) 1,000 12,240
American Standard Cos, Inc. (a) 100 4,286
Black & Decker Corp. (a) 300 26,067
Illinois Tool Works, Inc. (a) 100 9,631
Ingersoll-Rand Co., Class A (a) 300 12,537
Joy Global, Inc. (a) 200 11,954
L-3 Communications Holdings, Inc. (a) 100 8,579
Lockheed Martin Corp. (a) 300 22,539
Molex, Inc. (a) 1,200 39,840
Terex Corp. (a) 100 7,924
Thomas & Betts Corp. (a)(b) 800 41,104
Timken Co. (a) 400 12,908
WW Grainger, Inc. (a) 100 7,535
--------
224,861
--------
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Information Technology--3.5%
Ingram Micro, Inc. Class A (a)(b) 900 $ 18,000
International Business Machines Corp. (a) 500 41,235
Micrel, Inc. (a)(b) 2,000 29,640
---------
88,875
---------
Technology--10.5%
Advent Software, Inc. (a)(b) 900 25,578
Avnet, Inc. (a)(b) 400 10,152
CommScope, Inc. (a)(b) 900 25,695
EMC Corp./Massachusetts (a) 1,100 14,993
Jabil Circuit, Inc. (a)(b) 700 30,002
Lam Research Corp. (a)(b) 400 17,200
Mettler-Toledo International, Inc. ADR (a)(b) 400 24,136
Microchip Technology, Inc. (a) 200 7,260
National Semiconductor Corp. (a) 1,200 33,408
NCR Corp. (a)(b) 500 20,895
Nvidia Corp. (a)(b) 600 34,356
Plexus Corp. (a)(b) 600 22,542
---------
266,217
---------
Telecommunication Services--2.0%
Leucadia National Corp. (a) 300 17,898
Telephone & Data Systems, Inc. (a) 800 31,552
---------
49,450
---------
Transportation--3.9%
Alaska Air Group, Inc. (a)(b) 600 21,270
Hunt (JB) Transport Services, Inc. (a) 1,300 28,002
Norfolk Southern Corp. (a) 500 27,035
Southwest Airlines Co. (a) 1,200 21,588
---------
97,895
---------
Utilities--5.8%
Duke Energy Corp. (a)(b) 1,000 29,150
Edison International (a) 300 12,354
Energen Corp. (a) 600 21,000
Oneok, Inc. 1,000 32,250
Sierra Pacific Resources (a)(b) 700 9,667
TXU Corp. (a) 800 35,808
WPS Resources Corp. (a) 100 4,922
---------
145,151
---------
TOTAL EQUITIES (Cost $ 2,383,202) 2,476,664
---------
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Rate Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--8.5%
AFFILIATED INVESTMENTS--8.5%
Dreyfus Institutional Preferred Plus Money Market Fund (c)(d)(Cost $ 214,474) 4.770% 214,474 $ 214,474
TOTAL INVESTMENTS--106.6% (Cost $ 2,597,676) 2,691,138
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(6.6%) (165,743)
-----------
NET ASSETS--100% $ 2,525,395
===========
Notes to Schedule of Investments:
(a) Denotes all or part of security segregated as collateral.
(b) Non-income producing security.
(c) Stated rate is the seven day yield for the fund at March 31, 2006.
(d) Affiliated institutional money market fund.
EQUITIES SOLD SHORT--(97.9%)
Basic Materials--(8.8%)
Bowater, Inc. (400) $ (11,832)
Cabot Corp. (1,200) (40,788)
Carlisle Companies, Inc. (100) (8,180)
Cytec Industries, Inc. (800) (48,008)
El Du Pont de Nemours & Co. (200) (8,442)
Massey Energy Minerals Technologies, Inc. (200) (7,214)
Monsanto Co. (200) (11,682)
Owens-Illinois, Inc. (b) (500) (42,375)
Smurfit-Stone Container Corp. (b) (1,000) (17,370)
Tronox, Inc., Class B (b) (2,000) (27,140)
(60) (1,019)
-----------
(224,050)
-----------
Commerical Services--(6.3%)
Cognizant Technology Solutions Corp. (b) (400) (23,796)
Copart, Inc. (b) (300) (8,235)
DeVry, Inc. (b) (300) (6,831)
Interpublic Group of Cos, Inc. (b) (1,800) (17,208)
Lamar Advertising Co. (b) (600) (31,572)
Regis Corp. (700) (24,136)
RHDonnelley Corp. (b) (700) (40,761)
Kelly Services, Inc. (200) (5,434)
-----------
(157,973)
-----------
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Consumer Cyclical--(11.9%)
Autozone, Inc. (b) (100) $ (9,969)
Bandag, Inc. (500) (20,935)
Best Buy Co., Inc. (1,200) (11,186)
Borders Group, Inc. (600) (15,144)
Chico's FAS, Inc. (b) (400) (16,256)
Coach, Inc. (b) (200) (6,916)
Cooper Tire & Rubber Corp. (1,800) (25,812)
CVS Corp. (700) (20,909)
Forest City Enterprises, Inc. (1,000) (47,150)
HNI Corp. (200) (11,800)
Johnson Controls, Inc. (100) (7,593)
Ltd. Brands (300) (7,338)
MDU Resources Group, Inc. (600) (20,070)
Mohawk Industries, Inc. (b) (200) (16,144)
OfficeMax, Inc. (400) (12,068)
Polo Ralph Lauren Corp. (100) (6,061)
Quicksilver, Inc. (b) (900) (12,474)
Urban Outfitters, Inc. (b) (500) (12,270)
VF Corp. (200) (11,380)
Walgreen Co. (200) (8,626)
---------
(300,101)
---------
Consumer Noncyclical--(4.6%)
Hershey Co./The (800) (41,784)
HJ Heinz Co. (400) (15,168)
Procter & Gamble Co. (300) (17,286)
Ruddick Corp. (700) (17,017)
WM Wrigley Jr Co. (400) (25,600)
---------
(116,855)
---------
Consumer Services--(6.5%)
Dow Jones & Co., Inc. (1,200) (47,160)
Eastman Kodak Co. (1,800) (51,192)
Harrah's Entertainment, Inc. (200) (15,592)
Outback Steakhouse, Inc. (200) (8,800)
Scientific Games Corp. (b) (1,200) (42,156)
---------
(164,900)
---------
Energy--(9.8%)
Amerada Hess Corp. (200) (28,480)
Baker Hughes, Inc. (200) (13,680)
El Paso Corp. (3,500) (42,175)
FMC Technologies, Inc. (b) (700) (35,854)
Halliburton Co. (100) (7,302)
Kerr-McGee Corp. (300) (28,644)
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Energy (continued)
Plains Exploration & Production Co. (b) (1,100) $ (42,504)
Questar Corp. (300) (21,015)
Range Resources Corp. (700) (19,117)
Southwestern Energy Co. (b) (300) (9,657)
---------
(248,428)
---------
Financial--(9.8%)
Allstate Corp./The (700) (36,477)
AmerUs Group Co. (100) (6,024)
Arthur J Gallagher & Co. (1,300) (36,153)
Everest Re Group Ltd. (400) (37,348)
Fannie Mae (200) (10,280)
Janus Capital Group, Inc. (400) (9,268)
JPMorgan Chase & Co. (100) (4,164)
Legg Mason, Inc. (100) (12,533)
People's Bank/Bridgeport CT (700) (22,925)
Progressive Corp./The (200) (20,852)
The Bank of New York Company, Inc. (600) (21,624)
The St. Paul Travelers Companies, Inc. (700) (29,253)
---------
(246,901)
---------
Health Care--(8.2%)
Allergan, Inc. (200) (21,700)
Amerigroup Corp. (b) (300) (6,312)
Bristol-Myers Squibb Co. (400) (9,844)
Covance, Inc. (b) (700) (41,125)
Davita, Inc. (b) (300) (18,063)
Forest Laboratories, Inc. (b) (600) (26,778)
Gen-Probe, Inc. (b) (200) (11,024)
Medtronic, Inc. (100) (5,075)
Par Pharmaceutical Cos., Inc. (b) (1,300) (36,634)
Perrigo Co. (700) (11,417)
Pfizer, Inc. (200) (4,984)
Resmed, Inc. (b) (200) (8,796)
Schering-Plough Corp. (300) (5,697)
---------
(207,449)
---------
Industrial--(9.3%)
American Power Conversion Corp. (2,000) (46,220)
Cooper Industries Ltd. (100) (8,690)
Honeywell International, Inc. (500) (21,385)
Hubbell, Inc. (500) (25,630)
Pall Corp. (1,000) (31,190)
Spectrum Brands, Inc. (b) (1,300) (28,236)
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Industrial (continued)
Stericycle, Inc. (b) (100) $ (6,762)
Tecumseh Products Co. (b) (1,200) (29,448)
Textron, Inc. (400) (37,356)
----------
(234,917)
----------
Technology--(12.3%)
Ametek, Inc. (600) (26,976)
Avid Technology, Inc. (b) (700) (30,422)
CA, Inc. (1,300) (35,373)
Cypress Semiconductor Corp. (b) (1,800) (30,510)
Diebold, Inc. (100) (4,110)
Electronic Arts, Inc. (b) (500) (27,360)
FLIR Systems, Inc. (b) (900) (25,569)
International Rectifier Corp. (b) (900) (37,287)
Macrovision Corp. (b) (1,000) (22,150)
Silicon Laboratories, Inc. (b) (400) (21,980)
SRA International, Inc. (b) (200) (7,546)
Symbol Technologies, Inc. (1,500) (15,870)
Tektronix, Inc. (300) (10,713)
Zebra Technologies Corp. (b) (300) (13,416)
----------
(309,282)
----------
Telecommunication Services--(2.1%)
American Tower Corp., Class A Shares (b) (1,000) (30,320)
NII Holdings Inc. (b) (200) (11,794)
US Cellular Corp. (b) (200) (11,872)
----------
(53,986)
----------
Transportation--(3.7%)
Airtran Holdings, Inc. (b) (300) (5,433)
Alexander & Baldwin, Inc. (600) (28,608)
Expeditors International Washington, Inc. (400) (34,556)
GATX Corp. (100) (4,129)
The Brink's Co. (400) (20,304)
----------
(93,030)
----------
Utilities--(4.6%)
Ameren Corp. (200) (9,964)
Aqua America, Inc. (800) (22,256)
DPL, Inc. (1,700) (45,900)
Exelon Corp. (700) (37,031)
----------
(115,151)
----------
Total Equities Sold Short (Proceeds $2,387,575) (2,473,023)
----------
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A):
Unaffiliated investments (cost $2,383,202) $2,476,664
Affiliated investments (Note 1G) (cost $214,474) 214,474
Receivable from brokers for proceeds on securities sold short (Note 1F) 2,387,575
Interest and dividends receivable 7,793
Receivable for investments sold 193,541
----------
Total assets 5,280,047
Liabilities
Due to prime broker $ 36,574
Payable for investments purchased 208,239
Securities sold short, at value (proceeds $2,387,575) (Note 1F) 2,473,023
Accrued accounting, custody, administration and transfer agent fees (Note 2) 19,052
Accrued professional fees 13,510
Accrued trustees' fees (Note 2) 1,173
Accrued chief compliance officer fee (Note 2) 292
Other accrued expenses and liabilities 2,789
---------
Total liabilities 2,754,652
----------
Net Assets $2,525,395
==========
Net Assets consist of:
Paid-in capital $2,500,000
Accumulated net realized loss (947)
Undistributed net investment income 18,327
Net unrealized appreciation 8,015
----------
Total Net Assets $2,525,395
==========
Shares of beneficial interest outstanding 125,000
==========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.20
==========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Statements of Operations
For the Period December 21, 2005 (commencement of operations) to March 31, 2006
(Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $ 22,835
Dividend income from affiliated investments (Note 1G) 3,039
Dividend income 9,115
--------
Total investment income 34,989
Expenses
Investment advisory fee (Note 2) $ 6,829
Accounting, custody, administration and transfer agent fees (Note 2) 23,516
Registration fees 9,187
Professional fees 19,435
Trustees' fees and expenses (Note 2) 1,193
Insurance expense 1,767
Dividends on securities sold short (Note 1F) 8,126
Miscellaneous expenses 6,450
-------
Total expenses 76,503
Deduct:
Waiver of invesment advisory fee (Note 2) (6,829)
Reimbursement of Fund operating expenses (Note 2) (53,012)
-------
Total deduction (59,841)
-------
Net expenses 16,662
--------
Net investment income 18,327
--------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 48,796
Short sales (49,743)
-------
Net realized gain (loss) (947)
Change in unrealized appreciation (depreciation) on:
Investments 93,462
Short sales (85,447)
-------
Change in net unrealized appreciation (depreciation) 8,015
--------
Net realized and unrealized gain (loss) on investments 7,068
--------
Net Increase in Net Assets from Operations $ 25,395
========
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
(Unaudited)
-----------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 18,327
Net realized gain (loss) (947)
Change in net unrealized appreciation (depreciation) 8,015
----------
Net increase (decrease) in net assets from investment operations 25,395
----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 2,500,000
Cost of shares redeemed --
----------
Net increase (decrease) in net assets from Fund share transactions 2,500,000
----------
Total Increase in Net Assets 2,525,395
Net Assets
At beginning of period --
----------
At end of period (including net investment income of $18,327) $2,525,395
==========
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
(Unaudited)
-----------------
Net Asset Value, Beginning of Period $ 20.00
----------
From Operations:
Net investment income* (a) 0.15
Net realized and unrealized gain (loss) on investments 0.05
----------
Total from operations 0.20
----------
Net Asset Value, End of Period $20.20
==========
Total Return (b) 1.00%
Ratios/Supplemental data:
Expenses (to average daily net assets)
including dividends on securities sold short* 2.44%(c)
Expenses (to average net assets)
excluding dividends on securities sold short* 1.25%(c)
Net Investment Income (to average daily net assets) 2.68%(c)
Portfolio Turnover 196%(d)
Net Assets, End of Period (000's omitted) $2,525
- --------
* 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 (a) $(0.33)
Ratios (to average daily net assets):
Expenses including dividends on securities sold short 11.20%(c)
Expenses excluding dividends on securities sold short 10.01%(c)
Net investment income (loss) (6.08%)(c)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(c) Computed on an annualized basis.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral 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
Mellon Institutional Market Neutral Fund (the "Fund"), which commenced
operations on December 21, 2005, is a separate diversified investment
series of the Trust.
The objective of the Fund is to achieve investment returns exceeding the
3-month U.S. Treasury Bill from a broadly diversified portfolio of U.S.
stocks while neutralizing the general risks associated with stock market
investing. The Fund seeks to achieve its objective by investing, under
normal circumstances, at least 80% of net assets in equity securities.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, 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 days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method
on debt securities with greater than sixty days to maturity when required
for federal income tax purposes. Dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences which may result in reclassifications, are primarily due to
differing treatments for wash sales and realized and unrealized gains or
losses on futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among the funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
17
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
F. Securities Sold Short
The Fund will sell a security short by borrowing it from a third party and
selling it at the then-current market price. The fund is then obligated to
buy the security on a later date in order to return the security to the
lender. Short sales, therefore, involve the risk that the fund will incur a
loss by subsequently having to buy a security at a higher price than the
price at which the fund previously sold the security short. Moreover,
because a fund's loss on a short sale would arise from increases in the
value of the security sold short, the extent of such loss, like the
potential increase in the price of the security sold short, is
theoretically unlimited. By contrast, a fund's risk of loss on a long
position arises from the possible decrease in the value of the security and
therefore is limited by the fact that a security's value cannot drop below
zero. The fund may be required to pay a fee to borrow a security sold short
and pay over to the lender any payments received from the security
borrowed. These short sales are collateralized by cash equivalents or
securities held with the Fund's prime broker and segregated account at the
Fund's custodian. The collateral required is determined daily by reference
to the market value of the short positions. Dividend expense on short sales
is treated as an expense on the Statement of Operations. Liabilities for
securities sold short are reported at market value in the Statement of
Assets and Liabilities.
G. Affiliated issuers
Affiliated issuers are investment companies advised by Franklin Portfolio
Associates (Franklin Portfolio), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to Franklin Portfolio for overall
investment advisory, administrative services, and general office
facilities, is paid monthly at the annual rate of 1.00% of the Fund's
average daily net assets. Franklin Portfolio voluntarily agreed to limit
the Fund's total annual operating expenses (excluding brokerage
commissions, dividend expense on short sales, taxes and extraordinary
expenses) to 1.25% of the Fund's average daily net assets for the period
December 21, 2005 (commencement of operations) to March 31, 2006. Pursuant
to this arrangement, for the period December 21, 2005 (commencement of
operations) to March 31, 2006, Franklin Portfolio voluntarily waived its
investment advisory fee in the amount of $6,829 and reimbursed the Fund for
$53,012 of its operating expenses. This arrangement is voluntary and
temporary and may be discontinued or revised by Franklin Portfolio at any
time.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of Franklin
Portfolio, to provide personnel and facilities to perform transfer agency
and certain shareholder services for the Fund. For these services the Fund
pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction
based fees, as well as, out-of-pocket expenses. Pursuant to this agreement
the Fund was charged $1,643 for the period December 21, 2005 (commencement
of operations) to March 31, 2006.
The Fund entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of Mellon Financial Corporation and an affiliate
of Franklin Portfolio, to provide custody, fund administration and fund
accounting services for the Fund. For these services, the Fund pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund was charged
$21,873 during the period December 21, 2005 (commencement of operations) to
March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the period December 21, 2005
(commencement of operations) to March 31, 2006, the Fund was charged
$1,079. No other 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to retirement
plans and their participants. As compensation for such services, the Fund
may pay each Plan Administrator an administrative service fee in an amount
of up to 0.15% (on an annualized basis) of the Fund's average daily net
assets attributable to Fund shares that are held in accounts serviced by
such Plan Administrator. The Fund's adviser or its affiliates may pay
additional compensation from their own resources to Plan Administrators and
other entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts.
18
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period December 21, 2005 (commencement of operations)
to March 31, 2006 were as follows:
Purchases Sales
---------- -----------
Investments (non-U.S. Government Securities) $4,744,549 $ 4,758,064
========== ===========
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
-----------------
Shares sold 125,000
-------
Net increase (decrease) 125,000
=======
At March 31, 2006, one shareholder of record (MBC Investments Corp., a
wholly-owned subsidiary of Mellon Financial Corporation and an affiliate of
the Fund) held 100% of the total outstanding shares of the Fund. Investment
activities of this shareholder could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the period December 21, 2005 (commencement of
operations) to March 31, 2006, the Fund did not collect any redemption
fees.
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $4,985,251
==========
Unrealized appreciation $ 204,761
Unrealized depreciation (196,746)
----------
Net unrealized appreciation (depreciation) $ 8,015
==========
19
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Futures contracts
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to margin requirements the Fund deposits
either cash or securities in an amount equal to a certain percentage of the
contract amount. Subsequent payments are made or received by the Fund each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. There are several risks in connection with the
use of futures contracts as a hedging device. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments or indices, which may not correlate with changes in the value
of hedged investments. Buying futures tends to increase the Fund's exposure
to the underlying instrument, while selling futures tends to decrease the
Fund's exposure to the underlying instrument or hedge other investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparty does
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to seek to manage its exposure to certain
markets and to changes in securities prices and foreign currencies. Gains
and losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
During the period December 21, 2005 (commencement of operations) to March
31, 2006, the Fund did not hold any open financial futures contracts.
(7) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust") are parties to
a committed line of credit facility, which enables each fund/portfolio to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating Fund/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of 0.060 of 1% on the committed amount, is
allocated ratably among the participating funds/portfolios at the end of
each quarter. For the period December 21, 2005 (commencement of operations)
to March 31, 2006, the expense allocated to the Fund was $424.
During the period December 21, 2005 (commencement of operations) to March
31, 2006, the Fund did not borrow under the credit facility.
20
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Factors Considered by the Trustees in Approving the Investment Advisory
Agreements
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the Fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
Fund's advisory agreement and related fees initially and, after a two year
initial term, on an annual basis. At a meeting held on October 18, 2005,
the Board of Trustees, including all of the Independent Trustees voting
separately in person, determined that the terms of the Fund's proposed
investment advisory agreement were fair and reasonable and that the
agreement is in the best interest of the Fund.
The Independent Trustees considered the initial approval of the advisory
agreement of the Fund in connection with their broader consideration of the
annual renewal of the advisory agreements of the other funds of the Trust,
in two separate meetings held on September 22 and October 18, 2005. On each
date, the Independent Trustees held executive sessions in which they met
privately without representatives of Franklin Portfolio Associates, LLC
("Franklin Portfolio"), the Fund's investment adviser, or Mellon Financial
Corporation ("Mellon") present and were advised throughout the process by
their own legal counsel.
In conducting this review and in making their determinations, the
Independent Trustees received from Franklin Portfolio a broad range of
information compiled using an information request list prepared on their
behalf by their own legal counsel in connection with their annual approval
of advisory arrangements with respect to the funds comprising the Trust
generally.
This information included information about Franklin Portfolio, its
personnel, operations and financial results and information about the
Mellon organization. The Trustees also discussed in person with
representatives of Franklin Portfolio the adviser's investment strategy and
process, and the Fund's proposed operations under Franklin Portfolio's
management. The information requested by the Independent Trustees and
reviewed by the entire Board included:
1. Financial and Economic Data: Franklin Portfolio's income statement, as
well as a profitability analysis of Franklin Portfolio, including a
separate presentation of the comparative profitability of several publicly
traded investment advisers;
2. Management Teams and Operations: Franklin Portfolio's Form ADV, as well
as information concerning its executive management and portfolio management
personnel and overall organizational structure, brokerage and soft dollar
policies and practices;
3. Comparative Performance and Fees: Analyses regarding the performance of
similarly managed accounts of Franklin Portfolio, as well as the Fund's
proposed management fee and estimated expense ratio compared to those of
comparable funds and Franklin Portfolio's separate account advisory fee
schedules; and
4. Other Benefits: The benefits flowing to Mellon and its affiliates in the
form of fees for transfer agency, custody, administration and securities
lending services provided to the Fund and the other funds of the Trust by
affiliates of Mellon.
In considering the approval of the Fund's advisory agreement, the Board of
Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to Franklin Portfolio provided therein are
fair and reasonable, and they approved the advisory agreement for an
initial two-year period. Some of the factors that figured prominently in
the Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
to be provided to the Fund by Franklin Portfolio. In their deliberations as
to the approval of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders would be choosing to entrust Franklin Portfolio, under the
supervision of the Trustees, to manage the portion of their assets invested
in the Fund.
The Trustees reviewed the background and experience of the Fund's portfolio
manager(s) and received an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered
the size, education and experience of Franklin Portfolio's investment
staff.
In connection with the proposed advisory agreement with Franklin Portfolio
with respect to the Fund, the Trustees considered the fact that Franklin
Portfolio had been in operation since 1982 and had over $28 billion in
assets under management as of June 30, 2005, including $275 million in the
market neutral strategy proposed to be utilized by the Fund. The Trustees
received a presentation by Franklin Portfolio concerning its management and
investment personnel, its investment philosophy and investment strategy,
including specifically its experience with the operation of the long and
short positions of its market neutral product.
The Trustees determined that the services proposed by Franklin Portfolio to
be provided to the Fund were of high quality and at least commensurate with
industry standards. The Board determined that Franklin Portfolio had the
expertise and resources to manage the Fund effectively.
21
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Factors Considered by the Trustees in Approving the Investment Advisory
Agreements
- --------------------------------------------------------------------------------
Investment Performance
The Board compared Franklin Portfolio's historical composite performance
for similarly managed funds and other similarly managed investment vehicles
to applicable market indices or other benchmarks. They also reviewed pro
forma investment results of Franklin Portfolio calculated by applying the
Fund's proposed total expense ratio (after giving effect to proposed
expense caps) to Franklin Portfolio's gross composite performance record
and compared the resulting pro forma returns to certain investment company
peer group averages, including a peer group of no load institutional funds
without Rule 12b-1 plans having an investment strategy substantial
identical to the Fund, and where applicable, the larger corresponding
Morningstar universe of funds in that investment category. The Trustees
noted that Franklin Portfolio's pro forma average annual returns exceeded
those of the institutional peer group average for the 1, 3 and 5 year
periods ending June 30, 2005. (Management had advised the Board that an
appropriate Morningstar peer group category for market neutral funds was
not available.)
Advisory Fee and Other Expenses
The Board considered the advisory fee rate proposed to be paid by the Fund
to Franklin Portfolio as well as its estimated total expense ratio (after
giving effect to proposed expense caps) and compared each to that of its
peer group of no-load institutional funds without Rule 12b-1 plans
utilizing a similar strategy, and where applicable, that of the larger
corresponding Morningstar universe of funds in that category.
With regard to the proposed advisory fee to be payable by the Fund to
Franklin Portfolio, the Trustees noted that the proposed fee of 1.00% was
below the 1.13% average management fee of a peer group of institutional
funds utilizing a similar strategy.
They also noted that the Fund's proposed total expense ratio of 1.25%
(after giving effect to the proposed cap) was well below the 1.73% total
expense ratio of this peer group, even though most other funds in the peer
group were significantly larger than the Fund at projected asset levels
during its first year. (Management had advised the Board that an
appropriate Morningstar peer group category for market neutral funds was
not available.)
The Board also compared the fees proposed to be payable by the Fund
relative to those payable by separate account clients of Franklin
Portfolio.
Based on the comparative peer group data provided, as well as the
additional scope and complexity of the services to be provided and
responsibilities to be assumed by Franklin Portfolio with respect to the
Fund relative to its separate account clients, the Board concluded that the
fees proposed to be payable by the Fund under the advisory agreement were
reasonable.
Advisers' Profitability
The Board considered Franklin Portfolio's projected profitability in
managing the Fund, as well as the methodology used to compute such
profitability, and the various direct and indirect expenses incurred by
Franklin Portfolio in managing the Fund. The Board noted that the
information provided indicated that, after giving effect to fee waivers and
expense subsidiaries, Franklin Portfolio was projected to experience a net
operating loss in the initial year of the Fund's operations, based on the
Fund's projected asset levels during such period. The Trustees noted that
they intend to monitor the profitability of Franklin Portfolio.
Economies of Scale
The Board also considered that Franklin Portfolio may experience economies
of scale as the Fund grows and the extent to which the proposed fees
reflected such economies. The Trustees noted again that Franklin Portfolio
was projected to incur net operating losses initially as a result of the
Fund's small size and the Franklin Portfolio's fee reductions pursuant to
expense cap arrangements. They also noted that projected asset levels
indicated that significant economies of scale would not be realized for
some time. The Trustees concluded that, considering initial and projected
asset size over the initial term of the advisory agreements, the
implementation of breakpoints or further fee reductions was not necessary
at this time. The Trustees intend to review the need for breakpoints in
connection with further advisory agreement approval deliberations.
22
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Factors Considered by the Trustees in Approving the Investment Advisory
Agreements
- --------------------------------------------------------------------------------
Other Benefits
As part of their broader review of the advisory agreements of all of the
funds in the Trust, the Board also considered the additional benefits
flowing to Mellon as a result of its relationship with the funds. Mellon
affiliates provide custodial, administrative, transfer agency and
securities lending services to the funds. In each case, such affiliates
were selected on the basis of a comparative analysis of their capabilities
and fees relative to those of unaffiliated competitors. In addition, the
Trustees, including a majority of the Independent Trustees, conduct an
examination annually of each such arrangement as to whether (i) the terms
of the relevant service agreement are in the best interests of fund
shareholders; (ii) the services to be performed by the affiliate pursuant
to the agreement are required by and appropriate for the funds; (iii) the
nature and quality of the services provided by the affiliate pursuant to
the agreement are at least equal to those provided by other, unaffiliated
firms offering the same or similar services for similar compensation; and
(iv) the fees payable by the funds to the affiliate for its services are
fair and reasonable in light of the usual and customary charges imposed by
other, unaffiliated firms for services of the same nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the funds and the Mellon Institutional Funds as a group.
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to Franklin Portfolio provided therein are fair and
reasonable and, thus, in approving the agreement for an initial two-year
period.
23
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)*
- ----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, 34 None $0
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
260 Charles Street ("DRI") (biotechnology
Waltham, MA 02453 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None $0
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None $0
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens 34 None $0
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee,President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
* The Fund commenced operations on December 21, 2005.
24
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global
Boston, MA 02108 Investments
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund
Boston, MA 02108 Operations, Standish Mellon Asset Management,
8/19/51 LLC
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM");
One Boston Place formerly Manager of Shareholder Services, MAM,
Boston, MA 02108 and Shareholder Representative, Standish Mellon
1/19/71 Asset Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy
Boston, MA 02108 Fund, LLC; formerly Director, Blackrock, Inc.,
4/8/57 Senior Vice President, State Street Research &
Management Company ("SSRM"), and Vice
President, SSRM
25
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26
THIS PAGE INTENTIONALLY LEFT BLANK
27
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6911SA0306
[Logo] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report Newton
International Equity Fund
- --------------------------------------------------------------------------------
December 21, 2005 (commencement of
operations) to March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (December 21, 2005 (commencement of
operations) to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value December 21, 2005
December 21, 2005 March 31, 2006 to March 31, 2006
- -------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,112.00 $3.33
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.20 $5.79
- -----------
+ The "Actual" expense calculation is equal to the Fund's annualized expense
ratio of 1.15%, multiplied by the average account value over the period,
multiplied by 100/365 (to reflect the number of days from commencement of
operations to March 31, 2006). The "Hypothetical" expense calculation is
equal to the Fund's annualized expense ratio of 1.15% multiplied by the
average account value over the period, multiplied by 182/365 (to reflect
the number of days from commencement of operations to March 31, 2006).
3
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -----------------------------------------------------------------------------------------------
Petroleo Brasileiro SA ADR Brazil Oil & Gas 2.6%
Mitsubishi UFJ Financial Group, Inc. Japan Financials 2.3
Norsk Hydro ASA Norway Basic Materials 2.3
Toyota Motor Corp. Japan Consumer Goods 2.0
HSBC Holdings PLC United Kingdom Financials 2.0
GlaxoSmithKline PLC United Kingdom Health Care 2.0
UBS AG Registered Shares Switzerland Financials 2.0
KT&G Corp. 144AGDR South Korea Consumer Goods 1.9
BHP Billition PLC United Kingdom Basic Materials 1.8
ING Groep NV CVA Netherlands Financials 1.8
----
20.7%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------------------------
Europe ex U.K. 40.0%
U.K. 18.1
Asia ex Japan 11.4
Japan 18.0
Americas ex U.S. 12.5
-----
100.0%
* Excluding short-term investments and investment of cash collateral.
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--124.4%
EQUITIES--98.8%
Australia--1.1%
ABC Learning Centres Ltd. (a) 27,992 $ 166,859
Excel Coal Ltd. 36,995 198,552
----------
365,411
----------
Belgium--1.0%
KBC Groupe 3,190 342,355
----------
Brazil--5.2%
Brasil Telecom Participacoes SA ADR (b) 15,167 550,410
Diagnosticos da America SA (b) 9,410 241,649
Gafisa SA (b) 5,500 58,575
Petroleo Brasileiro SA ADR (b) 10,938 873,399
----------
1,724,033
----------
Canada--6.5%
Canadian Pacific Railway Ltd. 4,023 200,702
EnCana Corp. (a) 4,375 204,177
Goldcorp, Inc 9,574 280,137
Oncolytics Biotech, Inc. (a) (b) 93,674 485,295
Paramount Resources Ltd. 12,943 461,617
Petro--Canada 6,943 329,254
Talisman Energy, Inc 3,644 193,527
----------
2,154,709
----------
France--6.0%
Accor SA (a) 5,287 304,645
Alcatel SA 17,600 272,242
AXA SA 16,388 574,879
Societe Generale 3,387 509,142
Vivendi Universal SA 9,432 323,784
----------
1,984,692
----------
Germany--12.7%
Allianz AG 2,806 468,302
Comdirect Bank AG 32,894 405,219
DaimlerChrysler AG 7,400 424,876
Deutsche Bank AG Registered Shares 2,162 246,825
Deutsche Boerse AG (a) 4,151 598,345
Deutsche Post AG 5,932 148,667
Deutsche Postbank AG (a) 4,783 346,924
Deutsche Wohnen AG 912 290,538
Henkel KGaA (a) 2,998 350,329
MLP AG 9,825 240,044
Praktiker Bau--und Heimwerkermaerkte AG 7,088 205,971
Siemens AG 2,643 246,641
Tipp24 AG (b) 8,297 248,239
----------
4,220,920
----------
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Hong Kong--0.7%
China Netcom Group Corp. Hong Kong Ltd. 135,500 $ 239,248
---------
Ireland--1.2%
Irish Life & Permanent PLC 17,220 413,000
---------
Italy--1.1%
UniCredito Italiano SPA 49,179 353,253
---------
Japan--17.8%
Fuji Television Network, Inc 172 429,781
Hakuhodo DY Holdings, Inc 2,500 209,289
Japan Tobacco, Inc 130 457,420
Keihin Electric Express Railway Co., Ltd. (a) 31,000 254,250
Matsui Securities Co. Ltd. (a) 38,100 528,465
Mitsubishi Corp. (a) 18,000 409,995
Mitsubishi UFJ Financial Group, Inc 56 856,706
Nikko Cordial Corp. (a) 34,000 563,488
Nippon Express Co., Ltd. 40,000 227,095
Nissan Motor Co., Ltd. (a) 32,000 380,214
Nisshin Fire and Marine Insurance Co., Ltd. (a) 72,000 342,682
Toyota Motor Corp. (a) 14,100 770,551
Yamato Holdings Co. Ltd. (a) 25,000 512,069
---------
5,942,005
---------
Malaysia--0.6%
Bursa Malaysia Bhd (b) 132,000 211,510
---------
Mexico--0.7%
Desarrolladora Homex S.A. de C.V. ADR (b) 6,690 236,358
---------
Netherlands--4.2%
ASM Lithography Holding NV (b) 17,974 366,857
ING Groep NV CVA 15,421 608,950
Koninklijke Philips Electronics NV (a) 12,436 420,127
---------
1,395,934
---------
Norway--3.9%
Norsk Hydro ASA (a) 5,566 771,215
Statoil ASA (a) 18,216 525,365
---------
1,296,580
---------
Russia--2.6%
AFK Sistema--GDR (b) 15,466 377,370
Lukoil--ADR 5,849 487,807
---------
865,177
---------
Singapore--1.6%
Singapore Airlines Ltd. 30,000 259,965
Singapore Post Ltd. 377,000 280,020
---------
539,985
---------
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
South Korea--4.3%
KT&G Corp. 144A GDR 22,639 $ 645,212
Samsung Corp. 13,790 353,517
Samsung Electronics Co., Ltd 144A GDR 1,370 447,648
----------
1,446,377
----------
Sweden--0.8%
Ericsson LM (a) 69,872 265,687
----------
Switzerland--6.1%
Novartis AG (a) 8,393 466,564
Roche Holding AG (a) 3,107 462,405
UBS AG Registered Shares 6,028 661,869
Zurich Financial Services AG (b) 1,928 452,730
----------
2,043,568
----------
Thailand--2.8%
Bank of Ayudhya PCL 695,700 338,318
Banpu PCL 70,400 269,898
Siam Commercial Bank Public Co. Ltd. 206,500 334,736
----------
942,952
----------
United Kingdom--17.9%
Anglo American PLC 5,864 225,881
Barclays PLC 42,562 497,834
BHP Billition PLC 34,218 624,869
BP PLC 43,180 495,689
British American Tobacco PLC 8,691 210,406
Cable & Wireless PLC 167,201 317,238
GlaxoSmithKline PLC 25,806 674,500
GUS PLC 16,945 310,469
HSBC Holdings PLC 40,311 675,578
ICAP PLC 61,292 476,345
Old Mutual PLC 140,531 491,171
Prudential PLC 44,492 515,772
Standard Chartered PLC 18,664 464,159
----------
5,979,911
----------
TOTAL EQUITIES (Cost $29,735,389) 32,963,665
----------
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Description Rate Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL--25.6%
BlackRock Cash Strategies L.L.C (c) (Cost $8,526,903) 4.701% 8,526,903 $ 8,526,903
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $38,262,292) 41,490,568
-----------
AFFILIATED INVESTMENTS--1.1%
Dreyfus Institutional Preferred Plus Money Market Fund 4.770% 369,111 369,111
(c)(d)(Cost $369,111) -----------
TOTAL INVESTMENTS--125.5% (Cost $38,631,403) 41,859,679
LIABILITIES IN EXCESS OF OTHER ASSETS--(25.5%) (8,500,260)
-----------
NET ASSETS--100% $33,359,419
===========
Notes to Schedule of Investments:
ADR--American Depository Receipt
GDR--Global Depository Receipt
144A-Securities exempt from registration under Rule 144A of the Securities Act
of 1933.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
At the period end, the value of these securities amounted to $1,092,860 or 3.3%
of net assets.
(a) Security, or a portion of thereof, was on loan at March 31, 2006.
(b) Non-income producing security.
(c) Stated rate is seven-day yield for the fund at March 31, 2006.
(d) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments -- March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2006 the Portfolio held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date March 31, 2006 to Deliver Gain/(Loss)
- --------------------------------------------------------------------------------------------------------------------
British Pound 35,209 4/3/2006 $ 61,147 $ 61,231 $ (84)
Euro 1,253,460 5/15/2006 1,522,509 1,527,000 (4,491)
Norwegian Krone 5,191,994 5/15/2006 794,542 785,000 9,542
Swiss Franc 793,181 6/15/2006 613,153 628,000 (14,847)
---------- ---------- ---------
$2,991,351 $3,001,231 $ (9,880)
========== ========== =========
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Deliver Amount Value Date March 31, 2006 to Receive Gain
- -------------------------------------------------------------------------------------------------------------------
Canadian Dollar 60,627 4/3/2006 $ 51,916 $ 51,965 $ 49
======== ======== ====
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
Oil & Gas 10.7%
Basic Materials 7.1
Industrials 7.3
Consumer Goods 11.7
Health Care 7.0
Consumer Services 8.1
Telecommunications 4.5
Financials 38.5
Technology 4.1
Short Term and other assets 1.0
-----
100.0%
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- -------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $8,111,503 (Note 7)):
Unaffiliated investments (cost $38,262,292) $41,490,568
Affiliated investments (Note 1H) (cost $369,111) 369,111
Foreign currency, at value (cost $21,327) 21,314
Interest and dividends receivable 127,147
Receivable for investments sold 257,016
Unrealized appreciation on forward currency exchange contracts (Note 6) 9,591
-----------
Total assets 42,274,747
-----------
Liabilities
Collateral for securities on loan (Note 7) $ 8,526,903
Payable for investments purchased 320,263
Unrealized depreciation on forward currency exchange contracts (Note 6) 19,423
Accrued accounting, custody, administration and transfer agent fees (Note 2) 22,607
Accrued professional fees 15,736
Accrued trustees' fees (Note 2) 942
Accrued chief compliance officer fee (Note 2) 292
Accrued insurance fees 3,534
Other accrued expenses and liabilities 5,628
-----------
Total liabilities 8,915,328
-----------
Net Assets $33,359,419
===========
Net Assets consist of:
Paid-in capital $30,000,100
Accumulated net realized gain 16,263
Undistributed net investment income 123,600
Net unrealized appreciation 3,219,456
-----------
Total Net Assets $33,359,419
===========
Shares of beneficial interest outstanding 1,500,005
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 22.24
===========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statements of Operations
For the Period from December 21, 2005 (commencement of operations)
to March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net foreign witholding taxes $17,098) $ 191,910
Dividend income from affiliated investments (Note 1 H) 26,511
Securities lending income (Note 7) 5,013
----------
Total investment income 223,434
Expenses
Investment advisory fee (Note 2) $ 69,450
Accounting, custody, administration and transfer agent fees (Note 2) 32,253
Registration fees 10,133
Professional fees 17,668
Trustees' fees and expenses (Note 2) 1,193
Insurance expense 3,534
Miscellaneous expenses 6,450
---------
Total expenses 140,681
Deduct:
Waiver of invesment advisory fee (Note 2) (40,847)
---------
Net Expenses 99,834
----------
Net investment income 123,600
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 52,921
Foreign currency transactions and forward foreign currency exchange transactions (36,658)
---------
Net realized gain (loss) 16,263
Change in unrealized appreciation (depreciation) on:
Investments 3,228,276
Foreign currency translations and forward foreign currency exchange contracts (8,820)
---------
Change in net unrealized appreciation (depreciation) 3,219,456
----------
Net realized and unrealized gain (loss) on investments 3,235,719
----------
Net Increase in Net Assets from Operations $3,359,319
==========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
(Unaudited)
------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 123,600
Net realized gain (loss) 16,263
Change in net unrealized appreciation (depreciation) 3,219,456
-----------
Net increase (decrease) in net assets from investment operations 3,359,319
-----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 30,000,100
Cost of shares redeemed --
-----------
Net increase (decrease) in net assets from Fund share transactions 30,000,100
-----------
Total Increase in Net Assets 33,359,419
Net Assets
At beginning of period --
-----------
At end of period (including net investment income of $123,600) $33,359,419
===========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
(Unaudited)
-----------------
Net Asset Value, Beginning of Period $ 20.00
-------
From Operations:
Net investment income* (a) 0.08
-------
Net realized and unrealized gain (loss) on investments 2.16
-------
Total from operations 2.24
-------
Net Asset Value, End of Period $ 22.24
=======
Total Return (b) 11.20%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.15%(c)
Net Investment Income (to average daily net assets)* 1.42%(c)
Portfolio Turnover 28%(d)
Net Assets, End of Period (000's omitted) $33,359
- --------
* 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 (a) $ 0.06
Ratios (to average daily net assets):
Expenses 1.62%(c)
Net investment income (loss) 0.95%(c)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(c) Computed on an annualized basis.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Newton International 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
Newton International Equity Fund (the "Fund"), which commenced operations
on December 21, 2005, is a separate diversified investment series of the
Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in common stocks or securities
convertible into common stocks of foreign companies and depositing receipts
evidencing ownership in such securities. At least 75% of the fund's net
assets is invested in countries represented in the Morgan Stanley Capital
International Europe, Australasia and the Far East (MSCI EAFE) Index. The
Fund may invest up to 20% of its total assets in emerging market countries.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. 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.
Because foreign markets may be open at different times than the New York
Stock Exchange, the value of the Fund's shares may change on days when
shareholders are not able to buy or sell them. Many securities markets and
exchanges outside the U.S. close prior to the close of the New York Stock
Exchange and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect the events that occur after such
close but before the close of the New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market),
the Fund may value its assets by a method the Trustees believe accurately
reflects the fair value. The Trustees have adopted fair value pricing
procedures, which, among other things, require the Fund to fair value such
securities if there has been a movement in the U.S. market that exceeds a
specified threshold. Although the threshold may be revised by the Trustees
from time to time and the number of days on which fair value prices will be
used will depend on market activity, it is possible that fair value prices
for foreign securities will be used by the Fund to a significant extent.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity 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.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless the shareholder elects
to receive them in cash.
14
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in reclassifications, are primarily due to differing
treatments for wash sales and realized and unrealized gains or losses on
futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) 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.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
E. Foreign currency transactions
The Fund maintains its books and records in U.S. dollars. Investment
security valuations and other assets and liabilities initially expressed in
foreign currencies are converted into U.S. dollars based upon current
currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
F. Investment risk
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed foreign
markets.
G. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
H. Affiliated issuers
Affiliated issuers are investment companies advised by Newton Capital
Management Ltd. ("Newton"), a wholly-owned subsidiary of Mellon Financial
Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to Newton for overall investment advisory
and administrative services, and general office facilities, is paid monthly
at the annual rate of 0.80% of the Fund's average daily net assets. Newton
voluntarily agreed to limit the Fund's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
1.15% of the Fund's average daily net assets for the period December 21,
2005 (commencement of operations) to March 31, 2006. Pursuant to this
arrangement, for the period December 21, 2005 (commencement of operations)
to March 31, 2006, Newton voluntarily waived its investment advisory fee in
the amount of $40,847. This arrangement is voluntary and temporary and may
be discontinued or revised by Newton at any time.
15
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of Newton, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services the Fund pays Dreyfus
Transfer, Inc. a fixed fee plus per account and transaction based fees, as
well as, out-of-pocket expenses. Pursuant to this agreement the Fund was
charged $1,643 for the period December 21, 2005 (commencement of
operations) to March 31, 2006.
The Fund entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of Mellon Financial Corporation and an affiliate
of Newton, to provide custody, fund administration and fund accounting
services for the Fund. For these services, the Fund pays Mellon Bank a
fixed fee plus asset and transaction based fees, as well as, out-of-pocket
expenses. Pursuant to this agreement the Fund was charged $30,610 for the
period December 21, 2005 (commencement of operations) to March 31, 2006.
The Fund also entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Fund's lending agent.
Pursuant to this agreement Mellon Bank receives an agreed upon percentage
of the net lending revenues. For these services, Mellon Bank received
$1,273 for the period December 21, 2005 (commencement of operations) to
March 31, 2006. See Note 7 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the period December 21, 2005
(commencement of operations) to March 31, 2006, the Fund was charged
$1,079. No other director, officer or employee of Newton 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 Newton or its affiliates an annual fee and
a per meeting fee as well as reimbursement for travel and out-of-pocket
expenses. In addition, the Trust pays the legal fees for the independent
counsel of the Trustees.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator an administrative service fee in
an amount of up to 0.15% (on an annualized basis) of the Fund's average
daily net assets attributable to Fund shares that are held in accounts
serviced by such Plan Administrator. The Fund's adviser or its affiliates
may pay additional compensation from their own resources to Plan
Administrators and other entities for administrative services, as well as
in consideration of marketing or other distribution-related services. These
payments may provide an incentive for these entities to actively promote
the Fund or cooperate with the distributor's promotional efforts.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period December 21, 2005 (commencement of operations)
to March 31, 2006 were as follows:
Purchases Sales
----------- -----------
Investments (non-U.S. Government Securities) $38,428,012 $ 8,745,544
=========== ===========
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
-----------------
Shares sold 1,500,005
---------
Net increase (decrease) 1,500,005
=========
At March 31, 2006, two shareholders of record held approximately 100% of
the total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that were acquired through reinvestment of
distributions. For the period December 21, 2005 (commencement of
operations) to March 31, 2006, the Fund did not collect any redemption
fees.
16
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $38,631,403
===========
Unrealized appreciation $ 3,369,387
Unrealized depreciation (141,110)
-----------
Net unrealized appreciation (depreciation) $ 3,228,276
===========
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Forward currency exchange contracts
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the 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, 2006, the Fund held forward currency exchange contracts. See
the Schedule of Investments for further details.
(7) Security Lending:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities for the period from December 21, 2005
(commencement of operations) to March 31, 2006 and earned interest on the
invested collateral of $21,013 of which $16,000 was rebated to borrowers or
paid in fees. At March 31, 2006, the Fund had securities valued at
$8,111,503 on loan. See Schedule of Investments for further detail on the
security positions on loan and collateral held.
(8) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust") are parties to
a committed line of credit facility, which enables each fund/portfolio to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating fund/portfolio based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of 0.060 of 1% on the committed amount, is
allocated ratably among the participating funds/portfolios at the end of
each quarter. For the period December 21, 2005 (commencement of operations)
to March 31, 2006, the expense allocated to the Fund was $424.
During the period December 21, 2005 (commencement of operations) to March
31, 2006, the Fund did not borrow under the credit facility.
17
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Factors Considered by the Trustees in Approving the
Investment Advisory Agreements
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the Fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
Fund's advisory agreement and related fees initially and, after a two year
initial term, on an annual basis. At a meeting held on October 18, 2005,
the Board of Trustees, including all of the Independent Trustees voting
separately in person, determined that the terms of the Fund's proposed
investment advisory agreement were fair and reasonable and that the
agreement is in the best interest of the Fund.
The Independent Trustees considered the initial approval of the advisory
agreement of the Fund in connection with their broader consideration of the
annual renewal of the advisory agreements of the other funds of the Trust,
in two separate meetings held on September 22 and October 18, 2005. On each
date, the Independent Trustees held executive sessions in which they met
privately without representatives of Newton Capital Management Ltd.
("Newton"), the Fund's investment adviser, or Mellon Financial Corporation
("Mellon") present and were advised throughout the process by their own
legal counsel.
In conducting this review and in making their determinations, the
Independent Trustees received from Newton a broad range of information
compiled using an information request list prepared on their behalf by
their own legal counsel in connection with their annual approval of
advisory arrangements with respect to the funds comprising the Trust
generally.
This information included information about Newton, its personnel,
operations and financial results and information about the Mellon
organization. The Trustees also discussed in person with representatives of
Newton the adviser's investment strategy and process, and the Fund's
proposed operations under Newton's management. The information requested by
the Independent Trustees and reviewed by the entire Board included:
1. Financial and Economic Data: Newton's income statement, as well as a
profitability analysis of Newton, including a separate presentation of the
comparative profitability of several publicly traded investment advisers;
2. Management Teams and Operations: Newton's Form ADV, as well as
information concerning its executive management and portfolio management
personnel and overall organizational structure, brokerage and soft dollar
policies and practices;
3. Comparative Performance and Fees: Analyses regarding the performance of
similarly managed accounts of Newton, as well as the Fund's proposed
management fee and estimated expense ratio compared to those of comparable
funds and Newton's separate account advisory fee schedules; and
4. Other Benefits: The benefits flowing to Mellon and its affiliates in the
form of fees for transfer agency, custody, administration and securities
lending services provided to the Fund and the other funds of the Trust by
affiliates of Mellon.
In considering the approval of the Fund's advisory agreement, the Board of
Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to Newton provided therein are fair and
reasonable, and they approved the advisory agreement for an initial
two-year period. Some of the factors that figured prominently in the
Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
to be provided to the Fund by Newton. In their deliberations as to the
approval of the Fund's advisory agreement, the Trustees were also mindful
of the fact that, by choosing to invest in the Fund, the Fund's
shareholders would be choosing to entrust Newton, under the supervision of
the Trustees, to manage the portion of their assets invested in the Fund.
The Trustees reviewed the background and experience of the Fund's portfolio
manager(s) and received an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered
the size, education and experience of Newton's investment staff.
In connection with the proposed advisory agreement with Newton with respect
to the Fund, the Trustees considered the fact that the Newton group of
advisers had been in operation since 1978 and together with its affiliates
had over $44 billion in assets under management as of June 30, 2005,
including $177 million in the EAFE strategy proposed to be utilized by the
Fund. The Trustees received a presentation by Newton concerning its
management and investment personnel, its investment philosophy and
investment strategy.
The Trustees determined that the services proposed by Newton to be provided
to the Fund were of high quality and at least commensurate with industry
standards. The Board determined that Newton had the expertise and resources
to manage the Fund effectively.
18
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Factors Considered by the Trustees in Approving
the Investment Advisory Agreements
- --------------------------------------------------------------------------------
Investment Performance
The Board compared Newton's historical composite performance for similarly
managed funds and other similarly managed investment vehicles to applicable
market indices or other benchmarks. They also reviewed pro forma investment
results of Newton calculated by applying the Fund's proposed total expense
ratio (after giving effect to proposed expense caps) to Newton's gross
composite performance record and compared the resulting pro forma returns
to certain investment company peer group averages, including a peer group
of no load institutional funds without Rule 12b-1 plans having an
investment strategy substantial identical to the Fund, and where
applicable, the larger corresponding Morningstar universe of funds in that
investment category. The Trustees noted that Newton's pro forma average
annual returns exceeded those of both the relevant institutional peer group
average and the Morningstar foreign large capitalization blend category, in
each case, for the 1, 3 and 5 year periods ending June 30, 2005.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate proposed to be paid by the Fund
to Newton as well as its estimated total expense ratio (after giving effect
to proposed expense caps) and compared each to that of its peer group of
no-load institutional funds without Rule 12b-1 plans utilizing a similar
strategy, and where applicable, that of the larger corresponding
Morningstar universe of funds in that category.
With regard to the proposed advisory fee to be payable by the Fund to
Newton, the Trustees noted that the proposed management fee of 0.80% was
below the 0.87% average management fee of a peer group of institutional
funds using a similar strategy.
They also noted that the Fund's total expense ratio of 1.15% (after giving
effect to the proposed cap) was below the 1.21% average expense ratio of a
peer group of institutional funds utilizing a similar strategy and well
below the 1.64% total expense ratio of the Morningstar foreign large
capitalization blend category, even though most other funds in the peer
group and Morningstar category were significantly larger than the Fund at
projected asset levels during its first year.
The Board also compared the fees proposed to be payable by the Fund
relative to those payable by separate account clients of Newton.
Based on the comparative peer group data provided, as well as the
additional scope and complexity of the services to be provided and
responsibilities to be assumed by Newton with respect to the Fund relative
to its separate account clients, the Board concluded that the fees proposed
to be payable by the Fund under the advisory agreement were reasonable.
Advisers' Profitability
The Board considered Newton's projected profitability in managing the Fund,
as well as the methodology used to compute such profitability, and the
various direct and indirect expenses incurred by Newton in managing the
Fund. The Board noted that the information provided indicated that, after
giving effect to fee waivers and expense subsidiaries, Newton was projected
to experience a net operating loss in the initial year of the Fund's
operations, based on the Fund's projected asset levels during such period.
The Trustees noted that they intend to monitor the profitability of Newton.
Economies of Scale
The Board also considered that Newton may experience economies of scale as
the Fund grows and the extent to which the proposed fees reflected such
economies. The Trustees noted again that Newton was projected to incur net
operating losses initially as a result of the Fund's small size and the
Newton's fee reductions pursuant to expense cap arrangements. They also
noted that projected asset levels indicated that significant economies of
scale would not be realized for some time. The Trustees concluded that,
considering initial and projected asset size over the initial term of the
advisory agreements, the implementation of breakpoints or further fee
reductions was not necessary at this time. The Trustees intend to review
the need for breakpoints in connection with further advisory agreement
approval deliberations.
19
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Factors Considered by the Trustees in Approving
the Investment Advisory Agreements
- --------------------------------------------------------------------------------
Other Benefits
As part of their broader review of the advisory agreements of all of the
funds in the Trust, the Board also considered the additional benefits
flowing to Mellon as a result of its relationship with the funds. Mellon
affiliates provide custodial, administrative, transfer agency and
securities lending services to the funds. In each case, such affiliates
were selected on the basis of a comparative analysis of their capabilities
and fees relative to those of unaffiliated competitors. In addition, the
Trustees, including a majority of the Independent Trustees, conduct an
examination annually of each such arrangement as to whether (i) the terms
of the relevant service agreement are in the best interests of fund
shareholders; (ii) the services to be performed by the affiliate pursuant
to the agreement are required by and appropriate for the funds; (iii) the
nature and quality of the services provided by the affiliate pursuant to
the agreement are at least equal to those provided by other, unaffiliated
firms offering the same or similar services for similar compensation; and
(iv) the fees payable by the funds to the affiliate for its services are
fair and reasonable in light of the usual and customary charges imposed by
other, unaffiliated firms for services of the same nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to Newton provided therein are fair and reasonable
and, thus, in approving the agreement for an initial two-year period.
20
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)*
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, 34 None $0
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
260 Charles Street ("DRI") (biotechnology
Waltham, MA 02453 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None $0
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None $0
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens 34 None $0
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of
Asset Management, LLC Executive Officer The Boston Company
One Boston Place Asset Management, LLC;
Boston, MA 02108 formerly Senior Vice
7/24/65 President and
Chief Operating
Officer, Mellon
Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
* The Fund commenced operations on December 21, 2005.
21
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ---------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management, LLC
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of Compliance,
Mellon Asset Management President Mellon Asset Management ("MAM"); formerly Manager
One Boston Place of Shareholder Services, MAM, and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds Distributor
One Boston Place Officer and Mellon Optima L/S Strategy Fund, LLC; formerly
Boston, MA 02108 Director, Blackrock, Inc., Senior Vice President,
4/8/57 State Street Research & Management Company
("SSRM"), and Vice President, SSRM
22
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[Logo] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6912SA0306
[Logo] Mellon
----------------------------
Mellon Institutional Funds
Semiannual Report Mellon Equity
Large Cap Growth Fund
- --------------------------------------------------------------------------------
December 21, 2005 (commencement of
operations) to March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (December 21, 2005 (commencement of
operations) to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value December 21, 2005
December 21, 2005 March 31, 2006 to March 31, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,017.00 $2.62
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.19 $4.78
- -------------
+ The "Actual" expense calculation is equal to the Fund's annualized expense
ratio of 0.95%, multiplied by the average account value over the period,
multiplied by 100/365 (to reflect the number of days from commencement of
operations to March 31, 2006). The "Hypothetical" expense calculation is
equal to the Fund's annualized expense ratio of 0.95% multiplied by the
average account value over the period, multiplied by 182/365 (to reflect
the number of days from commencement of operations to March 31, 2006).
3
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ------------------------------------------------------------------------------------------------------
General Electric Corp. Interest Sensitive 4.7%
Microsoft Corp. Technology 3.9
Johnson & Johnson Health Care 3.2
Cisco Systems, Inc. Technology 2.6
Intel Corp. Technology 2.2
Amgen, Inc. Health Care 1.9
UnitedHealth Group, Inc. Health Care 1.9
International Business Machines Corp. Technology 1.9
Pepsico, Inc. Consumer Staples 1.8
Proctor & Gamble Co. Consumer Staples 1.8
----
25.9%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation* Net Assets
- ------------------------------------------------------------------------
Consumer Cyclical 12.4%
Consumer Staples 8.6
Energy Related 4.2
Health Care 18.6
Interest Sensitive 10.1
Producer Goods & Services 10.4
Services 6.9
Technology 26.0
Utilities 1.0
Short-term and other assets 1.8
-----
100.0%
* Excluding short-term investments and investment of cash collateral.
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.6%
EQUITIES--98.2%
Consumer Cyclical--12.4%
Aeropostale, Inc.(a) 300 $ 9,048
Bed Bath & Beyond, Inc.(a) 400 15,360
Best Buy Co., Inc. 400 22,372
Chico's FAS, Inc.(a) 200 8,128
Claire's Stores, Inc. 500 18,155
Coach, Inc.(a) 300 10,374
Costco Wholesale Corp. 400 21,664
Cummins, Inc. 100 10,510
Harley-Davidson, Inc.(b) 300 15,564
Johnson Controls, Inc. 200 15,186
Lowe's Companies, Inc. 600 38,664
Michaels Stores, Inc. 300 11,274
NIKE, Inc., Class B 200 17,020
Nordstrom, Inc. 400 15,672
Panera Bread Co.(a) 200 15,036
Sears Holdings Corp.(a) 100 13,224
Starbucks Corp.(a) 600 22,584
Target Corp. 300 15,603
Wal-Mart Stores, Inc. 400 18,896
--------
314,334
--------
Consumer Staples -- 8.6%
Anheuser Busch Companies 500 21,385
Coca-Cola Co./The 900 37,683
HJ Heinz Co. 300 11,376
Kimberly-Clark Corp. 400 23,120
Kraft Foods, Inc.(b) 300 9,093
Loews Corp -- Carolina Group 300 14,181
Pepsico, Inc. 800 46,232
Procter & Gamble Co. 800 46,096
Reynolds American, Inc. 100 10,550
--------
219,716
--------
Energy Related--4.2%
Baker Hughes, Inc. 200 13,680
ConocoPhillips 300 18,945
Marathon Oil Corp. 200 15,234
Newfield Exploration Co.(a) 400 16,760
Tesoro Corp. 100 6,834
Transocean, Inc.(a) 300 24,090
Valero Energy Corp. 200 11,956
--------
107,499
--------
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment
Trust Mellon Equity Large Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
Health Care--18.6%
Aetna, Inc. 600 $ 29,484
Amerisourcebergen Corp. 400 19,308
Amgen, Inc.(a) 700 50,925
Becton Dickinson & Co. 500 30,790
Biogen Idec, Inc.(a) 200 9,420
Caremark Rx, Inc. 300 14,754
Cigna Corp. 100 13,062
Genentech, Inc.(a) 100 8,451
Gilead Sciences, Inc. (a) 400 24,888
Johnson & Johnson 1,400 82,908
Kinetic Concepts, Inc.(a) 300 12,351
Laboratory Corp. of America Holdings (a) 300 17,544
Medtronic, Inc. 700 35,525
Pfizer, Inc. 600 14,952
Quest Diagnostics, Inc. 200 10,260
St. Jude Medical, Inc. 300 12,300
UnitedHealth Group, Inc. 900 50,274
Wyeth 600 29,112
Zimmer Holdings, Inc.(a) 100 6,760
--------
473,068
--------
Interest Sensitive--10.1%
American Express Co. 200 10,510
Capital One Financial Corp. 100 8,052
Endurance Specialty Holdings Ltd 200 6,510
Franklin Resources, Inc. 200 18,848
General Electric Corp. 3,500 121,730
Goldman Sachs Group, Inc. 200 31,392
Merrill Lynch & Co., Inc. 200 15,752
Metlife, Inc. 200 9,674
Morgan Stanley 200 12,564
Nationwide Financial Services 200 8,604
Wells Fargo & Co. 200 12,774
--------
256,410
--------
Producer Goods & Services--10.4%
3M Co. 500 37,845
Black & Decker Corp. 100 8,689
CH Robinson Worldwide, Inc. 300 14,727
Dow Chemical Co. 500 20,300
Emerson Electric Co. 300 25,089
FedEx Corp. 200 22,588
Fluor Corp. 100 8,580
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
Producer Goods & Services (continued)
Graco, Inc. 400 $ 18,172
L-3 Communications Holdings, Inc. 100 8,579
Monsanto Co. 300 25,425
Phelps Dodge Corp. 200 16,106
Raytheon Co. 400 18,336
United Technologies Corp. 700 40,579
--------
265,015
--------
Services--6.9%
Accenture Ltd., Class A 400 12,028
Equifax, Inc. 400 14,896
Gannett Co, Inc. 200 11,984
Getty Images, Inc. (a) 100 7,488
McGraw-Hill Companies, Inc. 400 23,048
Moody's Corp. 300 21,438
NAVTEQ Corp. (a) 300 15,195
News Corp., Class A Shares 700 11,627
News Corp., Class B Shares (b) 600 10,536
NII Holdings, Inc. (a) 300 17,691
Omnicom Group 200 16,650
Time Warner, Inc. 800 13,432
--------
176,013
--------
Technology--26.0%
Adobe Systems, Inc. (a) 300 10,476
Altera Corp. (a) 500 10,320
Amphenol Corp. 300 15,654
Apple Computer, Inc. (a) 500 31,360
Applied Materials, Inc. 1,100 19,261
Autodesk, Inc. (a) 300 11,556
Broadcom Corp. (a) 300 12,948
Cisco Systems, Inc. (a) 3,100 67,177
Danaher Corp. 300 19,065
Dell, Inc. (a) 1,300 38,688
eBay, Inc. (a) 600 23,436
EMC Corp./Massachusetts 1,600 21,808
Google, Inc. (a) 100 39,000
Harris Corp. 400 18,916
Intel Corp. 3,000 58,050
International Business Machines Corp. 600 49,482
Linear Technology Corp. 400 14,032
Microsoft Corp. 3,700 100,677
Motorola , Inc. 1,400 32,074
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------
Technology (continued)
National Semiconductor Corp. 400 $ 11,136
Nokia OYJ ADR 700 14,504
Oracle Corp. (a) 1,700 23,273
QLogic Corp. (a) 600 11,610
Verisign, Inc. (a) 300 7,197
--------
661,700
--------
Utilities--1.0%
TXU Corp. 500 22,380
TOTAL EQUITIES (Cost $2,459,081) ----------
2,496,135
----------
INVESTMENT OF CASH COLLATERAL--1.4% Rate
BlackRock Cash Strategies L.L.C. (c) (Cost $36,300) 4.701% 36,300 36,300
----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $2,495,381) 2,532,435
----------
AFFILIATED INVESTMENTS--3.2%
Dreyfus Institutional Preferred Plus Money
Market Fund (c) (d) (Cost $80,906) 4.770% 80,906 80,906
---------
TOTAL INVESTMENTS--102.8% (Cost $2,576,287) 2,613,341
---------
LIABILITIES IN EXCESS OF OTHER ASSETS--(2.8%) (70,876)
----------
NET ASSETS--100% $2,542,465
===========
Notes to Schedule of Investments
ADR--American Depository Receipt
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at March 31, 2006.
(c) Stated rate is seven-day yield for the fund at March 31, 2006.
(d) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan, valued at $35,193 (Note 7)):
Unaffiliated investments (cost $2,495,381) $2,532,435
Affiliated investments (Note 1F) (cost $80,906) 80,906
Cash 50
Interest and dividends receivable 2,911
----------
Total assets 2,616,302
Liabilities
Collateral for securities on loan (Note 7) $ 36,300
Accrued accounting, custody, administration and transfer agent fees (Note 2) 13,833
Accrued professional fees 14,270
Accrued trustees' fees (Note 2) 1,173
Accrued chief compliance officer fee (Note 2) 292
Accrued administrative service fees (Note 2 ) 134
Other accrued expenses and liabilities 7,835
--------
Total liabilities 73,837
Net Assets $2,542,465
Net Assets consist of: ==========
Paid-in capital $2,500,000
Accumulated net realized gain 704
Undistributed net investment income 4,707
Net unrealized appreciation 37,054
----------
Total Net Assets $2,542,465
==========
Shares of beneficial interest outstanding 125,000
Net Asset Value, offering and redemption price per share ==========
(Net Assets/Shares outstanding) $ 20.34
==========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Statement of Operations
For the Period from December 21, 2005 (commencement of operations)
to March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net foreign witholding taxes $47) $ 9,097
Dividend income from affiliated investments (Note 1 F) 1,882
Interest income 268
Securities lending income (Note 7) 5
-------
Total investment income 11,252
Expenses
Investment advisory fee (Note 2) $ 4,477
Accounting, custody, administration and transfer agent fees (Note 2) 18,118
Registration fees 9,187
Professional fees 16,078
Trustees' fees and expenses (Note 2) 1,193
Insurance expense 1,767
Miscellaneous expenses 4,966
-------
Total expenses 55,786
Deduct:
Waiver of invesment advisory fee (Note 2) (4,477)
Reimbursement of Fund operating expenses (Note 2) (44,764)
--------
Total expense deduction (49,241)
--------
Net Expenses 6,545
-------
Net investment income 4,707
-------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 704
Change in unrealized appreciation (depreciation) on:
Investments 37,054
-------
Net realized and unrealized gain (loss) on investments 37,758
-------
Net Increase in Net Assets from Operations $ 42,465
========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
(Unaudited)
-----------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 4,707
Net realized gain (loss) 704
Change in net unrealized appreciation (depreciation) 37,054
----------
Net increase(decrease) in net assets from investment operations 42,465
----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 2,500,000
Cost of shares redeemed --
----------
Net increase (decrease) in net assets from Fund share transactions 2,500,000
----------
Total Increase in Net Assets 2,542,465
Net Assets
At beginning of period --
----------
At end of period (including net investment income of $4,707) $2,542,465
==========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
(Unaudited)
-----------------
Net Asset Value, Beginning of Period $ 20.00
-------
From Operations:
Net investment income*(a) 0.04
Net realized and unrealized gain (loss) on investments 0.30
-------
Total from operations 0.34
Net Asset Value, End of Period $ 20.34
=======
Total Return(b) 1.70%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.95%(c)
Net Investment Income (to average daily net assets)* 0.68%(c)
Portfolio Turnover 3%(d)
Net Assets, End of Period (000's omitted) $ 2,542
- --------------
* For the period indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the Fund
for all or a portion of its operating expenses. If this voluntary action had
not been taken, the investment income per share and the ratios would have
been:
Net investment income per share (a) $ (0.36)
Ratios (to average daily net assets):
Expenses 8.10%(c)
Net investment income (loss) (6.46)%(c)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(c) Computed on an annualized basis.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Mellon Equity Large 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
Mellon Equity Large Cap Growth Fund (the "Fund"), which commenced
operations on December 21, 2005, is a separate diversified investment
series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of large cap
U.S. companies with total market capitalizations in the top 70% of the
Russell 1000 Growth Index at the time of purchase.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method
on debt securities with greater than sixty days to maturity when required
for federal income tax purposes. Dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences which may result in reclassifications, are primarily due to
differing treatments for wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among the funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
13
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuers
Affiliated issuers are investment companies advised by Mellon Equity
Associates, LLP ("Mellon Equity"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to Mellon Equity for overall investment
advisory, administrative services, and general office facilities, is paid
quarterly at the annual rate of 0.65% of the Fund's average daily net
assets. Mellon Equity voluntarily agreed to limit the Fund's total annual
operating expenses (excluding brokerage commissions, taxes and
extraordinary expenses) to 0.95% of the Fund's average daily net assets for
the period December 21, 2005 (commencement of operations) to March 31,
2006. Pursuant to this arrangement, for the period December 21, 2005
(commencement of operations) to March 31, 2006, Mellon Equity voluntarily
waived its investment advisory fee in the amount of $4,477 and reimbursed
the Fund for $44,764 of its operating expenses. This arrangement is
voluntary and temporary and may be discontinued or revised by Mellon Equity
at any time.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of Mellon
Equity, to provide personnel and facilities to perform transfer agency and
certain shareholder services for the Fund. For these services the Fund pays
Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based
fees, as well as, out-of-pocket expenses. Pursuant to this agreement the
Fund was charged $1,643 for the period December 21, 2005 (commencement of
operations) to March 31, 2006.
The Fund entered into an agreement Mellon Bank, N.A. ("Mellon Bank"), a
wholly owned subsidiary of Mellon Financial Corporation and an affiliate of
Mellon Equity, to provide custody, fund administration and fund accounting
services for the Fund. For these services, the Fund pays Mellon Bank a
fixed fee plus asset and transaction based fees, as well as, out-of-pocket
expenses. Pursuant to this agreement the Fund was charged $16,475 during
the period December 21, 2005 (commencement of operations) to March 31,
2006.
The Fund also entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Fund's lending agent.
Pursuant to this agreement Mellon Bank receives an agreed upon percentage
of the net lending revenues. For these services, Mellon Bank received $1
for the period December 21, 2005 (commencement of operations) to March 31,
2006. See Note 7 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the period December 21, 2005
(commencement of operations) to March 31, 2006, the Fund was charged
$1,079. No other director, officer or employee of Mellon Equity 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 Mellon Equity or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out-of-pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator an Administration service fee in
an amount of up to 0.15% (on an annualized basis) of the Fund's average
daily net assets attributable to Fund shares that are held in accounts
serviced by such Plan Administrator. The Fund's adviser or its affiliates
may pay additional compensation from their own resources to Plan
Administrators and other entities for administrative services, as well as
in consideration of marketing or other distribution-related services. These
payments may provide an incentive for these entities to actively promote
the Fund or cooperate with the distributor's promotional efforts.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period December 21, 2005 (commencement of operations)
to March 31, 2006 were as follows:
Purchases Sales
----------- -------
Investments (non-U.S. Government Securities) $ 2,542,503 $84,127
=========== =======
14
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the period
December 21, 2005
(commencement of
operations) to
March 31, 2006
------------------
Shares sold 125,000
-------
Net increase (decrease) 125,000
=======
At March 31, 2006, one shareholder of record (MBC Investments Corp., a
wholly-owned subsidiary of Mellon Financial Corporation and an affiliate of
the Fund) held 100% of the total outstanding shares of the Fund. Investment
activities of this shareholder could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that were acquired through reinvestment of
distributions. For the period December 21, 2005 (commencement of
operations) to March 31, 2006, the Fund did not collect any redemption
fees.
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $ 2,576,287
===========
Unrealized appreciation $ 123,487
Unrealized depreciation (86,433)
-----------
Net unrealized appreciation (depreciation) $ 37,054
===========
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Futures contracts
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to margin requirements the Fund deposits
either cash or securities in an amount equal to a certain percentage of the
contract amount. Subsequent payments are made or received by the Fund each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. There are several risks in connection with the
use of futures contracts as a hedging device. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments or indices, which may not correlate with changes in the value
of hedged investments. Buying futures tends to increase the Fund's exposure
to the underlying instrument, while selling futures tends to decrease the
Fund's exposure to the underlying instrument or hedge other investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparty does
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to seek to manage its exposure to certain
markets and to changes in securities prices and foreign currencies. Gains
and losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
The Fund did not enter into any futures transactions during the period
December 21, 2005 (commencement of operations) to March 31, 2006.
15
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(7) Security Lending:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the period December 21, 2005
(commencement of operations) to March 31, 2006 and earned interest on the
invested collateral of $162 of which $157 was rebated to borrowers or paid
in fees. At March 31, 2006, the Fund had securities valued at $35,193 on
loan. See Schedule of Investments for further detail on the security
positions on loan and collateral held.
(8) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust") are parties to
a committed line of credit facility, which enables each fund/portfolio to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating portfolio/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of 0.060 of 1% on the committed amount, is
allocated ratably among the participating funds/portfolios at the end of
each quarter. For the period December 21, 2005 (commencement of operations)
to March 31, 2006, the expense allocated to the Fund was $353.
During the period December 21, 2005 (commencement of operations) to March
31, 2006, the Fund did not borrow under the credit facility.
16
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Factors Considered by the Trustees in Approving the Investment Advisory
Agreements
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of its
Trustees who are not affiliated with the Fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the Fund's
advisory agreement and related fees initially and, after a two year initial
term, on an annual basis. At a meeting held on October 18, 2005, the Board of
Trustees, including all of the Independent Trustees voting separately in person,
determined that the terms of the Fund's proposed investment advisory agreement
were fair and reasonable and that the agreement is in the best interest of the
Fund.
The Independent Trustees considered the initial approval of the advisory
agreement of the Fund in connection with their broader consideration of the
annual renewal of the advisory agreements of the other funds of the Trust, in
two separate meetings held on September 22 and October 18, 2005. On each date,
the Independent Trustees held executive sessions in which they met privately
without representatives of Mellon Equity Associates, LLP ("Mellon Equity"), the
Fund's investment adviser, or Mellon Financial Corporation ("Mellon") present
and were advised throughout the process by their own legal counsel.
In conducting this review and in making their determinations, the Independent
Trustees received from Mellon Equity a broad range of information compiled using
an information request list prepared on their behalf by their own legal counsel
in connection with their annual approval of advisory arrangements with respect
to the funds comprising the Trust generally.
This information included information about Mellon Equity, its personnel,
operations and financial results and information about the Mellon organization.
The Trustees also discussed in person with representatives of Mellon Equity the
adviser's investment strategy and process, and the Fund's proposed operations
under Mellon Equity's management. The information requested by the Independent
Trustees and reviewed by the entire Board included:
1. Financial and Economic Data: Mellon Equity's income statement, as well as a
profitability analysis of Mellon Equity, including a separate presentation of
the comparative profitability of several publicly traded investment advisers;
2. Management Teams and Operations: Mellon Equity's Form ADV, as well as
information concerning its executive management and portfolio management
personnel and overall organizational structure, brokerage and soft dollar
policies and practices;
3. Comparative Performance and Fees: Analyses regarding the performance of
similarly managed accounts of Mellon Equity, as well as the Fund's proposed
management fee and estimated expense ratio compared to those of comparable funds
and Mellon Equity's separate account advisory fee schedules; and
4. Other Benefits: The benefits flowing to Mellon and its affiliates in the form
of fees for transfer agency, custody, administration and securities lending
services provided to the Fund and the other funds of the Trust by affiliates of
Mellon.
In considering the approval of the Fund's advisory agreement, the Board of
Trustees, including the Independent Trustees, did not identify any single factor
as all-important or controlling and individual Trustees did not necessarily
attribute the same weight or importance to each factor. The Trustees determined
that the terms and conditions of the Fund's advisory agreement and the
compensation to Mellon Equity provided therein are fair and reasonable, and they
approved the advisory agreement for an initial two-year period. Some of the
factors that figured prominently in the Trustees' determination are described
below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services to be
provided to the Fund by Mellon Equity. In their deliberations as to the approval
of the Fund's advisory agreement, the Trustees were also mindful of the fact
that, by choosing to invest in the Fund, the Fund's shareholders would be
choosing to entrust Mellon Equity, under the supervision of the Trustees, to
manage the portion of their assets invested in the Fund.
The Trustees reviewed the background and experience of the Fund's portfolio
manager(s) and received an overview of its organization, personnel, resources
and strategic plans. Among other things, the Trustees considered the size,
education and experience of Mellon Equity's investment staff.
In connection with the proposed advisory agreement with Mellon Equity with
respect to the Fund, the Trustees considered the fact that Mellon Equity had
been in operation since 1983 and had over $20 billion in assets under management
as of June 30, 2005, including $272 million in the large cap growth strategy
proposed to be utilized by the Fund. The Trustees received a presentation by
Mellon Equity concerning its management and investment personnel, its investment
philosophy and investment strategy and sell discipline, as well as the
characteristics of its large cap growth strategy portfolio.
The Trustees determined that the services proposed by Mellon Equity to be
provided to the Fund were of high quality and at least commensurate with
industry standards. The Board determined that Mellon Equity had the expertise
and resources to manage the Fund effectively.
17
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Factors Considered by the Trustees in Approving the Investment Advisory
Agreements
- --------------------------------------------------------------------------------
Investment Performance
The Board compared Mellon Equity's historical composite performance for
similarly managed funds and other similarly managed investment vehicles to
applicable market indices or other benchmarks. They also reviewed pro forma
investment results of Mellon Equity calculated by applying the Fund's proposed
total expense ratio (after giving effect to proposed expense caps) to Mellon
Equity's gross composite performance record and compared the resulting pro forma
returns to certain investment company peer group averages, including a peer
group of no load institutional funds without Rule 12b-1 plans having an
investment strategy substantial identical to the Fund, and where applicable, the
larger corresponding Morningstar universe of funds in that investment category.
The Trustees noted that Mellon Equity's pro forma average annual returns
exceeded those of both the institutional peer group average and the Morningstar
large capitalization growth category, in each case, for the 1 and 3 year periods
ending June 30, 2005, although for the 5 year period ending June 30, 2005,
Mellon Equity's pro forma average annual returns slightly underperformed the
institutional peer group average and the Morningstar large capitalization growth
category.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate proposed to be paid by the Fund to
Mellon Equity as well as its estimated total expense ratio (after giving effect
to proposed expense caps) and compared each to that of its peer group of no-load
institutional funds without Rule 12b-1 plans utilizing a similar strategy, and
where applicable, that of the larger corresponding Morningstar universe of funds
in that category.
With regard to the proposed advisory fee to be payable by the Fund to Mellon
Equity, the Trustees noted that the proposed fee of 0.65% was approximately
equal to the 0.66% average management fee of a peer group of institutional funds
using a similar strategy.
They also noted that the Fund's proposed total expense ratio of 0.95% (after
giving effect to the proposed cap) was slightly above the 0.91% average total
expense ratio of a peer group of institutional funds using a similar strategy,
but was well below the 1.51% average expense ratio of the Morningstar large
capitalization growth category, even though most other funds in the peer group
and Morningstar category were significantly larger than the Fund at projected
asset levels during its first year.
The Board also compared the fees proposed to be payable by the Fund relative to
those payable by separate account clients of Mellon Equity.
Based on the comparative peer group data provided, as well as the additional
scope and complexity of the services to be provided and responsibilities to be
assumed by Mellon Equity with respect to the Fund relative to its separate
account clients, the Board concluded that the fees proposed to be payable by the
Fund under the advisory agreement were reasonable.
Advisers' Profitability
The Board considered Mellon Equity's projected profitability in managing the
Fund, as well as the methodology used to compute such profitability, and the
various direct and indirect expenses incurred by Mellon Equity in managing the
Fund. The Board noted that the information provided indicated that, after giving
effect to fee waivers and expense subsidiaries, Mellon Equity was projected to
experience a net operating loss in the initial year of the Fund's operations,
based on the Fund's projected asset levels during such period. The Trustees
noted that they intend to monitor the profitability of Mellon Equity.
Economies of Scale
The Board also considered that Mellon Equity may experience economies of scale
as the Fund grows and the extent to which the proposed fees reflected such
economies. The Trustees noted again that Mellon Equity was projected to incur
net operating losses initially as a result of the Fund's small size and the
Mellon Equity's fee reductions pursuant to expense cap arrangements. They also
noted that projected asset levels indicated that significant economies of scale
would not be realized for some time. The Trustees concluded that, considering
initial and projected asset size over the initial term of the advisory
agreements, the implementation of breakpoints or further fee reductions was not
necessary at this time. The Trustees intend to review the need for breakpoints
in connection with further advisory agreement approval deliberations.
18
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Factors Considered by the Trustees in Approving the Investment Advisory
Agreements
- --------------------------------------------------------------------------------
Other Benefits
As part of their broader review of the advisory agreements of all of the funds
in the Trust, the Board also considered the additional benefits flowing to
Mellon as a result of its relationship with the funds. Mellon affiliates provide
custodial, administrative, transfer agency and securities lending services to
the funds. In each case, such affiliates were selected on the basis of a
comparative analysis of their capabilities and fees relative to those of
unaffiliated competitors. In addition, the Trustees, including a majority of the
Independent Trustees, conduct an examination annually of each such arrangement
as to whether (i) the terms of the relevant service agreement are in the best
interests of fund shareholders; (ii) the services to be performed by the
affiliate pursuant to the agreement are required by and appropriate for the
funds; (iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the funds to the affiliate for its
services are fair and reasonable in light of the usual and customary charges
imposed by other, unaffiliated firms for services of the same nature and
quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the funds and
the Mellon Institutional Funds as a group.
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Fund's advisory agreement and the
compensation to Mellon Equity provided therein are fair and reasonable and,
thus, in approving the agreement for an initial two-year period.
19
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of
Principal Portfolios in
Name Term of Office Occupation(s) Fund Complex
Address, and Position(s) and Length of During Past Overseen by
Date of Birth Held with Trust Time Served 5 Years Trustee
- ------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, 34
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
260 Charles Street ("DRI") (biotechnology
Waltham, MA 02453 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens 34
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34
The Boston Company and Chief Operating Officer of
Asset Management, LLC Executive Officer The Boston Company
One Boston Place Asset Management, LLC;
Boston, MA 02108 formerly Senior Vice
7/24/65 President
and Chief Operating
Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
Trustee
Other Remuneration
Name Directorships (period ended
Address, and Held by March 31,
Date of Birth Trustee 2006)*
- ----------------------------------------------------------------
Samuel C. Fleming None $0
c/o Decision Resources, Inc.
260 Charles Street
Waltham, MA 02453
9/30/40
Caleb Loring III None $0
c/o Essex Street Associates
P.O. Box 5600
Beverly, MA 01915
11/14/43
Benjamin M. Friedman None $0
c/o Harvard University
Littauer Center 127
Cambridge, MA 02138
8/5/44
John H. Hewitt None $0
P.O. Box 2333
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard None $0
The Boston Company
Asset Management, LLC
One Boston Place
Boston, MA 02108
7/24/65
* The Fund commenced operations on December 21, 2005.
20
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management, LLC
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of Compliance,
Mellon Asset Management President Mellon Asset Management ("MAM"); formerly Manager
One Boston Place of Shareholder Services, MAM, and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor
One Boston Place Officer and Mellon Optima L/S Strategy Fund, LLC; formerly
Boston, MA 02108 Director, Blackrock, Inc., Senior Vice President,
4/8/57 State Street Research & Management Company
("SSRM"), and Vice President, SSRM
21
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(LOGO) Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6913SA0306
[Logo] Mellon
--------------------------
Mellon Institutional Funds
The Boston Company
Small/Mid Cap Growth Fund
- --------------------------------------------------------------------------------
Semiannual Report
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- -------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,117.80 $5.28
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.95 $5.04
- --------
+ Expenses are equal to the Fund's annualized expense ratio of 1.00%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ---------------------------------------------------------------------------------------------
Range Resources Corp. Energy 1.7%
Respironics, Inc. Health Care 1.7
Palm, Inc. Information Technology 1.5
BEA Systems, Inc. Information Technology 1.4
Fisher Scientific International Health Care 1.4
Oil States International, Inc. Energy 1.3
Verisign, Inc. Information Technology 1.2
PerkinElmer, Inc. Health Care 1.2
Covance, Inc. Health Care 1.2
Sigma-Aldrich Corp. Basic Materials 1.2
----
13.8%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------
Basic Materials 4.2%
Communications 0.5
Consumer Discretionary 13.1
Consumer Staple 4.9
Energy 9.9
Financial 10.3
Health Care 20.0
Industrial 15.5
Information Technology 16.6
Services 1.5
Utilities 1.0
Short-term and other assets 2.5
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--106.3%
EQUITIES--97.5%
Basic Materials--4.2%
Cleveland-Cliffs, Inc. 2,320 $ 202,118
Kinross Gold Corp. (a) 21,000 229,530
Pan American Silver Corp. (a) (b) 4,370 110,998
Sigma-Aldrich Corp. (b) 4,100 269,739
Silver Standard Resources, Inc. (a) 5,300 108,968
----------
921,353
----------
Communications--0.5%
Arris Group, Inc. (a) 8,100 111,456
----------
Consumer Discretionary--13.1%
California Pizza Kitchen, Inc. (a) 6,390 207,356
Central Garden & Pet Co. (a) 3,300 175,362
Jos A Bank Clothiers, Inc. (a) 2,390 114,601
Lions Gate Entertainment Corp. (a) (b) 24,598 249,670
Penn National Gaming, Inc. (a) 5,270 222,289
Petsmart, Inc. 7,600 213,864
Polo Ralph Lauren Corp. 2,600 157,586
Red Robin Gourmet Burgers, Inc. (a) 5,036 237,699
Ross Stores, Inc. 7,900 230,601
School Specialty, Inc. (a) 3,140 108,330
Tiffany & Co. 5,480 205,719
Too, Inc. (a) 6,340 217,779
Tractor Supply Co. (a) 1,620 107,471
Wabtec Corp. 5,260 171,476
Williams-Sonoma, Inc. (b) 5,700 241,680
----------
2,861,483
----------
Consumer Staple--4.9%
Church & Dwight Co., Inc. 2,900 107,068
Dean Foods Corp. (a) 5,900 229,097
Hain Celestial Group, Inc. (a) 6,260 163,949
Herbalife Ltd. (a) 2,960 99,959
Performance Food Group Co. (a) 6,990 218,018
Playtex Products, Inc. (a) 10,170 106,480
USANA Health Sciences, Inc. (a) 3,720 155,198
----------
1,079,769
----------
Energy--9.9%
Consol Energy, Inc. (b) 2,810 208,390
Dril-Quip, Inc. (a) 2,640 187,044
ENSCO International, Inc. 4,600 236,670
Foundation Coal Holdings, Inc. 3,500 143,990
Global Industries, Ltd. (a) 8,400 121,716
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------
Energy (continued)
Hydril Co. (a) 3,109 $ 242,347
Oceaneering International, Inc. (a) 2,000 114,600
Oil States International, Inc. (a) 8,070 297,380
Range Resources Corp. (b) 14,300 390,533
Tesoro Corp. 3,200 218,688
----------
2,161,358
----------
Financial--10.3%
Affiliated Managers Group (a) (b) 2,350 250,534
American Equity Investment Life Holding Co. 4,100 58,794
Arch Capital Group Ltd. ADR (a) 2,000 115,480
CapitalSource, Inc. REIT 10,710 266,465
City National Corp., Class A 2,380 182,760
Corrections Corp. of America (a) 2,490 112,548
Crescent Real Estate Equities Co. REIT 10,500 221,235
Cullen/Frost Bankers, Inc. 1,200 64,500
First Community Bancorp, Inc., Class A 2,400 138,384
First Midwest Bancorp, Inc. 4,530 165,662
Mercantile Bankshares Corp. 4,700 180,715
The Colonial BancGroup, Inc. 7,100 177,500
UCBH Holdings, Inc. 8,500 160,820
Waddell & Reed Financial, Inc. 7,200 166,320
----------
2,261,717
----------
Health Care--20.0%
American Medical Systems Holdings, Inc. (a) 4,830 108,675
Community Health Systems, Inc. (a) 5,900 213,285
Covance, Inc. (a) 4,630 272,013
Coventry Health Care, Inc. (a) 3,800 205,124
Cytyc Corp. (a) 6,500 183,170
Emdeon Corp. (a) 14,780 159,624
Fisher Scientific International (b) 4,680 318,474
IMS Health, Inc. (b) 8,400 216,468
Integra LifeSciences Holdings (a) 3,100 127,038
InterMune, Inc. (a) 8,200 152,028
Laboratory Corp. of America Holdings (a) 4,400 257,312
Matria Healthcare, Inc. (a) 2,910 110,464
Medarex, Inc. (a) 7,930 104,835
Nektar Therapeutics (a) 7,600 154,888
PDL BioPharma, Inc. (a) 5,180 169,904
Pediatrix Medical Group, Inc. (a) 1,100 112,904
PerkinElmer, Inc. 11,610 272,487
Respironics, Inc. (a) 9,940 386,765
Sybron Dental Specialties, Inc. (a) 5,600 230,944
Triad Hospitals, Inc. (a) 2,600 108,940
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------
Health Care (continued)
VCA Antech, Inc. (a) 3,900 $ 111,072
Vertex Pharmaceuticals, Inc. (a) (b) 2,830 103,550
Viasys Healthcare, Inc. (a) 5,390 162,131
ZymoGenetics, Inc. (a) 5,900 127,558
----------
4,369,653
----------
Industrial--15.5%
Alaska Air Group, Inc. (a) 4,460 158,107
Bucyrus International, Inc., Class A 2,580 124,330
Copart, Inc. (a) 6,030 165,524
FTI Consulting, Inc. (a) 5,810 165,759
Global Cash Access, Inc. (a) 9,190 161,009
Harris Corp. 4,820 227,938
Jack Henry & Associates, Inc. 9,000 205,830
Huron Consulting Group, Inc. (a) 6,880 208,395
Interline Brands, Inc. (a) 3,900 98,397
Kennametal, Inc. 2,620 160,187
Landstar System 3,340 147,361
MSC Industrial Direct Co., Inc. 2,070 111,821
Mobile Mini (a) 3,900 120,588
Old Dominion Freight Line (a) 5,850 157,658
Pacer International, Inc. 6,510 212,747
Quanta Services, Inc. (a) 13,900 222,678
Stericycle, Inc. (a) 1,900 128,478
Washington Group International, Inc. (a) 4,550 261,125
Watson Wyatt Worldwide, Inc. 7,880 256,730
West Corp. (a) 2,500 111,650
----------
3,406,312
----------
Information Technology--16.6%
Akamai Technologies, Inc. (a) 4,870 160,174
Altera Corp. (a) 10,500 216,720
Amdocs, Ltd. ADR (a) 6,300 227,178
Avid Technology, Inc. (a) 2,230 96,916
BEA Systems, Inc. (a) 25,000 328,250
CACI International, Inc. (a) 2,480 163,060
Filenet Corp. (a) 8,200 221,564
Informatica Corp. (a) 6,550 101,853
ManTech International Corp., Class A (a) 5,700 189,354
Mcafee, Inc. (a) 8,640 210,211
Micrel, Inc. (a) 11,670 172,949
Novellus Systems, Inc. (a) 9,200 220,800
Palm, Inc. (a) (b) 14,760 341,842
Polycom, Inc. (a) 7,410 160,649
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------
Information Technology (continued)
Satyam Computer Services Ltd. ADR 2,700 $ 118,152
Tektronix, Inc. 7,190 256,755
Verisign, Inc. (a)(b) 11,400 273,486
Wright Express Corp. (a) 6,200 173,910
-----------
3,633,823
-----------
Services--1.5%
Bright Horizons Family Solutions, Inc. (a)
Pharmaceutical Product Development, Inc. 2,280 88,300
6,200 214,582
800 20,920
-----------
323,802
-----------
Utilities--1.0%
ITC Holdings Corp. 8,000 210,000
-----------
TOTAL EQUITIES (Cost $18,443,412) 21,340,726
-----------
SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value
------ --------- ---------
U.S. Government--0.2%
U.S.Treasury Bill (c)(Cost $29,717) 4.510% 6/15/2006 30,000 29,728
-----------
INVESTMENT OF CASH COLLATERAL--8.6% Shares
---------
BlackRock Cash Strategies ITC Holdings Corp.L.L.C (d) (Cost $1,881,408) 4.701% 1,881,408 1,881,408
-----------
TOTAL UNAFFILIATED INVESTMENTS(Cost $20,354,537) 23,251,862
-----------
AFFILIATED INVESTMENTS--0.3%
Dreyfus Institutional PreferredPlus Money Market Fund (d)(e)(Cost $63,296) 4.770% 63,296 63,296
-----------
TOTAL INVESTMENTS--106.6% (Cost $20,417,833) 23,315,158
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(6.6%) (1,438,303)
-----------
NET ASSETS--100% $21,876,855
===========
Notes to Schedule of Investments:
ADR--American Depository
Receipt REIT--Real Estate Investment Trust
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at 3/31/2006.
(c) Rate noted is yield to maturity.
(d) Stated rate is the seven day yield for the fund at 3/31/2006.
(e) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A)(including securities on loan, valued at $1,812,046(Note 7)):
Unaffiliated investments (cost $20,354,537) $23,251,862
Affiliated investments (Note 1F) (cost $63,296) 63,296
Interest and dividends receivable 8,494
Receivable for investments sold 1,060,394
Prepaid expenses 16,102
-----------
Total assets 24,400,148
Liabilities
Collateral for securities on loan (Note 7) $ 1,881,408
Payable for investments purchased 555,074
Due to Custodian 33,338
Accrued accounting, custody, administration and transfer agent fees (Note 2) 19,599
Accrued professional fees 28,381
Accrued trustees' fees (Note 2) 1,008
Accrued administrative service fees (Note 2) 308
Accrued chief compliance officer fee (Note 2) 666
Other accrued expenses and liabilities 3,511
-----------
Total liabilities 2,523,293
-----------
Net Assets $21,876,855
===========
Net Assets consist of:
Paid-in capital $18,888,591
Accumulated net realized gain 96,045
Accumulated net investment loss (5,106)
Net unrealized appreciation 2,897,325
-----------
Total Net Assets $21,876,855
===========
Shares of beneficial interest outstanding 1,414,382
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 15.47
===========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statements of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 58,188
Dividend income from affiliated investments (Note 1F) 22,812
Interest income 663
Securities lending income (Note 7) 7,888
-----------
Total investment income 89,551
Expenses
Investment advisory fee (Note 2) $ 60,394
Accounting, custody, administration and transfer agent fees (Note 2) 39,353
Registration fees 7,218
Professional fees 21,193
Trustees' fees and expenses (Note 2) 1,696
Insurance expense 1,583
Miscellaneous expenses 8,230
-----------
Total expenses 139,667
Deduct:
Waiver of invesment advisory fee (Note 2) (39,011)
-----------
Net expenses 100,656
-----------
Net investment loss (11,105)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 2,328,769
Financial futures transactions 74,642
-----------
Net realized gain 2,403,411
Change in unrealized appreciation (depreciation) on:
Investments (94,009)
Net increase from payments by affiliate (Note 2) 6,357
-----------
Net realized and unrealized gain (loss) on investments 2,315,759
-----------
Net Increase in Net Assets from Operations $ 2,304,654
===========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (11,105) $ (64,874)
Net realized gain (loss) 2,403,411 3,158,060
Change in net unrealized appreciation (depreciation) (94,009) 848,595
Net increases from payments by affiliates 6,357 --
----------- -----------
Net increase (decrease) in net assets from investment operations 2,304,654 3,941,781
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 38,625 400,565
Cost of shares redeemed (175,588) (3,854,864)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions (136,963) (3,454,299)
----------- -----------
Total Increase (Decrease) in Net Assets 2,167,691 487,482
Net Assets
At beginning of period 19,709,164 19,221,682
----------- -----------
At end of period [including undistributed
net investment income (loss) of ($5,106) and $5,999, respectively] $21,876,855 $19,709,164
=========== ===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 --------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001(a)
----------- -------- -------- -------- -------- --------
Net Asset Value, Beginning of Period $ 13.84 $ 11.26 $ 9.48 $ 7.10 $ 8.15 $ 230.48
-------- -------- -------- -------- -------- --------
From Operations:
Net investment income* (b) (0.01) (0.04) (0.08) (0.01) (0.02) (0.07)
Net realized and unrealized gains (loss) on investments 1.64 2.62 1.86(d) 2.39(d) (1.03)(d) (54.83)(d)
-- --
Net increase from payments by affiliates (c) 0.00(e) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total from operations 1.63 2.58 1.78 2.38 (1.05) (54.90)
-------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income -- -- -- (0.00)(e) -- --
From net realized gains on investments -- -- -- -- -- (167.43)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders -- -- -- (0.00) -- (167.43)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 15.47 $ 13.84 $ 11.26 $ 9.48 $ 7.10 $ 8.15
======== ======== ======== ======== ======== ========
Total Return (f) 11.78% 22.91% 18.78% 33.54% (12.88%) (46.58%)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.00%(g) 1.00% 0.98% 0.74% 0.74% 0.74%
Net Investment Income (to average daily net assets)* (0.11%)(g) (0.32%) (0.69%) (0.17%) (0.24%) (0.33%)
Portfolio Turnover 85%(h) 167% 157% 252%(i) 248%(i) 136%(i)
Net Assets, End of Period (000's omitted) $ 21,877 $ 19,709 $ 19,222 $ 21,852 $ 18,861 $ 17,073
- --------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Net investment income per share (b) $ (0.04) $ (0.09) $ (0.12) $ (0.07) $ (0.08) $ (0.14)
Ratios (to average daily net assets):
Expenses 1.39%(g) 1.38% 1.33% 1.40% 1.00% 1.08%
Net investment income (0.50%)(g) (0.70%) (1.04%) (0.83%) (0.96%) (0.67%)
(a) Amounts were adjusted to reflect a 1:3 reverse split effective December 14,
2000.
(b) Calculated using the average shares outstanding.
(c) For the six months ended March 31, 2006, 0.03% of the Fund's total return
consists of a voluntary payment by the advisor to compensate the Fund for a
trading error. Excluding this payment, total return would have been 11.75%.
(d) Amounts include litigation proceeds received by the Fund of $0.03 for the
year ended September 30, 2004, $0.01 for the year ended September 30, 2003
relating to securities litigation, $0.15 for the year ended September 30,
2002 relating to the settlement of multiple class action lawsuits and $0.14
for the year ended September 30, 2001 relating to NASDAQ recovery.
(e) Calculates to less than $0.01 per share.
(f) Total return would have been lower in the absence of expense waivers and
reimbursements.
(g) Calculated on an annualized basis.
(h) Not annualized.
(i) Represents portfolio turnover of The Boston Company Capitization Equity
Fund while the Fund was investing directly in securities.
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
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/Mid Cap Growth Fund (the "Fund") is a separate
diversified investment series of the Trust.
The Fund's Board of Trustees approved, effective September 1, 2005, the
change in the Fund's name from "The Boston Company Small Capitalization
Equity Fund" to "The Boston Company Small/Mid Cap Growth Fund".
The objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of small cap
U.S. companies with total market capitalizations equal to or less than 75%
of the average total market capitalization of the largest companies
included in the Russell 2500 Growth Index measured at the end of each of
the previous twelve months.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method
on debt securities with greater than sixty days to maturity when required
for federal income tax purposes. Dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences which may result in reclassifications, are primarily due to
differing treatments for losses deferred to wash sales, excise tax
regulations and capital loss carryovers.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated among the funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management Company LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.60% of the Fund's average daily net assets. TBCAM
voluntarily agreed to limit the Fund's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
1.00% of the Fund's average daily net assets for the period ended March 31,
2006. Pursuant to this arrangement, for the period ended March 31, 2006,
TBCAM voluntarily waived a portion of its investment advisory fee in the
amount of $39,011 of its investment advisory fee. This arrangement is
voluntary and temporary and may be discontinued or revised by TBCAM at any
time.
During the six months ended March 31, 2006, the Fund received $6,357 from
TBCAM as reimbursement due to a trading error.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services the Fund pays Dreyfus
Transfer, Inc. a fixed fee plus per account and transaction based fees, as
well as, out-of-pocket expenses. Pursuant to this agreement the Fund was
charged $5,474 during the six months ended March 31, 2006.
The Fund entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of Mellon Financial Corporation and an affiliate
of TBCAM, to provide custody, administration and accounting services for
the Fund. For these services the Fund pays Mellon Bank a fixed fee plus
asset and transaction based fees, as well as out-of-pocket expenses.
Pursuant to this agreement the Fund was charged $33,879 during the six
months ended March 31, 2006.
The Fund also entered into an agreement with Mellon Bank, to perform
certain securities lending activities and to act as the Fund's lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. Pursuant to this agreement, Mellon Bank received $3,373 for the
six months ended March 31, 2006. See Note 7 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,473. No other 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator an administrative service fee in
an amount of up to 0.15% (on an annualized basis) of the Fund's average
daily net assets attributable to Fund shares that are held in accounts
serviced by such Plan Administrator. The Fund's adviser or its affiliates
may pay additional compensation from their own resources to Plan
Administrators and other entities for administrative services, as well as
in consideration of marketing or other distribution-related services. These
payments may provide an incentive for these entities to actively promote
the Fund or cooperate with the distributor's promotional efforts. For the
six months ended March 31, 2006, the Fund was charged $273 for fees payable
to Mellon Private Wealth Management.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
----------- -----------
Investments (non-U.S. Government Securities) $16,458,071 $16,460,310
=========== ===========
14
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 2,722 30,650
Shares redeemed (12,589) (312,833)
------- --------
Net increase (decrease) (9,867) (282,183)
======= ========
At March 31, 2006, two shareholders of record held approximately 77% of the
total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that were acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund did not
collect any redemption fees.
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $20,417,833
===========
Unrealized appreciation 2,945,439
Unrealized depreciation (48,114)
-----------
Net unrealized appreciation (depreciation) $ 2,897,325
===========
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Futures contracts
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to margin requirements the Fund deposits
either cash or securities in an amount equal to a certain percentage of the
contract amount. Subsequent payments are made or received by the Fund each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. There are several risks in connection with the
use of futures contracts as a hedging device. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments or indices, which may not correlate with changes in the value
of hedged investments. Buying futures tends to increase the Fund's exposure
to the underlying instrument, while selling futures tends to decrease the
Fund's exposure to the underlying instrument or hedge other investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparty does
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to seek to manage its exposure to certain
markets and to changes in securities prices and foreign currencies. Gains
and losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
At March 31, 2006, the Fund did not hold any open financial futures
contracts.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(7) Security Lending:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the six months ended March 31, 2006 and
earned interest on the invested collateral of $26,564 of which $18,676 was
rebated to borrowers or paid in fees. At March 31, 2006, the Fund had
securities valued at $1,812,046 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
(8) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust") are parties to
a committed line of credit facility, which enables each fund/portfolio to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating Fund/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of 0.060 of 1% on the committed amount, is
allocated ratably among the participating funds/portfolios at the end of
each quarter. For the six months ended March 31, 2006, the facility fee was
$138 for the Fund.
During the six months ended March 31, 2006, the Fund did not borrow under
the credit facility.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
Fund's advisory agreement and the related fees on an annual basis. In their
most recent deliberations concerning their decision to approve the
continuation of the investment advisory agreement, the Board of Trustees
conducted the review and made the determinations that are described below.
In conducting this review and in making such determinations, the
Independent Trustees received from the Fund's investment adviser, The
Boston Company Asset Management, LLC ("the Adviser"), a broad range of
information in response to a written request prepared on their behalf by
their own legal counsel. The Independent Trustees met alone in a private
session with their legal counsel on September 22, 2005 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. Representatives of the Adviser attended a portion of the
September meeting to provide an overview of its organization, personnel,
resources and strategic plans, and to respond to questions and comments
arising from the Independent Trustees' review of the materials and their
deliberations. The entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and
income statements, as well as a profitability analysis of the Adviser,
including a separate presentation of the Adviser's profitability relative
to that of several publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management
fee and expense ratio compared to other funds, and the Adviser's separate
account advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the
Fund's performance and any material portfolio manager and strategy changes
that may have affected the Fund in the prior year, as well as the Fund's
"fact sheets" prepared by the Adviser providing salient data about the Fund
and the Adviser's views concerning the issues of breakpoints in the
management fee schedule of the Fund and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling, and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to the Adviser provided therein were fair
and reasonable in light of the services performed, expenses incurred and
such other matters as the Trustees considered relevant in the exercise of
their reasonable judgment. The following summary does not detail all the
matters that were considered. Some of the factors that figured prominently
in the Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Fund by the Adviser. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders have chosen to entrust the Adviser, under the supervision of
the Board, to manage the portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment
management, administrative, compliance and related services provided by the
Adviser. The Board determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees reviewed the background and experience of the Fund's two
portfolio managers and also met with senior management of the Adviser to
receive an overview of its organization, personnel, resources and strategic
plans. Among other things, the Trustees considered the size, education and
experience of the Adviser's investment staff, technological infrastructure
and overall responsiveness to changes in market conditions. The Board
determined that the Adviser had the expertise and resources to manage the
Fund effectively.
Investment Performance
The Board considered the investment performance of the Fund against a peer
group of investment companies selected by the Adviser with input from the
Trustees. The Board also compared the Fund's investment performance against
the average performance of a larger universe of funds regarded by Lipper as
having similar investment objectives and considered the Fund's performance
rankings against that universe. In addition to the information received by
the Board for at the September 22, 2005 Board meeting, the Trustees
received similar detailed comparative performance information for the Fund
at each regular Board meeting during the year.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2005 based on the Lipper materials
provided to the Board at the September 22, 2005 meeting. The Board found
that the Fund outperformed its peer group average return for the three-year
period (22.16% vs. 18.95%) but slightly underperformed its peer group
average returns for the one-year period (24.05% vs. 24.52%) and five-year
period (1.51% vs. -1.15%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser.
The Lipper data presenting the Fund's "net advisory fees" included fees
paid by the Fund, as calculated by Lipper, for administrative services
provided by Mellon Bank, N.A., the Trust's custodian. Such reporting was
necessary, according to Lipper, to allow the Board to compare the Fund's
advisory fees to those peers that include administrative fees within a
blended advisory fee.
The Fund's contractual advisory fee was 0.600%, lowest in its entire peer
group of funds, the median fee of which was 1.00%. The Fund's actual
advisory fee, after giving effect to expense limitations, was 0.331%,
lowest in its entire peer group of funds, and well below the median, which
was 1.000%. Based on the Lipper data, as well as other factors discussed at
the September 22, 2005 meeting, the Board determined that the Fund's
advisory fee is reasonable relative to its peer group averages, both with
and without giving effect to expense limitations.
The Board also compared the fees payable by the Fund relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed
by the Adviser with respect to the Fund relative to these other types of
clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board also considered the Fund's total expense ratio and compared it to
that of its peer group of similar funds. The Board found that the actual
total expense ratio of 0.977% (after giving effect to expense limitations)
was lower than the median total expense ratio of the peer group of 1.203%
notwithstanding the fact that all of the other funds in the peer group were
larger than the Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Fund and
the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by the Adviser or its affiliated investment adviser, Standish
Mellon Asset Management Company LLC ("Standish Mellon") in managing the
Fund and other funds in the Mellon Institutional Funds family of funds. The
Independent Trustees had observed that, based on the profitability
information submitted to them by the Adviser, the Adviser incurred losses
in managing many of the investment companies in the Mellon Institutional
Funds family of funds, including the Fund, and that among those funds that
were profitable to the Adviser, several generated only marginal
profitability for the firm. The Trustees observed that the Adviser had
incurred losses in operating the Fund in both 2003 and 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed
Income Portfolio, the largest fund in the complex, already had breakpoints
in its fee arrangement that reflected economies resulting from its size.
The Board concluded that, at existing asset levels and considering current
assets growth projections, the implementation of fee breakpoints or other
fee reductions with respect to the Fund was not necessary at this time.
They requested, however, that management consider the issue of future
breakpoints across the Mellon Institutional Funds complex and respond to
the Independent Trustees and to present a proposal for such breakpoints or,
in each case as applicable, management's rationale as to why such future
breakpoints are not necessary or appropriate for a particular Fund.
In response, the Adviser has subsequently proposed for the Independent
Trustees' consideration, forward-looking fee schedules for various types of
funds across the Mellon Institutional Funds complex. These schedules
contain asset-based breakpoints which vary based on the investment strategy
of fund and other factors considered by the Adviser to be relevant to the
issue of potential future economies of scale. The Independent Trustees and
their counsel have taken this proposal under advisement.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Mellon Institutional Funds as a group,
including revenues received by Mellon affiliates in consideration of
custodial, administrative, transfer agency and securities lending services
provided by such affiliates to the Funds. In each case, such affiliates
were selected by the Board on the basis of a comparative analysis of their
capabilities and fees relative to those of unaffiliated competitors. In
addition, the Board, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i)
the terms of the relevant service agreement are in the best interests of
Fund shareholders; (ii) the services to be performed by the affiliate
pursuant to the agreement are required by and appropriate for the Funds;
(iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for
its services are fair and reasonable in light of the usual and customary
charges imposed by other, unaffiliated firms for services of the same
nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to the Adviser provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for
one-year period.
19
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 34 None $330
c/o Decision Resources, Inc. 11/3/1986 Resources, Inc. ("DRI")
260 Charles Street biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None $351
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly,MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None $330
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens 34 None $330
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $ 0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial
Officer, MAM
20
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund
Boston, MA 02108 Operations, Standish Mellon Asset Management,
8/19/51 LLC
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM");
One Boston Place formerly Manager of Shareholder Services, MAM,
Boston, MA 02108 and Shareholder Representative, Standish Mellon
1/19/71 Asset Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy Fund,
Boston, MA 02108 LLC; formerly Director, Blackrock, Inc., Senior
4/8/57 Vice President, State Street Research &
Management Company ("SSRM"), and Vice President,
SSRM
21
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[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6928SA0306
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
The Boston Company
Large Cap Core Fund
- --------------------------------------------------------------------------------
Semiannual Report
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds. The Example is
based on an investment of $1,000 invested at the beginning of the period and
held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period+ Account Value Account Value
October 1, 2005 October 1, 2005 March 31, 2006 to March 31, 2006
Expenses Paid
Beginning Ending During Period +
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,071.50 $4.65
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.44 $4.53
- ---------
+ Expenses are equal to the Fund's annualized expense ratio of 0.90%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).The Example reflects the
combined expenses of the Fund and the master portfolio in which it invests
all its assets.
3
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -------------------------------------------------------------------------------------------
Exxon Mobil Corp. Energy 3.1%
Microsoft Corp. Information Information Technology 3.0
Altria Group, Inc. Consumer Staples 3.0
General Electric Corp. Industrial 2.9
JPMorgan Chase & Co. Financial 2.9
Bank of America Corp. Financial 2.8
Cisco Systems, Inc. Information Technology 2.2
Procter & Gamble Co. Consumer Staples 2.0
Wachovia Corp. Financial 2.0
Citigroup, Inc. Financial 1.7
----
25.6%
* Excludes short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------------
Basic Materials 2.5%
Consumer Discretionary 9.9
Consumer Staples 10.6
Energy 10.3
Financial 20.1
Health Care 13.2
Industrial 13.7
Information Technology 14.3
Telecommunication Service 2.4
Utilities 3.1
Short-term and other assets (0.1)
-----
100.0%
The Boston Company Large Cap Core Fund invests all of its investable assets in
an interest of The Boston Company Large Cap Core Portfolio (See Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in in The Boston Company Large Cap Core Portfolio ("Portfolio"), at value $47,092,951
(Note 1A)
Receivable for Fund shares sold 56,965
Prepaid expenses 10,932
-----------
Total assets 47,160,848
Liabilities
Accrued transfer agent fees (Note 2) $ 2,458
Professional fees 14,244
Payable for Fund shares redeemed 20,000
Accrued administrative service fees (Note 2) 10,132
Accrued trustees' fees (Note 2) 497
Accrued chief compliance officer fee (Note 2) 1,745
Other accrued expenses and liabilities 3,650
-------
Total liabilitiess 52,726
-----------
Net Assets $47,108,122
===========
Net Assets consist of:
Paid-in capital $39,456,841
Accumulated net realized gain 1,482,585
Undistributed net investment income 211,619
Net unrealized appreciation 5,957,077
-----------
Total Net Assets $47,108,122
===========
Shares of beneficial interest outstanding 1,277,558
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 36.87
===========
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 408,223
Interest income allocated from Portfolio 20,718
Expenses allocated from Portfolio (172,807
-----------
Net investment income allocated from Portfolio 256,134
Expenses
Transfer agent fees (Note 2) $ 4,313
Registration fees 9,848
Professional fees 12,283
Insurance expense 486
Administrative service fees (Note 2) 20,444
Trustees' fees (Note 2) 2,406
Chief compliance officer expense (Note 2) 3,551
Miscellaneous expenses 7,866
---------
Total expenses 61,197
Deduct:
Reimbursement of operating expenses (Note 2) (27,197)
---------
Net expenses 34,000
-----------
Net investment income 222,134
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investments 1,797,014
Financial futures transactions 18,883
---------
Net realized gain (loss) 1,815,897
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments 1,169,805
Financial futures contracts (2,730)
---------
Change in net unrealized appreciation (depreciation) 1,167,075
-----------
Net realized and unrealized gain (loss) 2,982,972
-----------
Net Increase in Net Assets from Operations $ 3,205,106
===========
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30,
2005
----------- -------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 222,134 $ 608,708
Net realized gain (loss) 1,815,897 7,108,328
Change in net unrealized appreciation (depreciation) 1,167,075 (560,299)
----------- -----------
Net increase (decrease) in net assets from investment operations 3,205,106 7,156,737
----------- -----------
Distributions to Shareholders (Note 1C)
From net investment income (222,760) (528,108)
From net realized gains on investments (5,953,616) --
----------- -----------
Total distributions to shareholders (6,176,376) (528,108)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 1,767,159 5,655,789
Value of shares issued in reinvestment of distributions 5,092,738 376,548
Cost of shares redeemed (2,816,487) (22,691,547)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions 4,043,410 (16,659,210)
----------- -----------
Total Increase (Decrease) in Net Assets 1,072,140 (10,030,581)
Net Assets
At beginning of period 46,035,982 56,066,563
----------- -----------
At end of period (including undistributed net
investment income of $211,619 and $212,245, respectively) $47,108,122 $46,035,982
=========== ===========
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended Septmber 30,
March 31, 2006 ------------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
Net Asset Value, Beginning of Period $ 39.57 $ 35.24 $ 31.43 $ 26.13 $ 34.00 $ 41.71
-------- -------- -------- -------- -------- --------
From Investment Operations:
Net investment income* (a) 0.18 0.41 0.23 0.36 0.32 0.39
Net realized and unrealized gains (loss)
on investments 2.49 4.28(b) 3.92(b) 5.30 (5.77)(b) (2.77)
-------- -------- -------- -------- -------- --------
Total from operations 2.67 4.69 4.15 5.66 (5.45) (2.38)
-------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.19) (0.36) (0.34) (0.36) (0.21) (0.29)
From net realized gains on investments (5.18) -- -- -- (2.21) (5.04)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (5.37) (0.36) (0.34) (0.36) (2.42) (5.33)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 36.87 $ 39.57 $ 35.24 $ 31.43 $ 26.13 $ 34.00
======== ======== ======== ======== ======== ========
Total Return 7.15%(c) 13.34% 13.23%(c ) 21.76%(c) (17.70%)(c) (7.18%)(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (d) 0.90%(e) 0.85% 0.83% 0.71% 0.71% 0.71%
Net Investment Income (to average daily net 0.97%(e) 1.10% 0.67% 1.23% 0.96% 1.00%
assets)*
Net Assets, End of Period (000's omitted) $ 47,108 $ 46,036 $ 56,067 $ 64,150 $ 55,029 $ 75,489
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Net investment income per share (a) $ 0.16 N/A $ 0.23 $ 0.29 $ 0.27 $ 0.38
Ratios (to average daily net assets):
Expenses (d) 1.02%(e) N/A 0.84% 0.93% 0.83% 0.73%
Net investment income 0.85%(e) N/A 0.66% 1.01% 0.84% 0.98%
(a) Calculated based on average shares outstanding.
(b) Amounts includes litigation proceeds received by the Portfolio of $0.02 for
the period ended September 30, 2005, $0.02 for the year ended September 30,
2004 and $0.06 for the year ended September 30, 2002.
(c) Total return would have been lower in the absence of expense waivers and
reimbursement.
(d) Includes the Fund's share of the Portfolio's allocated expenses.
(e) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Large Cap Core Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund invests all of its investable assets in an interest of The Boston
Company Large Cap Core Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and which has the same investment objective
as the Fund. The Portfolio seeks to achieve its objective by investing,
under normal circumstances, at least 80% of net assets in equity securities
in companies that appear to be undervalued relative to underlying business
fundamentals. The value of the Fund's investment in the Portfolio reflects
the Fund's proportionate interest in the net assets of the Portfolio. As of
March 31, 2006 the Fund owned 100% of the Portfolio's net assets. The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio are included elsewhere
in this report and should be read in conjunction with the Fund's financial
statements.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
The Fund records its investments in the Portfolio at value. The Portfolio
values its securities at value as discussed in Note 1A of the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities transactions and income
Securities transactions in the Portfolio are recorded as of trade date.
Currently, the Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all expenses of
the Fund determined in accordance with accounting principals generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Fund represent pro rata shares of gains and losses of the
Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. In determining
the amounts of its dividends, the Fund will take into account its share of
the income, gains or losses, expenses, and any other tax items of the
Portfolio. Dividends from net investment income and distributions from
capital gains, if any, are reinvested in additional shares of the Fund
unless a shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
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 will result in reclassifications
among undistributed net investment income (loss), accumulated net realized
gain (loss) and paid in capital. Undistributed net investment income (loss)
and accumulated net realized gain (loss) on investments may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
D. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
funds of the Trust and portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
9
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core 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 Fund to The Boston
Company Asset Management, LLC ("TBCAM"), a wholly-owned subsidiary of
Mellon Financial Corporation, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report. TBCAM voluntarily agreed to limit the total operating expenses
of the Fund and its pro rata share of the Portfolio expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.90% of the
Fund's average daily net assets. This agreement is voluntary and temporary
and may be discontinued or revised by TBCAM at any time. Pursuant to this
agreement, for the six months ended March 31, 2006, TBCAM voluntarily
reimbursed $27,197 of the Fund's operating expenses.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services the Fund pays Dreyfus
Transfer, Inc. a fixed fee plus per account and transaction based fees, as
well as, out-of-pocket expenses. Pursuant to this agreement the Fund was
charged $4,313 for the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $3,551. No other director, officer or employee
of TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio for serving as an officer or Trustee of the Trust. The Fund pays
each Trustee who is not a director, officer or employee of TBCAM or its
affiliates an annual fee.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator a service fee in an amount of up
to 0.15% (on an annualized basis) of the Fund's average daily net assets
attributable to Fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts. For the six months
ended March 31, 2006, the Fund was charged $9,885 for fees payable to
Mellon Private Wealth Management.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2006, aggregated $6,803,632 and $8,998,861,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expense and realized and unrealized gains and losses based on
applicable tax allocation rules. Book/tax differences arise when changes in
proportionate interest for funds investing in the Portfolio occur.
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 47,436 148,469
Shares issued to shareholders in
reinvestment of distributions 142,216 9,893
Shares redeemed (75,422) (585,936)
------- ---------
Net increase 114,230 (427,574)
======= =========
10
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2006, two shareholders of record held approximately 33% of the
total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund did not
collect any redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See the corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
11
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--100.2%
EQUITIES--100.1%
Basic Materials--2.5%
Dow Chemical Co. 9,560 $ 388,136
El Du Pont de Nemours & Co. 6,080 256,637
PPG Industries, Inc. 3,170 200,820
Smurfit-Stone Container Corp. (a) 9,770 132,579
Steel Dynamics, Inc. 3,700 209,901
---------
1,188,073
---------
Consumer Discretionary--9.9%
Advance Auto Parts, Inc. 7,095 295,436
Coach, Inc. (a) 6,140 212,321
Hilton Hotels Corp. 30,090 766,091
J.C. Penny Company, Inc. 6,290 379,979
McDonalds Corp. 17,580 604,049
Omnicom Group 2,650 220,613
Target Corp. 10,430 542,464
The Home Depot, Inc. 13,760 582,048
Time Warner, Inc. 29,390 493,458
Walt Disney Co. 20,580 573,976
---------
4,670,435
---------
Consumer Staples--10.6%
Altria Group, Inc. 20,100 1,424,286
Cadbury Schweppes PLC--ADR 14,940 597,600
CVS Corp. 16,150 482,401
Dean Foods Corp. (a) 5,570 216,283
General Mills, Inc. 4,590 232,621
Kellogg Co. 4,740 208,750
Pepsico, Inc. 11,310 653,605
Procter & Gamble Co. 16,873 972,222
The Kroger Co. 10,890 221,720
---------
5,009,488
---------
Energy--10.3%
Chevron Corp. 5,582 323,589
ConocoPhillips 11,350 716,753
Devon Energy Corp. 10,670 652,684
Exxon Mobil Corp. 24,694 1,502,877
GlobalSantaFe Corp. 8,170 496,328
Marathon Oil Corp. 3,120 237,650
Nabors Industries Ltd. (a) 3,540 253,393
Weatherford International Ltd. (a) 14,100 645,075
---------
4,828,349
---------
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------
Financial--20.1%
American International Group 6,579 $ 434,806
Bank of America Corp. 29,670 1,351,172
Capital One Financial Corp. 2,690 216,599
Chubb Corp. 2,770 264,369
CIT Group, Inc. 9,590 513,257
Citigroup, Inc. 16,906 798,639
E*TRADE Financial Corp. (a) 15,560 419,809
Hartford Financial Services Group, Inc. 5,250 422,888
JPMorgan Chase & Co. 33,190 1,382,032
Lehman Brothers Holdings, Inc. 2,090 302,068
Merrill Lynch & Co., Inc. 9,860 776,574
Morgan Stanley 5,870 368,753
Prudential Financial, Inc. 7,720 585,253
W. R. Berkley Corp. 5,640 327,458
Wachovia Corp. 17,290 969,105
Zions Bancorporation 3,980 329,265
---------
9,462,047
---------
Health Care--13.2%
Amerisourcebergen Corp. 9,780 472,081
Amgen, Inc. (a) 5,930 431,408
Barr Pharmaceuticals, Inc. (a) 5,340 336,313
Fisher Scientific International 6,790 462,060
IMS Health, Inc. 13,260 341,710
Invitrogen Corp. (a) 3,350 234,936
Johnson & Johnson 10,830 641,353
Medtronic, Inc. 7,670 389,253
Novartis AG ADR 8,560 474,566
Omnicare, Inc. 4,520 248,555
Pfizer, Inc. 18,910 471,237
Thermo Electron Corp. (a) 11,060 410,215
Wellpoint, Inc. 7,340 568,336
Wyeth 15,410 747,693
---------
6,229,716
---------
Industrial--13.7%
Burlington Northern Santa Fe Corp. 5,880 489,980
Cendant Corp. 27,120 470,532
Eaton Corp. 4,980 363,391
Empresa Brasileira de Aeronautica S.A. ADR (a) 7,190 264,952
Emerson Electric Co. 7,330 613,008
General Electric Corp. 40,630 1,413,111
Lockheed Martin Corp. 7,170 538,682
Norfolk Southern Corp. 13,470 728,323
Rockwell Automation, Inc. 5,050 363,146
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------
Industrial (continued)
Textron, Inc. 4,640 $ 433,330
Tyco International Ltd. 7,640 205,363
United Technologies Corp. 6,790 393,616
US Airways Group, Inc. (a) 4,980 199,200
----------
6,476,634
----------
Information Technology--14.3%
Accenture Ltd., Class A 8,010 240,861
Amphenol Corp. 5,490 286,468
Broadcom Corp. (a) 7,065 304,925
CA, Inc. 176 4,789
Cisco Systems, Inc. (a) 48,740 1,056,196
Citrix Systems, Inc. (a) 8,980 340,342
Hewlett-Packard Co. 23,380 769,202
International Business Machines Corp. 9,270 764,497
Microsoft Corp. 52,570 1,430,430
NCR Corp. (a) 6,630 277,068
Qualcomm, Inc. 15,460 782,431
Texas Instruments, Inc. 14,440 468,867
----------
6,726,076
----------
Telecommunication Service--2.4%
AT&T, Inc. 21,810 589,742
Verizon Communications, Inc. 15,420 525,205
----------
1,114,947
----------
Utilities--3.1%
Constellation Energy Group, Inc. 10,180 556,948
P G & E Corp. 14,080 547,712
Sempra Energy 7,510 348,909
----------
1,453,569
----------
TOTAL EQUITIES (COST $41,199,533) 47,159,334
----------
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Description Rate Maturity Value (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.1%
U.S. Government--0.1%
U.S. Treasury Bill (b)(c)(Cost $19,814) 4.470% 6/15/2006 $20,000 $ 19,819
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $41,219,347) 47,179,153
-----------
AFFILIATED INVESTMENTS--2.1% Shares
-------
Dreyfus Institutional Preferred Plus Money Market Fund (d)(e)(Cost $978,027) 4.770% 978,027 978,027
-----------
TOTAL INVESTMENTS--102.3% (Cost $42,197,374) 48,157,180
LIABILITIES IN EXCESS OF OTHER ASSETS--(2.3%) (1,064,229)
-----------
NET ASSETS-100% $47,092,951
===========
Notes to Schedule of Investments:
ADR-American Depository Receipt
(a) Non-income producing security.
(b) Denotes all or part of security segregated as collateral.
(c) Rate is yield to maturity.
(d) Stated yield is the seven day yield for the fund as of March 31, 2006.
(e) Affiliated institutional money market fund.
At March 31, 2006, the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Loss
- ---------------------------------------------------------------------------------------------------------------
S & P 500 Index (1 Contract) Long 6/15/2006 $328,550 $(2,730)
=======
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A):
Unaffiliated issuers, at value (cost $41,219,347) $47,179,153
Affiliated issuers, at value (cost $978,027) (Note 1F) 978,027
Receivable for investments sold 735,337
Interest and dividends receivable 62,453
Prepaid expenses 4,857
-----------
Total assets 48,959,827
Liabilities
Payable for investments purchased $ 1,805,392
Payable for variation margin on open futures contracts (Note 5) 1,050
Due to Custodian 650
Accrued accounting, administration and custody fees (Note 2) 19,639
Accrued trustees' fees and expenses (Note 2) 2,979
Other accrued expenses and liabilities 37,166
-----------
Total liabilities 1,866,876
-----------
Net Assets (applicable to investors' beneficial interest) $47,092,951
===========
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statements of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 408,223
Dividend income from affiliated investments (Note 1F) 18,387
Interest income 2,331
----------
Total investment income 428,941
Expenses
Investment advisory fee (Note 2) $ 114,990
Accounting, administration and custody fees (Note 2) 39,916
Professional fees 9,506
Trustees' fees and expenses (Note 2) 3,088
Insurance expense 4,375
Miscellaneous 932
---------
Total expenses 172,807
----------
Net investment income 256,134
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 1,797,014
Financial futures transactions 18,883
---------
Net realized gain (loss) 1,815,897
Change in unrealized appreciation (depreciation) on:
Investments 1,169,805
Financial futures contracts (2,730)
---------
Change in net unrealized appreciation (depreciation) 1,167,075
----------
Net realized and unrealized gain (loss) 2,982,972
----------
Net Increase in Net Assets from Operations $3,239,106
==========
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------- -------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 256,134 $ 688,874
Net realized gain (loss) 1,815,897 7,108,328
Change in net unrealized appreciation (depreciation) 1,167,075 (560,299)
----------- -----------
Net increase (decrease) in net assets from operations 3,239,106 7,236,903
----------- -----------
Capital Transactions
Contributions 6,803,632 6,081,476
Withdrawals (8,998,861) (23,303,488)
----------- -----------
Net increase (decrease) in net assets from capital transactions (2,195,229) (17,222,012)
----------- -----------
Total Increase (Decrease) in Net Assets 1,043,877 (9,985,109)
Net Assets
At beginning of period 46,049,074 56,034,183
----------- -----------
At end of period $47,092,951 $46,049,074
----------- -----------
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 --------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
---------- ------- ------- ------- ------- --------
Total Return 7.30% 13.37% 13.34% 21.76%(a) (17.69)%(a) (7.11)%(a)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.75%(b) 0.70% 0.72% 0.71% 0.70% 0.64%
Net Investment Income (to average daily net assets)* 1.12%(b) 1.24% 0.77% 1.23% 0.97% 1.06%
Portfolio Turnover 41%(c) 85% 66% 104% 80% 62%
Net Assets, End of Period (000's omitted) $47,093 $46,049 $56,034 $64,170 $55,007 $124,213
- --------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A 0.77% 0.72% N/A
Net investment income N/A N/A N/A 1.17% 0.95% N/A
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
(b) Calculated on an annualized basis.
(c) Not annualized.
The accompanying notes are an integral part of the financial statements.
19
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.
The objective of the Portfolio is long-term growth of capital. The
Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity and equity-related
securities of companies which appear to be undervalued relative to current
earnings growth.
At March 31, 2006, 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, 2006 was 100%.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Portfolio
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity when
required for federal income tax purposes. Dividend income is recorded on
the ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Income taxes
The Portfolio is treated as a disregarded entity for federal tax purposes.
No provision is made by the Portfolio for federal or state income taxes on
any taxable income of the Portfolio because each investor in the Portfolio
is ultimately responsible for the payment of any taxes. Since at least one
of the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them.
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.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
the funds of the Trust or the portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
F. Affiliated issuers
Affiliated issuers represent issuers in which the Portfolio held
investments in other investment companies advised by The Boston Company
Asset Management Company LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory
and administrative services is paid monthly at the annual rate of 0.50% of
the Portfolio's average daily net assets. For the six months ended March
31, 2006, the Portfolio was charged $114,990 in investment advisory fees to
TBCAM.
The Portfolio entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of TBCAM, to provide custody, administration and accounting
services for the Portfolio. For these services the Portfolio pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as
out-of-pocket expenses. Pursuant to this agreement the Portfolio was
charged $39,916 for the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust.
The Fund and Porfolio Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates (the "Independent Trustees")
an annual fee and the Portfolio Trust pays each Independent Trustee 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 counsel to the
Independent Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
----------- -----------
Investments (non-U.S. Government Securities) $18,780,979 $20,407,378
=========== ===========
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $42,197,374
===========
Unrealized appreciation $ 6,292,650
Unrealized depreciation (332,844)
-----------
Net unrealized appreciation (depreciation) $ 5,959,806
===========
21
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Portfolio may trade the following financial instruments with
off-balance sheet risk:
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, 2006, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
(6) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a facility fee, computed at an annual rate of 0.060 of 1%
on the committed amount, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended March
31, 2006, the expense allocated to the Portfolio was $787.
For the six months ended March 31, 2006, the Portfolio did not borrow under
the credit facility.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of its
Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the fund's
advisory agreement and the related fees on an annual basis. The Fund is not a
party to an investment advisory agreement directly with any investment adviser
and does not invest directly in portfolio securities. Instead, the Fund invests
all of its investable assets in The Boston Company Large Cap Core Portfolio (the
"Portfolio"), which is managed by The Boston Company Asset Management ("TBCAM").
The Fund's Board of Trustees determines annually whether the Fund should
continue to invest in the Portfolio. The members of the Fund's Board of Trustees
also serve as the Board of Trustees of the Portfolio. In that capacity, they
consider annually whether to continue the investment advisory agreement between
the Portfolio and TBCAM. In their most recent deliberations concerning their
decision to approve the continuation of the investment advisory agreement, the
Board of Trustees conducted the review and made the determinations that are
described below. In conducting this review and in making such determinations,
the Independent Trustees received from the Portfolio's investment adviser, TBCAM
("the Adviser"), a broad range of information in response to a written request
prepared on their behalf by their own legal counsel. The Independent Trustees
met alone in a private session with their legal counsel on September 22, 2005 to
review these materials and to discuss the proposed continuation of the Fund's
advisory agreement. Representatives of the Adviser attended a portion of the
September meeting to provide an overview of its organization, personnel,
resources and strategic plans, and to respond to questions and comments arising
from the Independent Trustees' review of the materials and their deliberations.
The entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and income
statements, as well as a profitability analysis of the Adviser, including a
separate presentation of the Adviser's profitability relative to that of several
publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and the Adviser's separate account
advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the Fund's
performance (rather than the Portfolio alone), and any material portfolio
manager and strategy changes that may have affected the Fund in the prior year,
as well as the Fund's "fact sheets" prepared by the Adviser providing salient
data about the Fund and Portfolio, including Portfolio's holdings, strategies,
recent market conditions and outlook, as well as the Adviser's views concerning
the issues of breakpoints in the management fee schedule of the Portfolio and
potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling, and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The Trustees
determined that the terms and conditions of the advisory agreement and the
compensation to the Adviser provided therein were fair and reasonable in light
of the services performed, expenses incurred and such other matters as the
Trustees considered relevant in the exercise of their reasonable judgment. The
following summary does not detail all the matters that were considered. Some of
the factors that figured prominently in the Trustees' determination are
described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by the Adviser. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of the
fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust the Adviser, under the supervision of the Board, to manage the
portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment management,
administrative, compliance and related services provided by the Adviser. The
Board determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees reviewed the background and experience of the Portfolio's two
portfolio managers and also met with senior management of the Adviser to receive
an overview of its organization, personnel, resources and strategic plans. Among
other things, the Trustees considered the size, education and experience of the
Adviser's investment staff, technological infrastructure and overall
responsiveness to changes in market conditions. The Board determined that the
Adviser had the expertise and resources to manage the Portfolio effectively.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Investment Performance
The Board considered the investment performance of the Fund (rather than the
Portfolio alone) against a peer group of investment companies selected by the
Adviser with input from the Trustees. The Board also compared the Fund's
investment performance against the average performance of a larger universe of
funds regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings against that universe. In addition to the
information received by the Board for at the September 22, 2005 Board meeting,
the Trustees received similar detailed comparative performance information for
the Fund at each regular Board meeting during the year.
The Board considered the Fund's performance for the one-, three- and five-year
periods ended July 31, 2005 based on the Lipper materials provided to the Board
at the September 22, 2005 meeting. The Board found that the Fund's performance
compares favorably to its peer group, as the Fund outperformed its peer group
average return for the one-year period (14.64% vs. 14.44%), three-year period
(11.80% vs. 10.99%) and five-year period (4.91% vs. -1.70%). The Trustees noted
that, while Fund continued to outperform its peer group, the extent of its
outperformance had declined in recent periods. The Trustees requested that the
Adviser arrange for a presentation to the Board, as part of the usual fund
reporting cycle, to explain the reasons for this decline in the Fund's
performance relative to earlier periods and efforts by the Adviser to improve
the Fund's performance.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to the Adviser.
The Lipper data presenting the Portfolio's "net advisory fees" included fees
paid by the Portfolio, as calculated by Lipper, for administrative services
provided by Mellon Bank, N.A., the Trust's custodian. Such reporting was
necessary, according to Lipper, to allow the Board to compare the Portfolio's
advisory fees to those peers that include administrative fees within a blended
advisory fee.
The Portfolio's contractual advisory fee was 0.500%, which was the lowest of
that peer group, and well below the median of 0.817%. The Portfolio's actual
advisory fee, after giving effect to expense limitations, was 0.517%, which was
below the median actual advisory fee of 0.761%. Based on the Lipper data, as
well as other factors discussed at the September 22, 2005 meeting, the Board
determined that the Portfolio's advisory fee is reasonable relative to its peer
group averages, both with and without giving effect to expense limitations.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed by
the Adviser with respect to the Portfolio relative to these other types of
clients, the Board concluded that the fees payable under the advisory agreement
were reasonable.
The Board also considered the Fund's (rather than solely the Portfolio's)
expense ratio and compared it to that of its peer group of similar funds. The
Board found that the Fund's actual total expense ratio of 0.821% (after giving
effect to expense limitations) was lower than the median total expense ratio of
the peer group of 0.919%.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Portfolio and
Fund and the Mellon Institutional Funds as a group, as well as the methodology
used to compute such profitability, and the various direct and indirect expenses
incurred by the Adviser or its affiliated investment adviser, Standish Mellon
Asset Management Company, LLC ("Standish Mellon") in managing the Portfolio and
other funds in the Mellon Institutional Funds family of funds. The Independent
Trustees had observed that, based on the profitability information submitted to
them by the Adviser, the Adviser incurred losses in managing many of the
investment companies in the Mellon Institutional Funds family of funds,
including the Portfolio and Fund, and that among those funds that were
profitable to the Adviser, several generated only marginal profitability for the
firm. The Trustees observed that the Adviser had incurred losses in operating
the Portfolio in both 2003 and 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed Income
Portfolio, the largest fund in the complex, already had breakpoints in its fee
arrangement that reflected economies resulting from its size. The Board
concluded that, at existing asset levels and considering current assets growth
projections, the implementation of fee breakpoints or other fee reductions with
respect to the Portfolio or Fund was not necessary at this time. They requested,
however, that management consider the issue of future breakpoints across the
Mellon Institutional Funds complex and respond to the Independent Trustees and
to present a proposal for such breakpoints or, in each case as applicable,
management's rationale as to why such future breakpoints are not necessary or
appropriate for a particular Fund.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
In response, the Adviser has subsequently proposed for the Independent Trustees'
consideration, forward-looking fee schedules for various types of funds across
the Mellon Institutional Funds complex. These schedules contain asset-based
breakpoints which vary based on the investment strategy of fund and other
factors considered by the Adviser to be relevant to the issue of potential
future economies of scale. The Independent Trustees and their counsel have taken
this proposal under advisement.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Mellon Institutional Funds as a group, including
revenues received by Mellon affiliates in consideration of custodial,
administrative, transfer agency and securities lending services provided by such
affiliates to the Funds. In each case, such affiliates were selected by the
Board on the basis of a comparative analysis of their capabilities and fees
relative to those of unaffiliated competitors. In addition, the Board, including
a majority of the Independent Trustees, conduct an examination annually of each
such arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Funds; (iii) the nature and quality of the services provided
by the affiliate pursuant to the agreement are at least equal to those provided
by other, unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for its
services are fair and reasonable in light of the usual and customary charges
imposed by other, unaffiliated firms for services of the same nature and
quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Funds and
the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Portfolio's advisory agreement and the
compensation to the Adviser provided therein are fair and reasonable and, thus,
in approving the continuation of the agreement for one-year period.
25
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee Chairman Emeritus, 34 None Fund: $584
c/o Decision Resources, Inc. since Decision Resources, Inc. Portfolio: $250
260 Charles Street 11/3/1986 ("DRI") (biotechnology
Waltham, MA 02453 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee Trustee, Essex Street 34 None Fund: $641
c/o Essex Street Associates since Associates (family Portfolio: $250
P.O. Box 5600 11/3/1986 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee William Joseph Maier, 34 None Fund: $584
c/o Harvard University since Professor of Political Portfolio: $250
Littauer Center 127 9/13/1989 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee Trustee, Mertens 34 None Fund: $584
P.O. Box 2333 since House, Inc. (hospice) Portfolio: $250
New London, NH 03257 11/3/1986
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 President and Chief 34 None $0
The Boston Company President and Operating Officer of
Asset Management, LLC Chief Executive The Boston Company
One Boston Place Officer Asset Management, LLC;
Boston, MA 02108 formerly Senior Vice President
7/24/65 and Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
26
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global
Boston, MA 02108 Investments
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly Vice
One Boston Place President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management, LLC
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of Compliance,
Mellon Asset Management President Mellon Asset Management ("MAM"); formerly Manager
One Boston Place of Shareholder Services, MAM, and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds Distributor
One Boston Place Officer and Mellon Optima L/S Strategy Fund, LLC; formerly
Boston, MA 02108 Director, Blackrock, Inc., Senior Vice President,
4/8/57 State Street Research & Management Company
("SSRM"), and Vice President, SSRM
27
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6930SA0306
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
Standish Mellon
Intermediate Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Semiannual Report
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- -----------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,005.80 $2.25
Hypothetical (5% return
per year before expenses) $1,000.00 $1,022.69 $2.27
- --------
+ Expenses are equal to the Fund's annualized expense ratio of 0.45%, multiplied
by the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
3
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Rate Maturity Investments
- -----------------------------------------------------------------------------------------------
New York Dormitory Authority Revenue 5.250 11/15/2023 3.5%
Puerto Rico Commonwealth Fuel Sales Tax Revenue 5.000 7/1/2018 2.5
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 2.0
Oklahoma DFA Revenue Hillcrest Healthcare System 5.625 8/15/2019 1.9
New York Dormitory Authority State
University Educational Facilities MBIA IBC 5.250 5/15/2015 1.8
Lubbock TX Health Facilities Development
St. Joseph Healthcare System 5.000 7/1/2008 1.7
Farmington New Mexico Pollution Control Revenue FGIC 3.550 4/1/2029 1.6
Cook County IL School District FSA NCL 6.750 5/1/2010 1.6
New York NY NCL 5.000 8/1/2011 1.5
Seattle WA Water System Revenue MBIA NCL 5.000 9/1/2014 1.5
-----
19.6%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- ----------------------------------------------------------------------
General Obligations 16.6%
Government Backed 4.5
Housing Revenue 4.8
Industrial Development 10.0
Insured Bond 33.2
Lease Revenue 5.3
Revenue Bonds 16.2
Special Revenues 2.7
Short-term and other assets 6.7
-----
100.0%
Summary of Combined Ratings+
- ----------------------------------------------------------------------
Percentage of
Quality Breakdown Investments
- ----------------------------------------------------------------------
AAA 45.6%
AA 16.7
A 25.8
BBB 11.9
-----
Total 100.0%
+ Based on ratings from Standard & Poor's and/or Moody's Investors Services.
If a security receives split (different) ratings from multiple rating
organizations, the Fund treats the security as being rated in the higher
rating category.
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- -------------------------------------------------------------------------------------------------------------
BONDS--93.3%
General Obligations--16.6%
ABAG CA Odd Fellows Homes 5.700 8/15/2014 1,000,000 $ 1,038,080
California State 5.000 10/1/2011 200,000 211,424
California State 5.000 10/1/2011 70,000 73,466
California State 5.000 6/1/2014 1,435,000 1,525,735
California State NCL 6.600 2/1/2009 1,000,000 1,075,860
California State NCL 5.750 11/1/2011 300,000 328,962
Commonwealth of Massachusetts NCL 6.000 11/1/2010 1,350,000 1,474,133
Commonwealth of Massachusetts NCL 5.250 8/1/2014 1,000,000 1,081,800
Goose Creek TX Independent School District 7.000 8/15/2009 370,000 407,988
New York NY NCL 5.000 6/1/2011 1,000,000 1,050,400
New York NY NCL 5.000 8/1/2011 770,000 809,932
New York NY NCL 5.000 8/1/2011 1,700,000 1,788,162
New York NY NCL 5.000 8/1/2013 1,500,000 1,584,570
Northeast TX Independent School District NCL 7.000 2/1/2009 1,000,000 1,087,320
Puerto Rico Commonwealth Fuel Sales Tax Revenue (a) 5.000 7/1/2018 3,000,000 3,066,030
Puerto Rico Public Building Authority Revenue 5.000 7/1/2028 1,000,000 1,038,990
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 2,250,000 2,418,705
-----------
20,061,557
-----------
Government Backed--4.5%
Alpine UT School District 5.000 3/15/2011 25,000 25,829
District of Columbia Prerefunded MBIA NCL 5.750 6/1/2010 10,000 10,794
Goose Creek TX Independent School District PSF 7.000 8/15/2009 230,000 254,150
Met Govt Nashville & Davidson TN Industrial
Development Board Revenue Prerefunded 7.500 11/15/2010 1,000,000 1,138,730
Oklahoma DFA Revenue Hillcrest Healthcare System 5.625 8/15/2019 2,185,000 2,332,422
Palm Beach County FL Solid Waste AMBAC 6.000 10/1/2009 60,000 64,580
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue 5.750 7/1/2041 1,500,000 1,661,010
Texas Municipal Power Agency MBIA (b) 0.000 9/1/2016 10,000 6,339
-----------
5,493,854
-----------
Housing Revenue--4.8%
Colorado HFA Single Family Project AMT (a) 6.600 8/1/2032 1,290,000 1,332,905
Colorado HFA Single Family Project AMT (a) 6.800 2/1/2031 1,705,000 1,762,868
Florida Housing Finance Corp. FSA 5.750 1/1/2017 50,000 50,073
Illinois Financial Authority Student Housing Revenue NCL 5.000 6/1/2012 1,160,000 1,196,737
Nebraska Investment Finance Authority SFM FHA VA AMT 6.700 9/1/2026 35,000 35,197
Ohio HFA Mortgage Revenue AMT GNMA 5.350 9/1/2018 215,000 219,012
Rhode Island Housing & Mortgage Finance Corp. 4.950 10/1/2016 150,000 150,147
Tennessee Housing Development Agency
Homeownership Project AMT NCL 5.750 7/1/2007 840,000 853,364
Utah HFA ATM SFM 5.400 7/1/2020 230,000 233,004
-----------
5,833,307
-----------
Industrial Development--10.0%
Connecticut Gaming Authority Mohegan Tribe 5.375 1/1/2011 1,000,000 1,039,590
Gloucester NJ Resource Recovery 6.850 12/1/2029 500,000 546,025
Golden State Tobacco Securitization Corp. 5.000 6/1/2020 500,000 516,620
Golden State Tobacco Securitization Corp. 5.000 6/1/2021 1,335,000 1,344,332
Golden State Tobacco Securitization Corp. (c) 0.000 6/1/2023 750,000 604,845
Hendersonville TN Kroger 5.950 12/15/2008 170,000 172,598
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
Industrial Development (continued)
Mass DFA Waste Management Resource Recovery AMT 6.900 12/1/2029 500,000 $ 544,565
Michigan State Strategic Funding AMT NCL (a) 3.750 8/1/2027 500,000 498,450
Morehouse Parish LA Pollution Control Revenue,
International Paper Project 5.250 11/15/2013 1,000,000 1,035,450
Northern TOB Securitization Corp. Alaska 4.750 6/1/2015 650,000 653,640
San Manuel Entertainment Series 2004-C 4.500 12/1/2016 1,000,000 984,130
Tobacco Settlement Authority Iowa 5.600 6/1/2035 1,000,000 1,088,310
Tobacco Settlement Authority Washington 6.500 6/1/2026 975,000 1,063,218
Tobacco Settlement Funding Corp. NJ 5.000 6/1/2010 500,000 513,110
Tobacco Settlement Funding Corp. NJ 4.375 6/1/2019 500,000 499,330
Tobacco Settlement Funding Corp. NY 5.250 6/1/2013 1,000,000 1,032,200
-----------
12,136,413
-----------
Insured Bond--33.2%
Broward County FL School Board AMBAC (d) 5.000 7/1/2013 1,000,000 1,065,910
California State 6.000 4/1/2016 1,000,000 1,150,900
Charleston SC COP MBIA 6.000 12/1/2008 1,000,000 1,059,430
Cleveland Ohio Waterworks Revenue MBIA 5.500 1/1/2013 1,500,000 1,603,980
Colorado State Department of Corrections
Penitentiary II Project B AMBAC 5.000 3/1/2015 1,000,000 1,061,940
Cook County IL High School FGIC NCL 7.875 12/1/2014 750,000 953,235
Cook County IL School District FSA NCL 6.750 5/1/2010 1,750,000 1,942,308
Corpus Christi TX Business & Job Development Corp.
Sales Tax Revenue AMBAC NCL 5.000 9/1/2011 1,215,000 1,286,819
District of Columbia FSA NCL 5.500 6/1/2011 1,000,000 1,077,890
District of Columbia MBIA NCL 5.750 6/1/2010 15,000 16,120
Douglas County CO School District MBIA 7.000 12/15/2012 625,000 738,144
Fairfax County VA EDA Residential Recovery AMT 6.100 2/1/2011 1,000,000 1,092,120
Farmington New Mexico Pollution Control Revenue FGIC 3.550 4/1/2029 2,000,000 1,968,520
Georgia Municipal Electric Authority Power FGIC NCL 6.250 1/1/2012 1,150,000 1,290,197
Harris County Texas Health Facility Development Corp. MBIA 6.000 6/1/2013 1,000,000 1,116,740
Harris County TX Toll Revenue FGIC NCL 6.000 8/1/2012 1,000,000 1,116,010
Hawaii State FSA 5.500 3/1/2013 1,000,000 1,091,580
Intermountain Power Agency UT NCL 6.500 7/1/2010 1,000,000 1,108,850
King County Washington School District No. 414 Lake Washington FSA 5.000 6/1/2011 1,000,000 1,056,610
Mass State School Building Auth. Dedicated Sales Tax Revenue FSA 5.000 8/15/2013 1,000,000 1,068,430
Mesa AZ Utility System Revenue NCL 6.000 7/1/2020 1,250,000 1,477,375
Metropolitan Washington DC Apartment Authority System AMT MBIA 5.000 10/1/2012 1,000,000 1,047,340
Nassau County NY FGIC 6.000 7/1/2010 25,000 27,164
New Jersey Health Care Facilities Financing Authority Revenue AMBAC 4.800 8/1/2021 640,000 646,445
New Jersey State Transportation FSA 5.750 12/15/2014 1,000,000 1,120,360
New York Dormitory Authority Presbyterian Hospital AMBAC 4.400 8/1/2013 50,000 50,262
New York Dormitory Authority State University
Educational Facilities MBIA 6.000 5/15/2015 1,000,000 1,092,320
New York Dormitory Authority State University
Educational Facilities MBIA IBC 5.250 5/15/2015 2,000,000 2,160,100
New York NY NCL CIFG 5.000 8/1/2014 1,000,000 1,061,410
Orange County CA COP MBIA 5.800 7/1/2016 400,000 410,260
Pasco County FL Solid Waste AMBAC AMT NCL 6.000 4/1/2010 1,000,000 1,063,580
Pennsylvania Economic DFA Resource
Recovery Revenue; Colver Project AMT AMBAC 5.000 12/1/2012 1,000,000 1,047,160
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
Insured Bond (continued)
Polk County Florida School District Sales Tax Revenue 5.250 10/1/2014 1,000,000 $ 1,084,730
Puerto Rico Electric Power Authority Revenue 5.500 7/1/2016 500,000 556,690
Seattle WA Water System Revenue MBIA NCL 5.000 9/1/2014 1,670,000 1,782,007
South Carolina Transit Infrastructure Bank Revenue AMBAC NCL 5.250 10/1/2015 1,000,000 1,097,890
Stafford TX Economic Development FGIC 6.000 9/1/2015 525,000 599,975
University of Massachusetts Building Authority Revenue AMBAC 5.000 11/1/2013 1,000,000 1,066,770
-----------
40,257,571
-----------
Lease Revenue--5.3%
Greenville County South Carolina School District 5.000 12/1/2011 1,000,000 1,049,600
New Jersey Economic Development Authority Revenue
School Facilities Construction NCL 5.000 9/1/2012 1,000,000 1,060,620
New York Dormitory Authority Revenue 5.250 11/15/2023 4,000,000 4,259,600
-----------
6,369,820
-----------
Revenue Bonds--16.2%
Arizona State Transit Highway Revenue NCL 5.000 7/1/2014 1,500,000 1,607,580
Broward County FL Resource Recovery 5.000 12/1/2007 1,000,000 1,021,290
California State Department of Water Resources Power Supply NCL 5.500 5/1/2010 250,000 265,985
California Statewide Communities DFA--Kaiser Permanente 2.300 4/1/2033 1,250,000 1,232,263
Camden NJ Cooper Hospitals NCL 5.600 2/15/2007 75,000 75,125
Energy Northwest Washington Electricity Revenue 5.000 7/1/2011 1,000,000 1,055,000
Franklin County Ohio Revenue Refunding Trinity Health Credit NCL 5.000 6/1/2014 1,340,000 1,414,249
Illinois DFA Depaul University NCL 5.500 10/1/2011 1,000,000 1,073,260
Illinois HEFA Condell Medical Center 6.000 5/15/2010 425,000 442,030
Illinois HEFA Northwestern University 5.050 11/1/2032 725,000 757,422
Indiana Health Facility Financing Authority Revenue 5.000 11/1/2011 500,000 524,740
Lubbock TX Health Facilities Development St. Joseph Healthcare 5.000 7/1/2008 2,000,000 2,055,700
System
Mass DFA Williston School 6.000 10/1/2013 205,000 215,566
Mass HEFA Lahey Clinic Medical Center FGIC 5.000 8/15/2014 1,000,000 1,059,480
Mass HEFA Partners NCL 5.000 7/1/2012 1,250,000 1,318,338
Metropolitan Transportation Authority NY Revenue Ser C 5.250 11/15/2014 1,000,000 1,081,930
Michigan State Hospital Finance Authority 5.250 11/15/2010 1,000,000 1,050,830
New Hampshire HEFA Monadnock Hospital 5.250 10/1/2007 180,000 181,316
New Mexico State Hospital Equipment Loan
Revenue Presbyterian Healthcare Services 5.750 8/1/2012 1,000,000 1,097,740
New York NY City Industrial Development
Agency Special Facility Revenue 5.500 1/1/2014 1,000,000 1,063,320
Oregon State Department Transit Highway Usertax Revenue NCL 5.000 11/15/2013 1,000,000 1,069,080
Wisconsin State Transportation 5.500 7/1/2010 15,000 15,983
-----------
19,678,227
-----------
Special Revenues--2.7%
California State Economic Recovery 5.250 7/1/2012 1,500,000 1,617,120
Delaware Valley PA Regional Finance Authority
Local Government Revenue 5.500 7/1/2012 1,000,000 1,081,460
Jicarilla NM Apache Nation Revenue 5.000 9/1/2013 500,000 515,569
-----------
3,214,149
-----------
TOTAL BONDS (Cost $113,223,335) 113,044,898
-----------
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--7.4%
Short-Term Bonds--7.4%
Idaho Health Facility Authority Revenue FSA (e) 3.150 7/1/2035 2,200,000 $ 2,200,000
Illinois DFA Revenue AMBAC (e) 3.180 9/1/2032 100,000 100,000
Indiana Health Facility Financing Authority (e) 3.200 3/1/2030 3,900,000 3,900,000
University NC Hospital--Chapel Hill Revenue (e) 3.150 2/15/2031 2,800,000 2,800,000
------------
Total Short Term Investments (Cost $9,000,000) 9,000,000
------------
TOTAL INVESTMENTS--100.7% (Cost $122,223,335) 122,044,898
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.7%) (838,369)
------------
NET ASSETS--100% $121,206,529
============
Notes to Schedule of Investments:
AMBAC--American Municipal Bond Assurance Corp.
AMT--Alternative Minimum Tax
COP--Certification of Participation
DFA--Development Finance Authority
EDA--Economic Development Authority
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Authority
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
HEFA--Health & Educational Facilities Authority
HFA--Housing Finance Authority
IBC --Insured Bond Certificate
LOC--Letter of Credit MBIA--Municipal Bond Insurance Association
NCL--Non-callable
SFM--Single Family Mortgage
TOB--Tobacco
VA--Veterans Administration
(a) Variable Rate Security; rate indicated is as of 3/31/2006.
(b) Zero coupon security.
(c) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(d) Delayed delivery security.
(e) Variable rate securities that reset monthly or more frequently and have put
features that can be exercised within 7 days.
At March 31, 2006, the Fund held the following open swap agreement:
Unrealized
Interest Rate Swaps Pay/Receive Expiration Notional Appreciation/
Counterparty Floating Rate Index Floating Rate Fixed Rate Date Amount (Depreciation)
- --------------------------------------------------------------------------------------------------------------------------
JPMorgan JPMorgan USD-BMA-Municipal Swap Index Receive Pay 3.815% 5/22/2016 $3,000,000 $ 43,816
USD-LIBOR-BBA 5.182 3/6/2017 2,000,000 (35,613)
--------
$ 8,203
========
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (cost $122,223,335) $122,044,898
Cash 31,729
Receivable for Fund shares sold 1,000,040
Interest receivable 1,587,894
Unrealized appreciation on swap contracts, at value (Note 6) 43,816
Prepaid expenses 45,002
------------
Total assets 124,753,379
Liabilities
Payable for Fund shares redeemed $ 165,782
Distributions Payable 86,182
Payable for securities purchased 3,187,162
Unrealized depreciation on swap contracts at value (Note 6) 35,613
Accrued Investment advisory fee (Note 2) 1,402
Accrued accounting, custody, administration and transfer agent fees (Note 2) 35,421
Accrued trustees' fees and expenses (Note 2) 5,674
Accrued administrative service fees (Note 2) 10,391
Accrued professional fees 18,267
Accrued chief compliance officer fee (Note 2) 311
Other accrued expenses and liabilities 645
---------
Total liabilities 3,546,850
------------
Net Assets $121,206,529
============
Net Assets consist of:
Paid-in capital $121,594,464
Accumulated net realized loss (235,810)
Undistributed net investment income 18,109
Net unrealized depreciation (170,234)
------------
Total Net Assets $121,206,529
============
Shares of beneficial interest outstanding 5,650,678
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 21.45
============
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statements of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $ 2,283,630
Expenses
Investment advisory fee (Note 2) $ 226,468
Accounting, custody, administration and transfer agent fees (Note 2) 64,906
Administrative service fees (Note 2) 20,555
Registration fees 19,874
Professional fees 18,338
Trustees' fees and expenses (Note 2) 10,564
Insurance expense 3,365
Miscellaneous expenses 7,492
----------
Total expenses 371,562
Deduct:
Waiver of invesment advisory fee (Note 2) (116,786)
----------
Net expenses 254,776
------------
Net investment income 2,028,854
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (127,946)
Swap transactions 18,999
----------
Net realized gain (loss) (108,947)
Change in unrealized appreciation (depreciation) on:
Investments (1,290,158)
Swap contracts (13,782)
----------
Net change in net unrealized appreciation (depreciation) (1,303,940)
------------
Net realized and unrealized gain (loss) on investments (1,412,887)
------------
Net Increase in Net Assets from Operations $ 615,967
============
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
--------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 2,028,854 $ 3,868,902
Net realized gain (loss) (108,947) (126,873)
Change in net unrealized appreciation (depreciation) (1,303,940) (1,363,609)
------------ -------------
Net increase (decrease) in net assets from investment operations 615,967 2,378,420
------------ -------------
Distributions to Shareholders (Note 1C)
From net investment income (2,028,854) (3,868,902)
From net realized gains on investments -- (224,030)
------------ -------------
Total distributions to shareholders (2,028,854) (4,092,932)
------------ -------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 25,708,984 23,387,266
Value of shares isued to shareholders in reinvestment of distributions 1,595,199 3,132,979
Cost of shares redeemed (13,998,729) (27,378,355)
------------ -------------
Net increase (decrease) in net assets from Fund share transactions 13,305,454 (858,110)
------------ -------------
Total Increase (Decrease) in Net Assets 11,892,567 (2,572,622)
Net Assets
At beginning of period 109,313,962 111,886,584
------------ -------------
At end of period (including undistributed
net investment income of $18,109 and $18,109, respectively) $121,206,529 $109,313,962
============ ============
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 -----------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
---------- -------- -------- ------- ------- -------
Net Asset Value, Beginning of Period $ 21.71 $ 22.05 $ 22.78 $ 22.78 $ 22.04 $ 21.11
-------- -------- -------- ------- ------- -------
From Operations:
Net investment income*(a) 0.39 0.77 0.69 0.81 0.90 0.93
Net realized and unrealized
gains (loss) on investments (0.26) (0.29) (0.08) 0.07 0.74 0.93
-------- -------- -------- ------- ------- -------
Total from operations 0.13 0.48 0.61 0.88 1.64 1.86
-------- -------- -------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.39) (0.77) (0.71) (0.81) (0.90) (0.93)
From net realized gains on investments -- (0.05) (0.63) (0.07) -- --
-------- -------- -------- ------- ------- -------
Total distributions to shareholders (0.39) (0.82) (1.34) (0.88) (0.90) (0.93)
-------- -------- -------- ------- ------- -------
Net Asset Value, End of Period $ 21.45 $ 21.71 $ 22.05 $ 22.78 $ 22.78 $ 22.04
======== ======== ======== ======= ======= =======
Total Return (b) 0.58% 2.18% 2.76% 3.88% 7.65% 9.00%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.45%(c) 0.45% 0.50% 0.65% 0.65% 0.62%
Net Investment Income (to average daily net assets)* 3.62%(c) 3.50% 3.16% 3.58% 4.09% 4.30%
Portfolio Turnover 11%(d) 35% 72% 42% 17% 43%
Net Assets, End of Period (000's omitted) $121,207 $109,314 $111,887 $70,505 $82,162 $82,358
- --------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the Fund
for all or a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income per share (a) $ 0.37 $ 0.73 $ 0.65 $ 0.80 $ 0.90 N/A
Ratios (to average daily net assets):
Expenses * 0.66%(c) 0.62% 0.68% 0.68% 0.66% N/A
Net investment income * 3.41%(c) 3.33% 2.97% 3.55% 4.08% N/A
(a) Calculated using the average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Calculated on an annualized basis.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Intermediate Tax Exempt Bond Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The objective of the Fund is to provide a high level of interest income
exempt from federal income taxes, while seeking preservation of capital.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in tax exempt municipal
securities issued by states, territories, and possessions of the United
States, the District of Columbia and their political subdivisions, agencies
and instrumentalities.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
Tax-exempt bonds and notes are priced at fair value on the basis of
valuations furnished by an independent pricing service or dealers, approved
by the Trustees. Such services or dealers determine valuations for normal
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships,
generally recognized by institutional traders, between securities.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method
on debt securities with greater than sixty days to maturity when required
for federal income tax purposes. Realized gains and losses from securities
sold are recorded on the identified cost basis. Dividends representing a
return of capital are reflected as a reduction of cost.
C. Distributions to shareholders
Distributions on shares of the Fund are declared daily from net investment
income and distributed monthly. Distributions from capital gains, if any,
will be distributed annually by the Fund. Distributions from net investment
income and capital gains, if any, are automatically reinvested in
additional shares of the applicable Fund unless the shareholder elects to
receive them in cash. Distributions are recorded on the ex-dividend date.
Income and capital gains distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. Book-tax differences
are primarily due to futures transactions, swap agreements, prior period
premium and discount on debt securities, market discount, capial loss
carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated among the funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
13
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuer
Affiliated issuers are investment companies advised by Standish Mellon
Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary
of Mellon Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory, administrative
services, and general office facilities, is paid at an annual rate of 0.40%
of the Fund's average daily net assets. Standish Mellon voluntarily agreed
to limit the Fund's total annual operating expenses (excluding litigation,
indemnification and other extraordinary expenses) to 0.45% of the Fund's
average daily net assets for the six months ended March 31, 2006. Pursuant
to this arrangement, for the six months ended March 31, 2006, Standish
Mellon voluntarily waived a portion of its advisory fee in the amount of
$116,786. This arrangement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of Standish
Mellon, to provide personnel and facilities to perform transfer agency and
certain shareholder services for the Fund. For these services, the Fund
pays Dreyfus Transfer, Inc. a fixed fee plus per account and transaction
based fees, as well as, out-of-pocket expenses. Pursuant to this agreement
the Fund was charged $7,221 for the six months ended March 31, 2006.
The Fund entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly owned subsidiary of Mellon Financial Corporation and an affiliate
of Standish Mellon, to provide custody, fund administration and fund
accounting services for the Fund. For these services the Fund pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund was charged
$57,685 for the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,117. No other director, officer or employee
of Standish Mellon or its affiliates receives any compensation from the
Trust or the Fund for serving as an officer or Trustee of the Trust. The
Trust pays each Trustee who is not a director, officer or employee of
Standish Mellon or its affiliates an annual fee and a per meeting fee as
well as reimbursement for travel and out-of-pocket expenses. In addition,
the Trust pays the legal fees for the independent counsel of the Trustees.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator an administrative service fee in
an amount of up to 0.15% (on an annualized basis) of the Fund's average
daily net assets attributable to fund shares that are held in accounts
serviced by such Plan Administrator. The Fund's adviser or its affiliates
may pay additional compensation from their own resources to Plan
Administrators and other entities for administrative services, as well as
in consideration of marketing or other distribution-related services. These
payments may provide an incentive for these entities to actively promote
the Fund or cooperate with the distributor's promotional efforts. For the
six months ended March 31, 2006, the Fund was charged $8,757 for fees
payable to Mellon Private Wealth Management.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
----------- -----------
Investments (non-U.S. Government Securities) $19,969,568 $12,349,071
=========== ===========
14
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 1,190,902 1,068,583
Shares issued to shareholders
in reinvestment of distributions declared 73,985 143,147
Shares redeemed (648,786) (1,251,493)
--------- ---------
Net increase (decrease) 616,101 (39,763)
========= =========
At March 31, 2006, two shareholders of record held approximately 67% of the
total outstanding shares of the Fund. Investment activity of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and their costs associated with short-term trading in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund did not
collect any redemption fees.
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $122,223,335
============
Unrealized appreciation $ 1,156,169
Unrealized depreciation (1,334,606)
------------
Net unrealized appreciation (depreciation) $ (178,437)
============
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Swap agreements
The Fund may enter into swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to
a notional amount of principal. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to receive a
specified return in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a
particular corporate or sovereign issuer's default. In connection with
these agreements, cash or securities may be set aside as collateral in
accordance with the terms of the
15
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
swap agreement. The Fund earns interest on cash set aside as collateral.
Swaps are marked to market daily based upon quotations from market makers
and change in value, if any, is recorded as unrealized gain or loss in the
Statement of Operations. These financial instruments are not actively
traded on financial markets. The values assigned to these instruments are
based upon the best available information and because of the uncertainty of
the valuation, these values may differ significantly from the values that
would have been realized had a ready market for these instruments existed,
and differences could be material. Payments received or made from credit
default swaps at the end of the measurement period are recorded as realized
gain or loss in the Statement of Operations. Net payments of interest on
interest rate swap agreements, if any, are included as part of realized
gain and loss. Entering into these agreements involves, to varying degrees,
elements of credit, market, and documentation risk in excess of the amounts
recognized on the Statement of Assets and Liabilities. Such risks involve
the possibility that there will be no liquid market for these agreements,
that the counterparty to the agreements may default on its obligation to
perform or disagree as to the meaning of contractual terms in the
agreements, and that there may be unfavorable changes in interest rates.
At March 31, 2006, the Fund held open swap contracts. See the Schedule of
Investments for further details.
(7) Delayed Delivery Transactions:
The Fund may purchase securities on a when-issued, delayed delivery or
forward commitment basis. Payment and delivery may take place a month or
more after the date of the transactions. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. Income on the
securities will not be earned until settlement date. The Fund instructs its
custodian to segregate securities having value at least equal to the amount
of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or the
Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Investment
security valuations" above.
At March 31, 2006, the Fund held delayed delivery securities. See the
Schedule of Investments for further details.
(8) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Mater Portfolio (the "Portfolio Trust") are parties to
a committed line of credit facility, which enables each fund/portfolio to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating Fund/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of 0.060 of 1% on the committed amount, is
allocated ratably among the participating funds/portfolios at the end of
each quarter. For the six months ended March 31, 2006, the facility fee was
$747 for the Fund.
During the six months ended March 31, 2006, the Fund did not borrow under
the credit facility.
16
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
Fund's advisory agreement and the related fees on an annual basis. In their
most recent deliberations concerning their decision to approve the
continuation of the investment advisory agreement, the Board of Trustees
conducted the review and made the determinations that are described below.
In conducting this review and in making such determinations, the
Independent Trustees received from the Fund's investment adviser, Standish
Mellon Asset Management Company LLC ("the Adviser"), a broad range of
information in response to a written request prepared on their behalf by
their own legal counsel. The Independent Trustees met alone in a private
session with their legal counsel on September 22, 2005 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. Representatives of the Adviser attended a portion of the
September meeting to provide an overview of its organization, personnel,
resources and strategic plans, and to respond to questions and comments
arising from the Independent Trustees' review of the materials and their
deliberations. The entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
1. Financial and Economic Data: The Adviser's income statements, as well as
a profitability analysis of the Adviser, including a separate presentation
of the Adviser's profitability relative to that of several publicly traded
investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management
fee and expense ratio compared to other funds, and the Adviser's separate
account advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the
Fund's performance and any material portfolio manager and strategy changes
that may have affected the Fund in the prior year, as well as the Fund's
"fact sheets" prepared by the Adviser providing salient data about the Fund
and the Adviser's views concerning the issues of breakpoints in the
management fee schedule of the Fund and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling, and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to the Adviser provided therein were fair
and reasonable in light of the services performed, expenses incurred and
such other matters as the Trustees considered relevant in the exercise of
their reasonable judgment. The following summary does not detail all the
matters that were considered. Some of the factors that figured prominently
in the Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Fund by the Adviser. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders have chosen to entrust the Adviser, under the supervision of
the Board, to manage the portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment
management, administrative, compliance and related services provided by the
Adviser. The Board determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees reviewed the background and experience of the Fund's two
portfolio managers and also met with senior management of the Adviser to
receive an overview of its organization, personnel, resources and strategic
plans. Among other things, the Trustees considered the size, education and
experience of the Adviser's investment staff, technological infrastructure
and overall responsiveness to changes in market conditions. The Board
determined that the Adviser had the expertise and resources to manage the
Fund effectively.
Investment Performance
The Board considered the investment performance of the Fund against a peer
group of investment companies selected by the Adviser with input from the
Trustees. The Board also compared the Fund's investment performance against
the average performance of a larger universe of funds regarded by Lipper as
having similar investment objectives and considered the Fund's performance
rankings against that universe. In addition to the information received by
the Board for at the September 22, 2005 Board meeting, the Trustees
received similar detailed comparative performance information for the Fund
at each regular Board meeting during the year.
17
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2005 based on the Lipper materials
provided to the Board at the September 22, 2005 meeting. The Board found
that the Fund underperformed its peer group average return for the one-year
period (3.85% vs. 4.02%), three-year period (3.71% vs. 3.88%) and five-year
period (5.17% vs. 5.39%). The Trustees requested that the Adviser arrange
for a presentation to the Board, as part of the usual fund reporting cycle,
to explain the reasons for the Fund's underperformance and efforts by the
Adviser to improve the Fund's performance.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser.
The Lipper data presenting the Fund's "net advisory fees" included fees
paid by the Fund, as calculated by Lipper, for administrative services
provided by Mellon Bank, N.A., the Trust's custodian. Such reporting was
necessary, according to Lipper, to allow the Board to compare the Fund's
advisory fees to those peers that include administrative fees within a
blended advisory fee.
The Fund's contractual advisory fee was 0.400%, which was in the 1st (best)
quintile of its peer group of funds and below the median of that peer
group, which was 0.520%. The Fund's actual advisory fee, after giving
effect to expense limitations, was 0.234%, which was in the 1st (best)
quintile of its peer group of funds, the median fee of which was 0.450%.
Based on the Lipper data, as well as other factors discussed at the
September 22, 2005 meeting, the Board determined that the Fund's advisory
fee is reasonable relative to its peer group averages, both with and
without giving effect to expense limitations.
The Board also compared the fees payable by the Fund relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed
by the Adviser with respect to the Fund relative to these other types of
clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board also considered the Fund's total expense ratio and compared it to
that of its peer group of similar funds. The Board found that the actual
total expense ratio of 0.496% (after giving effect to expense limitations)
was lower than the median total expense ratio of the peer group of 0.601%
notwithstanding the fact that the majority of all of the other funds in the
peer group were larger than the Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Fund and
the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by the Adviser or its affiliated investment adviser, The Boston
Company Asset Management, LLC ("TBCAM") in managing the Fund and other
funds in the Mellon Institutional Funds family of funds. The Independent
Trustees had observed that, based on the profitability information
submitted to them by the Adviser, the Adviser incurred losses in managing
many of the investment companies in the Mellon Institutional Funds family
of funds, including the Fund, and that among those funds that were
profitable to the Adviser, several generated only marginal profitability
for the firm. The Trustees observed that the Adviser had incurred losses in
operating the Fund in both 2003 and 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed
Income Portfolio, the largest fund in the complex, already had breakpoints
in its fee arrangement that reflected economies resulting from its size.
The Board concluded that, at existing asset levels and considering current
assets growth projections, the implementation of fee breakpoints or other
fee reductions with respect to the Fund was not necessary at this time.
They requested, however, that management consider the issue of future
breakpoints across the Mellon Institutional Funds complex and respond to
the Independent Trustees and to present a proposal for such breakpoints or,
in each case as applicable, management's rationale as to why such future
breakpoints are not necessary or appropriate for a particular Fund.
In response, the Adviser has subsequently proposed for the Independent
Trustees' consideration, forward-looking fee schedules for various types of
funds across the Mellon Institutional Funds complex. These schedules
contain asset-based breakpoints which vary based on the investment strategy
of fund and other factors considered by the Adviser to be relevant to the
issue of potential future economies of scale. The Independent Trustees and
their counsel have taken this proposal under advisement.
18
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Mellon Institutional Funds as a group,
including revenues received by Mellon affiliates in consideration of
custodial, administrative, transfer agency and securities lending services
provided by such affiliates to the Funds. In each case, such affiliates
were selected by the Board on the basis of a comparative analysis of their
capabilities and fees relative to those of unaffiliated competitors. In
addition, the Board, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i)
the terms of the relevant service agreement are in the best interests of
Fund shareholders; (ii) the services to be performed by the affiliate
pursuant to the agreement are required by and appropriate for the Funds;
(iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for
its services are fair and reasonable in light of the usual and customary
charges imposed by other, unaffiliated firms for services of the same
nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to the Adviser provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for
one-year period.
19
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 34 None $369
c/o Decision Resources, Inc. 11/3/1986 Resources, Inc. ("DRI")
260 Charles Street (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer,
DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None $398
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None $369
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens House, 34 None $369
P.O. Box 2333 11/3/1986 Inc. (hospice)
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $ 0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial Officer,
MAM
20
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ---------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund
Boston, MA 02108 Operations, Standish Mellon Asset Management,
8/19/51 LLC
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM");
One Boston Place formerly Manager of Shareholder Services, MAM,
Boston, MA 02108 and Shareholder Representative, Standish Mellon
1/19/71 Asset Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy Fund,
Boston, MA 02108 LLC; formerly Director, Blackrock, Inc., Senior
4/8/57 Vice President, State Street Research &
Management Company ("SSRM"), and Vice President,
SSRM
21
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[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6933SA0306
[Logo] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Small Cap Tax-Sensitive Equity Fund
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- -------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,124.80 $5.24
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.00 $4.99
- ---------
+ Expenses are equal to the Fund's annualized expense ratio of 0.99%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ----------------------------------------------------------------------------------------------------
Respironics, Inc Health Care 1.6%
Palm, Inc Information Technology 1.4
Oil States International, Inc. Energy 1.2
Covance, Inc. Health Care 1.1
CapitalSource, Inc. Financial 1.1
Washington Group International, Inc. Industrial 1.1
PerkinElmer, Inc. Health Care 1.1
Tektronix, Inc. Information Technology 1.1
Hydril Co. Energy 1.0
Watson Wyatt Worldwide, Inc. Industrial 1.0
----
11.7%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------------
Basic Materials 3.4%
Communications 0.5
Consumer Discretionary 11.6
Consumer Staples 5.8
Energy 9.7
Financials 9.7
Health Care 18.0
Industrial 14.2
Information Technology 22.1
Utilities 1.0
Short-term and Other Assets 4.0
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--107.9%
EQUITIES--96.0%
Basic Materials--3.4%
Cleveland-Cliffs, Inc 18,988 $ 1,654,235
Kinross Gold Corp. (a) 128,810 1,407,893
Pan American Silver Corp. (a) (b) 35,400 899,160
Silver Standard Resources, Inc. (a) 43,500 894,360
Stillwater Mining Co. (a) (b) 79,800 1,313,508
------------
6,169,156
------------
Communications--0.5%
Arris Group, Inc. (a) 66,340 912,838
------------
Consumer Discretionary--11.6%
Bright Horizons Family Solutions, Inc. (a) 18,630 721,540
California Pizza Kitchen, Inc. (a) (b) 49,230 1,597,514
Central Garden & Pet Co. (a) 26,840 1,426,278
Jos A Bank Clothiers, Inc. (a) 19,430 931,669
Lions Gate Entertainment Corp. (a) (b) 193,700 1,966,055
Penn National Gaming, Inc. (a) 43,070 1,816,693
Playboy Enterprises, Inc., Class B (a) 113,250 1,608,150
Red Robin Gourmet Burgers, Inc. (a) 41,064 1,938,221
Ruth's Chris Steak House, Inc. (a) 41,000 976,210
School Specialty, Inc. (a) 25,590 882,855
Steiner Leisure Ltd. (a) 38,670 1,566,135
The Sportsman's Guide, Inc. (a) 52,840 1,399,732
Too, Inc. (a) 51,830 1,780,361
Tractor Supply Co. (a) 13,240 878,342
Wabtec Corp 41,390 1,349,314
------------
20,839,069
------------
Consumer Staples--5.8%
Church & Dwight Co., Inc. (b) 23,720 875,742
Diamond Foods, Inc 47,900 822,443
Hain Celestial Group, Inc. (a) 51,010 1,335,952
Herbalife Ltd. (a) 24,230 818,247
Inter Parfums, Inc 71,700 1,428,981
Peet's Coffee & Tea, Inc. (a) 43,640 1,309,200
Performance Food Group Co. (a) 55,100 1,718,569
Playtex Products, Inc. (a) 82,900 867,963
USANA Health Sciences, Inc. (a) (b) 29,040 1,211,549
------------
10,388,646
------------
Energy--9.7%
Alon USA Energy, Inc 42,560 1,047,827
Arena Resources, Inc. (a) 29,700 1,036,530
Consol Energy, Inc 15,880 1,177,661
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Dril-Quip, Inc. (a) 21,530 $ 1,525,401
Foundation Coal Holdings, Inc 41,600 1,711,424
Global Industries, Ltd. (a) 66,500 963,585
Gulf Island Fabrication, Inc. 32,400 766,908
Hydril Co. (a) 25,441 1,983,126
Oceaneering International, Inc. (a) 16,280 932,844
Oil States International, Inc. (a) 65,800 2,424,730
Penn Virginia Corp 13,450 954,950
Superior Well Services, Inc. (a) 50,700 1,473,849
W-H Energy Services, Inc. (a) 32,840 1,461,052
------------
17,459,887
------------
Financial--9.7%
Affiliated Managers Group (a) (b) 15,150 1,615,142
American Equity Investment Life Holding Co 43,300 620,922
Arch Capital Group Ltd. ADR (a) 15,800 912,292
CapitalSource, Inc 86,870 2,161,326
Center Financial Corp 23,560 570,859
City National Corp., Class A 18,630 1,430,598
Corrections Corp. of America (a) 20,280 916,656
Crescent Real Estate Equities Co. REIT 85,700 1,805,699
Cullen/Frost Bankers, Inc 9,800 526,750
CVB Financial Corp 1 17
First Community Bancorp, Inc., Class A 18,000 1,037,880
First Midwest Bancorp, Inc 37,300 1,364,061
Mercantile Bank Corp 12,732 497,821
New York Community Bancorp, Inc. (b) 4 74
Sws Group 6,300 164,745
The Colonial BancGroup, Inc 52,300 1,307,500
UCBH Holdings, Inc. (b) 65,600 1,241,152
Waddell & Reed Financial, Inc 58,400 1,349,040
------------
17,522,534
------------
Health Care--18.0%
American Medical Systems Holdings, Inc. (a) 39,480 888,300
Applera Corp.-Celera Genomics Group (a) 58,700 686,203
Array BioPharma, Inc. (a) 56,320 514,765
Community Health Systems, Inc. (a) 32,500 1,174,875
Covance, Inc. (a) (b) 37,890 2,226,038
Coventry Health Care, Inc. (a) 14,575 786,759
Cytyc Corp. (a) 50,800 1,431,544
Emdeon Corp. (a) 113,400 1,224,720
Fisher Scientific International 27,800 1,891,790
Integra LifeSciences Holdings (a) 23,800 975,324
InterMune, Inc. (a) 61,600 1,142,064
IRIS International, Inc. (a) 25,600 400,128
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
Matria Healthcare, Inc. (a) 23,650 $ 897,754
Medarex, Inc. (a) 64,650 854,673
Nektar Therapeutics (a) (b) 60,200 1,226,876
Neurocrine Biosciences, Inc. (a) (b) 12,000 774,480
Panacos Pharmaceuticals, Inc. (a) 60,400 456,624
PDL BioPharma, Inc. (a) (b) 42,380 1,390,064
Pediatrix Medical Group, Inc. (a) 8,900 913,496
PerkinElmer, Inc 90,760 2,130,137
Respironics, Inc. (a) 81,090 3,155,212
Rigel Pharmaceuticals, Inc. (a) 50,795 583,635
Sybron Dental Specialties, Inc. (a) 26,400 1,088,736
Triad Hospitals (a) (b) 19,950 835,905
VCA Antech, Inc. (a) (b) 28,600 814,528
Vertex Pharmaceuticals, Inc. (a) (b) 23,060 843,765
Viasys Healthcare Inc. (a) 44,010 1,323,821
Wellcare Group, Inc. (a) 20,400 926,976
ZymoGenetics, Inc. (a) 46,600 1,007,492
------------
32,566,684
------------
Industrial--14.2%
Alaska Air Group, Inc. (a) 34,250 1,214,163
Bucyrus International, Inc., Class A 21,135 1,018,496
Copart, Inc. (a) 49,480 1,358,226
FTI Consulting, Inc. (a) 47,760 1,362,593
Global Cash Access, Inc. (a) 75,190 1,317,329
Huron Consulting Group, Inc. (a) 55,980 1,695,634
Interline Brands, Inc. (a) 60,000 1,513,800
Jack Henry & Associates, Inc 43,100 985,697
Kennametal, Inc 21,570 1,318,790
Mobile Mini (a) 31,700 980,164
MSC Industrial Direct Co., Inc 16,890 912,398
Old Dominion Freight Line (a) 47,583 1,282,362
Pacer International, Inc 53,280 1,741,190
Quanta Services, Inc. (a) 113,630 1,820,353
Stericycle, Inc. (a) 13,800 933,156
Universal Truckload Services, Inc. (a) 44,180 1,106,709
Washington Group International, Inc. (a) 37,140 2,131,465
Watson Wyatt Worldwide, Inc 60,520 1,971,742
West Corp. (a) 20,080 896,773
------------
25,561,040
------------
Information Technology--22.1%
24/7 Real Media, Inc. (a) 145,520 1,522,139
Akamai Technologies, Inc. (a) 38,920 1,280,079
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Information Technology (continued)
AMIS Holdings, Inc. (a) 99,630 $ 902,648
Ariba, Inc. (a) 93,189 911,388
Avid Technology, Inc. (a) (b) 18,270 794,014
BEA Systems, Inc. (a) (b) 143,400 1,882,842
CACI International, Inc. (a) 20,170 1,326,178
Cymer, Inc. (a) (b) 39,670 1,802,605
Exar Corp. (a) 137,440 1,962,643
Filenet Corp. (a) 61,400 1,659,028
Informatica Corp. (a) 53,690 834,880
Internet Security Systems (a) 36,470 874,551
JDA Software Group, Inc. (a) 52,470 757,667
LoJack Corp. (a) 32,940 789,901
ManTech International Corp., Class A (a) 46,490 1,544,398
Marchex, Inc. (a) (b) 62,540 1,344,610
Mcafee, Inc. (a) 39,640 964,441
Micrel, Inc. (a) 94,970 1,407,455
Mindspeed Technologies, Inc. (a) (b) 264,700 1,053,506
Novellus Systems, Inc. (a) (b) 31,130 747,120
O2Micro International Ltd.--ADR (a) 66,100 702,643
Online Resources Corp. (a) 132,200 1,718,600
Palm, Inc. (a) (b) 120,620 2,793,559
Polycom, Inc. (a) 41,770 905,574
Progress Software Corp. (a) 20,280 589,945
Radyne Corp. (a) 39,277 627,254
Rudolph Technologies, Inc. (a) 77,870 1,327,684
Sify Ltd. ADR (a) (b) 42,360 560,846
Tektronix, Inc 58,540 2,090,463
The Knot, Inc. (a) 50,751 918,593
Unica Corp. (a) 36,130 418,747
Verisign, Inc. (a) (b) 53,050 1,272,670
Wright Express Corp. (a) 50,300 1,410,915
------------
39,699,586
------------
Utilities--1.0%
ITC Holdings Corp 65,490 1,719,102
------------
TOTAL EQUITIES (Cost $137,783,250) 415,280 172,838,542
------------
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Rate Maturity Par Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.1%
U.S. Government--0.1%
U.S. Treasury Bill (c)(d) (Cost $257,576) 4.470% 6/15/2006 $ 260,000 $ 257,644
------------
INVESTMENT OF CASH COLLATERAL--11.8% Rate Shares
-------- ---------
BlackRock Cash Strategies L.L.C. (e) (Cost $21,145,754) 4.701% 21,145,754 21,145,754
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $159,186,580) 194,241,940
------------
AFFILIATED INVESTMENTS--2.1%
Dreyfus Institutional Preferred Plus Money Market
Fund (e)(f) (Cost $3,808,561) 4.770% 3,808,561 3,808,561
------------
TOTAL INVESTMENTS--110.0% (Cost $162,995,141) 198,050,501
LIABILITIES IN EXCESS OF OTHER ASSETS--(10.0%) (18,023,307)
------------
NET ASSETS--100% $180,027,194
============
Notes to Schedule of Investments:
(a) Non-income producing security
(b) Security, or a portion of thereof, was on loan at 3/31/2006.
(c) Denotes all or part of security segregated as collateral for futures
transactions.
(d) Rate noted is yield to maturity.
(e) Stated rate is the seven day yield for the fund at 3/31/2006.
(f) Affiliated institutional money market fund.
At March 31, 2006, the Fund held the following futures contracts:
Underlying Unrealized
Contract Position Expiration Date Face Amount Gain
- ---------------------------------------------------------------------------------------------------
Russell 2000 Index (7 Contracts) Long 6/15/2006 $2,554,250 $147,019
========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A)
(including securities on loan, valued at $20,147,736 (Note 7)):
Unaffiliated investments (cost $159,186,580) $194,241,940
Affiliated investments (Note 1F) (cost $3,808,561) 3,808,561
Due from Custodian 888,422
Receivable for investments sold 5,257,901
Interest and dividends receivable 74,473
Receivable for Fund shares sold 300,568
Variation margin receivable (Note 6) 12,600
Prepaid expenses 28,159
------------
Total assets 204,612,624
Liabilities
Collateral for securities on loan (Note 7) $21,145,754
Payable for investments purchased 3,345,998
Payable for Fund shares redeemed 11,608
Accrued administrative service fees (Note 2) 15,948
Accrued accounting, custody, administration and transfer agent fees (Note 2) 35,830
Accrued professional fees 20,374
Accrued trustees' fees and expenses (Note 2) 5,888
Accrued chief compliance officer fee (Note 2) 278
Other accrued expenses and liabilities 3,752
Total liabilities ----------- 24,585,430
------------
Net Assets $180,027,194
============
Net Assets consist of:
Paid-in capital $128,669,116
Accumulated net realized gain 16,243,847
Accumulated net investment loss (88,148)
Net unrealized appreciation 35,202,379
------------
Total Net Assets $180,027,194
============
Shares of beneficial interest outstanding 4,070,202
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 44.23
============
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statements of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 428,553
Dividend income from affiliated investments (Note 1F) 198,929
Interest income 5,504
Securities lending income (Note 7) 93,278
-----------
Total investment income 726,264
Expenses
Investment advisory fee (Note 2) $ 656,548
Accounting, custody, administration and transfer agent fees (Note 2) 71,412
Professional fees 18,662
Registration fees 13,939
Trustees' fees and expenses (Note 2) 11,214
Insurance expense 3,328
Miscellaneous expenses 39,391
-----------
Net Expenses 814,494
-----------
Net investment income (88,230)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 18,090,034
Financial futures transactions 336,598
-----------
Net realized gain 18,426,632
Change in unrealized appreciation (depreciation) on:
Investments 1,458,905
Financial futures contracts 119,199
-----------
Change in net unrealized appreciation (depreciation) 1,578,104
-----------
Net realized and unrealized gain (loss) 20,004,736
-----------
Net Increase in Net Assets from Operations $19,916,506
===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (88,230) $ (359,910)
Net realized gain (loss) 18,426,632 12,323,359
Change in net unrealized appreciation (depreciation) 1,578,104 15,670,893
------------ -------------
Net increase (decrease) in net assets from investment operations 19,916,506 27,634,342
------------ -------------
Distributions to Shareholders (Note 1C)
From net realized gains on investments (11,653,235) --
------------ -------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 11,911,672 28,290,912
Value of shares issued to shareholders in reinvestment of distributions 9,807,382 --
Cost of shares redeemed (9,989,999) (16,262,336)
------------ -------------
Net increase (decrease) in net assets from Fund share transactions 11,729,055 12,028,576
------------ -------------
Total Increase (Decrease) in Net Assets 19,992,326 39,662,918
Net Assets
At beginning of period 160,034,868 120,371,950
------------ -------------
At end of period [including undistributed net
investment income (loss) of $(88,148) and $82, respectively] $180,027,194 $160,034,868
============ ============
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 ---------------------------
(Unaudited) 2005 2004
--------- ------ ------
Net Asset Value, Beginning of Period $ 42.35 $ 34.71 $ 29.58
-------- --------- --------
From Operations:
Net investment income* (a) (0.02) (0.10) (0.24)
Net realized and unrealized gains (loss) on investments 4.98 7.74 5.37(b)
-------- --------- --------
Total from operations 4.96 7.64 5.13
-------- --------- --------
Less Distributions to Shareholders:
From net realized gains on investments (3.08) -- --
-------- --------- --------
Total distributions to shareholders (3.08) -- --
-------- --------- --------
Net Asset Value, End of Period $ 44.23 $ 42.35 $ 34.71
======== ========= ========
Total Return 12.48% 22.01% 17.34%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.99%(d) 0.99% 1.03%
Net Investment Income (to average daily net assets)* (0.11%)(d) (0.26%) (0.71%)
Portfolio Turnover 83%(e) 137% 150%
Net Assets, End of Period (000's omitted) $180,027 $160,035 $120,372
Year Ended September 30,
-----------------------------------------
2003 2002 2001
------ ------ ------
Net Asset Value, Beginning of Period $ 22.53 $ 26.23 $ 63.32
--------- ------- -------
From Operations:
Net investment income* (a) (0.11) (0.13) (0.20)
Net realized and unrealized gains (loss) on investments 7.16(b) (3.57)(b) (28.28)
--------- ------- -------
Total from operations 7.05 (3.70) (28.48)
--------- ------- -------
Less Distributions to Shareholders:
From net realized gains on investments -- -- (8.61)
--------- ------- -------
Total distributions to shareholders -- -- (8.61)
--------- ------- -------
Net Asset Value, End of Period $ 29.58 $ 22.53 $ 26.23
========= ======= =======
Total Return 31.29%(c) (14.11%)(c) (49.81%)(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.00% 1.00% 1.00%
Net Investment Income (to average daily net assets)* (0.43%) (0.47%) (0.54%)
Portfolio Turnover 252% 241% 174%
Net Assets, End of Period (000's omitted) $106,718 $82,469 $81,711
- --------
* 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 (a) N/A N/A N/A $ (0.13) $ (0.15) $ (0.21)
Ratios (to average daily net assets):
Expenses N/A N/A N/A (1.07%) 1.08% 1.04%
Net investment income N/A N/A N/A (0.50%) (0.55%) (0.58%)
(a) Calculated using the average shares outstanding.
(b) Amounts includes litigation proceeds received by the Portfolio of $0.03 for
the period ended September 30, 2004, $0.01 for the year ended September 30,
2003 and $0.02 for the year ended September 30, 2002.
(c) Total return would have been lower in the absence of expense waivers.
(d) Calculated on an annualized basis.
(e) Not annualized.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Cap Tax-Sensitive Equity Fund (the "Fund") is a
separate diversified investment series of the Trust.
The objective of the Fund is to maximize after-tax total return, consisting
of long-term growth of capital. The Fund seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in equity
securities of small capitalization U.S. companies.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Fund
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield-to-maturity method
on debt securities with greater than sixty days to maturity when required
for federal income tax purposes. Dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences which may result in reclassifications, are primarily due to
differing treatments for wash sales and realized and unrealized gains or
losses on futures.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated among the funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management Company LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Fund's average daily net assets.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund was charged
$6,940 for the six months ended March 31, 2006.
The Fund entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of Mellon Financial Corporation and an affiliate
of TBCAM, to provide custody, administration and accounting services for
the Fund. For these services the Fund pays Mellon Bank a fixed fee plus
asset and transaction based fees, as well as out-of-pocket expenses.
Pursuant to this agreement the Fund was charged $64,472 for the six months
ended March 31, 2006.
The Fund also entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Fund's lending agent.
Mellon Bank receives an agreed upon percentage of the net lending revenues.
Pursuant to this agreement, Mellon Bank received $40,013, for the six
months ended March 31, 2006. See Note 7 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,084. No other 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.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator an administrative service fee in
an amount of up to 0.15% (on an annualized basis) of the Fund's average
daily net assets attributable to Fund shares that are held in accounts
serviced by such Plan Administrator. The Fund's adviser or its affiliates
may pay additional compensation from their own resources to Plan
Administrators and other entities for administrative services, as well as
in consideration of marketing or other distribution-related services. These
payments may provide an incentive for these entities to actively promote
the Fund or cooperate with the distributor's promotional efforts. For the
six months ended March 31, 2006, the Fund was charged $16,171 for fees
payable to Mellon Private Wealth Management.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
------------ ------------
Investments (non-U.S. Government Securities) $134,926,710 $130,749,531
============ ============
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 284,684 734,506
Shares issued to shareholders
in reinvestment of distributions declared 244,756 --
Shares redeemed (238,293) (423,368)
--------- ---------
Net increase (decrease) 291,147 311,138
--------- ---------
At March 31, 2006, one shareholder of record held approximately 58% of the
total outstanding shares of the Fund. Investment activities of this
shareholder could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that were acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund received
$58 in redemption fees.
(5) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $162,995,141
============
Unrealized appreciation $ 35,720,652
Unrealized depreciation (665,292)
------------
Net unrealized appreciation (depreciation) $ 35,055,360
============
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following financial instruments with off-balance
sheet risk:
Futures contracts
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to margin requirements the Fund deposits
either cash or securities in an amount equal to a certain percentage of the
contract amount. Subsequent payments are made or received by the Fund each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. There are several risks in connection with the
use of futures contracts as a hedging device. The change in value of
futures contracts primarily corresponds with the value of their underlying
instruments or indices, which may not correlate with changes in the value
of hedged investments. Buying futures tends to increase the Fund's exposure
to the underlying instrument, while selling futures tends to decrease the
Fund's exposure to the underlying instrument or hedge other investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparty does
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to seek to manage its exposure to certain
markets and to changes in securities prices and foreign currencies. Gains
and losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
At March 31, 2006, the Fund held open financial futures contracts. See
Schedule of Investments for further details.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(7) Security Lending:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the six months ended March 31, 2006 and
earned interest on the invested collateral of $368,989 of which $275,711
was rebated to borrowers or paid in fees. At March 31, 2006, the Fund had
securities valued at $20,147,736 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
(8) Line of Credit:
The Fund, and other funds in the Trust and subtrusts in Mellon
Institutional Funds Mater Portfolio (the "Portfolio Trust") are parties to
a committed line of credit facility, which enables each fund/portfolio to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating Fund/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of 0.060 of 1% on the committed amount, is
allocated ratably among the participating funds/portfolios at the end of
each quarter. For the six months ended March 31, 2006, the facility fee was
$1,147 for the Fund.
During the six months ended March 31, 2006, the Fund did not borrow under
the credit facility.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of its
Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the Fund's
advisory agreement and the related fees on an annual basis. In their most recent
deliberations concerning their decision to approve the continuation of the
investment advisory agreement, the Board of Trustees conducted the review and
made the determinations that are described below. In conducting this review and
in making such determinations, the Independent Trustees received from the Fund's
investment adviser, The Boston Company Asset Management, LLC ("the Adviser"), a
broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 22, 2005 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. Representatives of the Adviser attended a portion of the September
meeting to provide an overview of its organization, personnel, resources and
strategic plans, and to respond to questions and comments arising from the
Independent Trustees' review of the materials and their deliberations. The
entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and income
statements, as well as a profitability analysis of the Adviser, including a
separate presentation of the Adviser's profitability relative to that of several
publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and the Adviser's separate account
advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the Fund's
performance and any material portfolio manager and strategy changes that may
have affected the Fund in the prior year, as well as the Fund's "fact sheets"
prepared by the Adviser providing salient data about the Fund and the Adviser's
views concerning the issues of breakpoints in the management fee schedule of the
Fund and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board of
Trustees, including the Independent Trustees, did not identify any single factor
as all-important or controlling, and individual Trustees did not necessarily
attribute the same weight or importance to each factor. The Trustees determined
that the terms and conditions of the Fund's advisory agreement and the
compensation to the Adviser provided therein were fair and reasonable in light
of the services performed, expenses incurred and such other matters as the
Trustees considered relevant in the exercise of their reasonable judgment. The
following summary does not detail all the matters that were considered. Some of
the factors that figured prominently in the Trustees' determination are
described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Fund by the Adviser. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also mindful of
the fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust the Adviser, under the supervision of the Board, to manage the
portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment management,
administrative, compliance and related services provided by the Adviser. The
Board determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees reviewed the background and experience of the Fund's two portfolio
managers and also met with senior management of the Adviser to receive an
overview of its organization, personnel, resources and strategic plans. Among
other things, the Trustees considered the size, education and experience of the
Adviser's investment staff, technological infrastructure and overall
responsiveness to changes in market conditions. The Board determined that the
Adviser had the expertise and resources to manage the Fund effectively.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Investment Performance
The Board considered the investment performance of the Fund against a peer group
of investment companies selected by the Adviser with input from the Trustees.
The Board also compared the Fund's investment performance against the average
performance of a larger universe of funds regarded by Lipper as having similar
investment objectives and considered the Fund's performance rankings against
that universe. In addition to the information received by the Board for at the
September 22, 2005 Board meeting, the Trustees received similar detailed
comparative performance information for the Fund at each regular Board meeting
during the year.
The Board considered the Fund's performance for the one-, three- and five-year
periods ended July 31, 2005 based on the Lipper materials provided to the Board
at the September 22, 2005 meeting. The Board found that the Fund outperformed
its peer group average return for the three-year period (21.11% vs. 18.91%) but
slightly underperformed its peer group average returns for the one-year period
(22.52% vs. 24.46%) and five-year period (-2.11% vs. -1.17%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser. The
Lipper data presenting the Fund's "net advisory fees" included fees paid by the
Fund, as calculated by Lipper, for administrative services provided by Mellon
Bank, N.A., the Trust's custodian. Such reporting was necessary, according to
Lipper, to allow the Board to compare the Fund's advisory fees to those peers
that include administrative fees within a blended advisory fee.
The Fund's contractual advisory fee was 0.800%, in the 1st (best) quartile of
its peer group of funds, the median fee of which was 1.000%. The Fund's actual
advisory fee, after giving effect to expense limitations, was 0.814%, which was
below the median of its peer group of funds, which was 1.000%. Based on the
Lipper data, as well as other factors discussed at the September 22, 2005
meeting, the Board determined that the Fund's advisory fee is reasonable
relative to its peer group averages, both with and without giving effect to
expense limitations.
The Board also compared the fees payable by the Fund relative to those payable
by separate account clients of the Adviser. Based on the additional scope and
complexity of the services provided and responsibilities assumed by the Adviser
with respect to the Fund relative to these other types of clients, the Board
concluded that the fees payable under the advisory agreement were reasonable.
The Board also considered the Fund's total expense ratio and compared it to that
of its peer group of similar funds. The Board found that the actual total
expense ratio of 1.025% (after giving effect to expense limitations) was lower
than the median total expense ratio of the peer group of 1.203% notwithstanding
the fact that most of the other funds in the peer group were larger than the
Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Fund and the
Mellon Institutional Funds as a group, as well as the methodology used to
compute such profitability, and the various direct and indirect expenses
incurred by the Adviser or its affiliated investment adviser, Standish Mellon
Asset Management Company LLC ("Standish Mellon") in managing the Fund and other
funds in the Mellon Institutional Funds family of funds. The Independent
Trustees had observed that, based on the profitability information submitted to
them by the Adviser, the Adviser incurred losses in managing many of the
investment companies in the Mellon Institutional Funds family of funds,
including the Fund, and that among those funds that were profitable to the
Adviser, several generated only marginal profitability for the firm. The
Trustees observed that the Adviser had realized reasonable profits in operating
the Fund in both 2003 and 2004.
19
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed Income
Portfolio, the largest fund in the complex, already had breakpoints in its fee
arrangement that reflected economies resulting from its size. The Board
concluded that, at existing asset levels and considering current assets growth
projections, the implementation of fee breakpoints or other fee reductions with
respect to the Fund was not necessary at this time. They requested, however,
that management consider the issue of future breakpoints across the Mellon
Institutional Funds complex and respond to the Independent Trustees and to
present a proposal for such breakpoints or, in each case as applicable,
management's rationale as to why such future breakpoints are not necessary or
appropriate for a particular Fund.
In response, the Adviser has subsequently proposed for the Independent Trustees'
consideration, forward-looking fee schedules for various types of funds across
the Mellon Institutional Funds complex. These schedules contain asset-based
breakpoints which vary based on the investment strategy of fund and other
factors considered by the Adviser to be relevant to the issue of potential
future economies of scale. The Independent Trustees and their counsel have taken
this proposal under advisement.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Mellon Institutional Funds as a group, including
revenues received by Mellon affiliates in consideration of custodial,
administrative, transfer agency and securities lending services provided by such
affiliates to the Funds. In each case, such affiliates were selected by the
Board on the basis of a comparative analysis of their capabilities and fees
relative to those of unaffiliated competitors. In addition, the Board, including
a majority of the Independent Trustees, conduct an examination annually of each
such arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Funds; (iii) the nature and quality of the services provided
by the affiliate pursuant to the agreement are at least equal to those provided
by other, unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for its
services are fair and reasonable in light of the usual and customary charges
imposed by other, unaffiliated firms for services of the same nature and
quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Funds and
the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Fund's advisory agreement and the
compensation to the Adviser provided therein are fair and reasonable and, thus,
in approving the continuation of the agreement for one-year period.
20
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Other Trustee
Principal Portfolios in Directorships Remuneration
Name Term of Office Occupation(s) Fund Complex Held by (period ended
Address, and Position(s) and Length of During Past Overseen by Trustee March 31, 2006)
Date of Birth Held with Trust Time Served 5 Years Trustee
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 34 None $1,891
c/o Decision Resources, Inc. 11/3/1986 Resources, Inc. ("DRI")
260 Charles Street (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None $2,052
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None $1,891
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens 34 None $1,891
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
03257 4/11/35
New London, NH
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial
Officer, MAM
21
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management, LLC
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of Compliance,
Mellon Asset Management President Mellon Asset Management ("MAM"); formerly Manager
One Boston Place of Shareholder Services, MAM, and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds Distributor
One Boston Place Officer and Mellon Optima L/S Strategy Fund, LLC; formerly
Boston, MA 02108 Director, Blackrock, Inc., Senior Vice President,
4/8/57 State Street Research & Management Company
("SSRM"), and Vice President, SSRM
22
THIS PAGE INTENTIONALLY LEFT BLANK
[Logo] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6938SA0306
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
The Boston Company
International Small Cap Fund
- --------------------------------------------------------------------------------
Semiannual Report
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- ----------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,230.10 $6.28
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.30 $5.69
- ---------
+ Expenses are equal to the Fund's annualized expense ratio of 1.13%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -----------------------------------------------------------------------------------------------
Mitsubishi Gas Chemical Japan Basic Materials 1.3%
Trican Well Service Ltd. Canada Energy 1.1
Inmet Mining Corp. Canada Basic Materials 1.0
IPSCO, Inc. Canada Basic Materials 1.0
Vallourec France Basic Materials 0.9
Tandberg Television ASA Norway Information Technology 0.9
Eiffage France Industrial 0.9
Rautaruukki Oyj Finland Basic Materials 0.9
Oxiana Ltd. Australia Basic Materials 0.9
Euler Hermes Sa France Financial 0.9
-----
9.8%
* Excluding short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- ---------------------------------------------------------------------
Europe ex U.K. 45.3%
U.K. 18.2
Asia ex Japan 10.4
Japan 20.8
Americas ex U.S. 5.3
-----
100.0%
* Excluding short-term securities and cash collateral investment.
The Boston Company International Small Cap Fund invests in an interest of The
Boston Company International Small Cap Portfolio (See Note 1 of the Fund's Notes
to Financial Statements). The Portfolio is actively managed. Current holdings
may be different than those presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International Small Cap Portfolio ("Portfolio"),
at value (Note 1A) $733,595,503
Receivable for Fund shares sold 3,074,061
Prepaid expenses 30,258
------------
Total assets 736,699,822
Liabilities
Payable for Fund shares redeemed $ 474,469
Accrued transfer agent fees (Note 2) 7,202
Accrued professional fees 20,412
Accrued administrative service fees (Note 2) 25,927
Accrued trustees' fees (Note 2) 497
Accrued chief compliance officer fee (Note 2) 278
Other accrued expenses and liabilities 4,158
---------
Total liabilities 532,943
------------
Net Assets $736,166,879
============
Net Assets consist of:
Paid-in capital $494,153,857
Accumulated net realized gain 31,705,191
Undistributed net investment income 337,455
Net unrealized appreciation 209,970,376
------------
Total Net Assets $736,166,879
============
Shares of beneficial interest outstanding 30,617,331
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 24.04
============
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net foreign witholding taxes $349,019) $ 3,573,903
Interest and securitry lending income allocated from Portfolio 45,792
Expenses allocated from Portfolio (3,181,902)
------------
Net investment income (loss) allocated from Portfolio 437,793
Expenses
Transfer agent fees (Note 2) $ 14,550
Registration fees 22,960
Professional fees 24,920
Insurance expense 486
Administrative service fee (Note 2) 53,329
Trustees' fees (Note 2) 997
Miscellaneous expenses 23,542
---------
Total expenses 140,784
------------
Net investment income 297,009
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange transactions and forward currency transactions 35,868,030
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange translations and forward currency contracts 91,136,619
------------
Net realized and unrealized gain (loss) on investments 127,004,649
------------
Net Increase in Net Assets from Operations $127,301,658
============
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 297,009 $ 4,484,816
Net realized gain (loss) 35,868,030 27,275,211
Change in net unrealized appreciation (depreciation) 91,136,619 86,395,650
------------ ------------
Net increase (decrease) in net assets from investment operations 127,301,658 118,155,677
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (1,314,863) (3,076,387)
From net realized gains on investments (33,657,880) (15,292,137)
------------ ------------
Total distributions to shareholders (34,972,743) (18,368,524)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 148,639,144 220,193,096
Value of shares issued in reinvestment of distributions 23,347,496 16,901,362
Cost of shares redeemed (53,058,531) (24,004,118)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 118,928,109 213,090,290
------------ ------------
Total Increase (Decrease) in Net Assets 211,257,024 312,877,443
Net Assets
At beginning of period 524,909,855 212,032,412
------------ ------------
At end of period (including undistributed net investment
income of $337,455 and $1,355,309, respectively) $736,166,879 $524,909,855
============ ============
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 -------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
--------------- -------- -------- -------- -------- --------
Net Asset Value, Beginning of Period $ 20.84 $ 15.93 $ 12.05 $ 8.91 $ 8.55 $ 10.65
-------- -------- -------- -------- -------- --------
From Investment Operations:
Net investment income * (a) 0.01 0.23 0.14 0.10 0.09 0.11
Net realized and unrealized gains (loss) on investments 4.56 5.86 3.86 3.13 0.38 (1.89)
-------- -------- -------- -------- -------- --------
Total from operations 4.57 6.09 4.00 3.23 0.47 (1.78)
-------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.05) (0.17) (0.12) (0.09) (0.11) (0.08)
From net realized gains on investments (1.32) (1.01) -- -- -- (0.24)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (1.37) (1.18) (0.12) (0.09) (0.11) (0.32)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 24.04 $ 20.84 $ 15.93 $ 12.05 $ 8.91 $ 8.55
======== ======== ======== ======== ======== ========
Total Return 23.01% 40.20% 33.35% 36.47%(b) 5.39%(b) (17.13%)(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (c) 1.13%(e) 1.16% 1.27% 1.39% 1.25% 1.25%
Net Investment Income (to average daily net assets)* 0.10%(e) 1.26% 0.99% 1.01% 0.96% 1.10%
Portfolio Turnover (d) N/A N/A N/A 15% 69% 89%
Net Assets, End of Period (000's omitted) $736,167 $524,910 $212,032 $ 89,570 $ 33,770 $ 22,386
- ---------
* 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 (a) N/A N/A N/A $ 0.08 $ 0.04 $ 0.04
Ratios (to average daily net assets):
Expenses (c) N/A N/A N/A 1.65% 1.82% 1.98%
Net investment income N/A N/A N/A 0.75% 0.39% 0.37%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers and
reimbursements.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 23, 2003. The portfolio turnover for
the period since the Fund transferred substantially all of its investable
assets to the Portfolio is shown in the Portfolio's financial statements
which are included elsewhere in this report.
(e) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company International Small Cap Fund (the "Fund") is a separate
diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of The Boston
Company International Small Cap Portfolio (the "Portfolio"), a subtrust of
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which
is organized as a New York trust, and has the same investment objective as
the Fund. The Portfolio seeks to achieve its objective by investing, under
normal circumstances, at least 80% of net assets in equity securities in
companies that are located in foreign countries represented in the S&P
Citigroup EMI Ex-U.S. Index and, to a limited extent, emerging markets. The
value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (68% at March 31,
2006). 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 investments in the Portfolio at value. The Portfolio
values its securities at value as discussed in Note 1A of the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities transactions and income
Securities transactions in the Portfolio are recorded as of trade date.
Currently, the Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all expenses of
the Fund determined in accordance with accounting principals generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Fund represent pro rata shares of gains and losses of the
Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. In determining
the amounts of its dividends, the Fund will take into account its share of
the income, gains or losses, expenses, and any other tax items of the
Portfolio. Dividends from net investment income and distributions from
capital gains, if any, are reinvested in additional shares of the Fund
unless a shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences which may result in
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 will result in reclassifications
among undistributed net investment income, accumulated net realized gain
(loss) and paid in capital. Undistributed net investment income (loss) and
accumulated net realized gain (loss) on investments may include temporary
book and tax basis differences which will reverse in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
D. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
funds of the Trust or portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
9
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap 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"), a wholly-owned subsidiary
of Mellon Asset Management, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services the Fund pays Dreyfus
Transfer, Inc. a fixed fee plus per account and transaction based fees, as
well as, out-of-pocket expenses. Pursuant to this agreement the Fund was
charged $14,550 during the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,084. No other director, officer or employee
of TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio for serving as an officer or Trustee of the Trust. The Fund pays
each Trustee who is not a director, officer or employee of TBCAM or its
affiliates an annual fee.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator a service fee in an amount of up
to 0.15% (on an annualized basis) of the Fund's average daily net assets
attributable to Fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts. For the six months
ended March 31, 2006, the Fund was charged $26,880 for fees payable to
Mellon Private Wealth Management.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2006, aggregated $177,029,100 and $88,214,923,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expense and realized and unrealized gains and losses based on
applicable tax allocation rules. Book/tax differences arise when changes in
proportionate interest for funds investing in the Portfolio occur.
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 6,792,412 12,160,695
Shares issued to shareholders in reinvestment of distributions 1,129,537 1,026,030
Shares redeemed (2,495,043) (1,306,673)
--------- ----------
Net increase 5,426,906 11,880,052
========= ==========
10
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2006, three shareholders of record held approximately 42% of
the total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund received
$4,279 in redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See the corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
11
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--94.1%
EQUITIES--93.0%
Australia--3.1%
Cochlear Ltd. 124,610 $ 4,738,542
Downer EDI Ltd. 703,700 4,466,646
Hardman Resources Ltd. (a) 2,067,000 3,194,954
Oxiana Ltd. 4,935,600 9,465,533
Pacific Brands Ltd. 1,396,400 2,388,241
Ramsay Health Care Ltd. 388,000 2,776,528
Record Investments Ltd. 901,300 6,836,685
------------
33,867,129
------------
Austria--0.7%
Boehler-Uddeholm 36,710 7,559,360
------------
Belgium--1.4%
Cofinimmo 6,800 1,132,566
Delhaize Group 73,100 5,241,925
NV Union Miniere SA 41,360 5,726,358
Option NV (a) 35,300 3,557,540
------------
15,658,389
------------
Canada--5.0%
Astral Media, Inc 108,600 3,093,026
Canaccord Capital, Inc 104,400 1,859,496
Ensign Energy Services, Inc 167,400 6,436,256
Gildan Activewear, Inc. (a) 123,300 5,832,413
Home Capital Group, Inc 32,000 956,328
Inmet Mining Corp. 351,600 10,471,526
IPSCO, Inc 97,200 10,072,910
Kingsway Financial Services, Inc 199,300 4,044,708
Trican Well Service Ltd. (a) 249,800 11,390,521
------------
54,157,184
------------
Denmark--0.4%
Jyske Bank A/S (a) 83,300 4,586,215
------------
Finland--1.4%
Rautaruukki Oyj 256,400 9,466,397
YIT Oyj 220,200 5,969,378
------------
15,435,775
------------
France--9.2%
Alten (a) 146,320 4,923,655
April Group 69,260 3,521,897
bioMerieux 51,700 2,912,026
Ciments Francais 28,350 4,440,208
CNP Assurances 42,740 4,307,344
Eiffage 57,813 9,495,917
Euler Hermes SA 69,860 8,800,627
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
France (continued)
Iliad SA 87,100 $ 7,343,094
Imerys SA 41,260 3,473,488
Legardere SCA 45,640 3,563,037
Natexis Banques Populaires 30,800 8,312,231
Nexans SA 57,930 4,508,462
Pierre & Vacances 32,600 3,435,489
Publicis Groupe 73,300 2,858,983
Silicon-On-Insulator Technologies (SOITEC) (a) 135,400 4,603,761
SR Teleperformance 129,800 4,763,970
Vallourec 10,250 9,895,413
Vinci SA 58,040 5,719,218
Vinci SA--Rights (a) 58,040 124,438
Zodiac SA 45,500 2,951,363
------------
99,954,621
------------
Germany--5.5%
Continental AG 73,940 8,136,846
Deutsche Boerse AG 53,970 7,779,489
Deutsche Postbank AG 71,590 5,192,612
Hugo Boss AG PFD 87,100 3,666,272
Hypo Real Estate Holding 42,190 2,890,996
Leoni AG 108,290 3,864,318
Man AG 72,600 5,036,346
Mobilcom AG 168,530 4,078,725
Software AG 75,660 4,220,342
Stada Arzneimittel AG 93,560 4,034,521
Vivacon AG (a) 178,200 7,710,293
Wincor Nixdorf AG 26,620 3,353,460
------------
59,964,220
------------
Hong Kong--2.3%
China Overseas Land & Investment Ltd. 11,428,000 7,806,112
Hengan International Group Co., Ltd. 4,979,400 7,893,521
Solomon Systech (Intl) 11,830,900 5,717,915
Wing Hang Bank Ltd. 374,400 3,143,684
------------
24,561,232
------------
Ireland--1.3%
C & C Group PLC 844,200 5,726,445
Grafton Group PLC (a) 296,670 3,891,830
IAWS Group PLC 246,900 4,279,691
------------
13,897,966
------------
Italy--4.9%
Amplifon Spa 36,800 3,209,460
Azimut Holding Spa 272,100 3,401,418
Banca Popolare di Milano Scarl (BPM) 361,000 4,259,100
Banco Popolare di Verona e Novara 288,560 7,633,795
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
Italy (continued)
Credito Emiliano Spa 364,800 $ 5,006,526
Davide Campari-Milano Spa 476,650 4,197,452
Erg Spa 152,180 3,981,650
Fondiaria-Sai Spa 118,540 4,734,080
Milano Assicurazioni Spa 697,950 5,081,015
Pirelli & C Real Estate 45,620 3,102,821
Recordati Spa 598,040 4,679,662
Terna Spa 1,674,000 4,400,144
------------
53,687,123
------------
Japan--19.5%
Asahi Denka Co., Ltd. 235,000 3,690,974
Asahi Pretec Corp. 133,300 4,169,165
Comsys Holdings Corp. 392,000 5,600,476
Cosmo Oil Co., Ltd. 526,000 2,758,304
Dainippon Screen Manufacturing Co., Ltd. 472,900 5,011,952
Dainippon Sumitomo Pharma Co., Ltd. 340,000 3,773,925
Don Quijote Co., Ltd. 48,500 3,664,499
EXEDY Corp. 132,300 4,284,064
Futaba Industrial Co., Ltd. 114,100 2,792,861
Hitachi Construction Machinery Co., Ltd. 194,100 5,113,972
Hitachi High-Technologies Corp. 182,600 4,826,500
Hitachi Information Systems, Ltd. 141,600 3,297,501
Izumi Co. Ltdronics, Inc 148,700 5,333,282
Japan Aviation Electronics Industry Ltd. 283,000 4,163,463
Keihin Corp. 339,400 9,288,356
Kenedix, Inc 1,167 6,179,169
Kirin Beverage Corp. 126,300 3,075,382
Kyowa Exeo Corp. 474,000 6,155,635
Makino Milling Machine Co., Ltd. 374,000 4,704,403
Makita Corp. 120,800 3,726,874
Mitsubishi Gas Chemical Co., Inc 1,095,800 13,373,864
Mori Seiki Co., Ltd. 165,500 3,488,356
Nachi-Fujikoshi Corp. 748,000 4,831,549
Nippon Shokubai Ltd. 620,000 7,371,919
Nippon System Development Co., Ltd. 112,800 3,930,648
Nissan Chemical Industries Ltd. 314,000 5,332,075
NTN Corp. 414,000 3,282,866
OSG Corp. 258,400 5,501,377
Rengo, Co. Ltd. 388,400 3,007,245
Ricoh Leasing Co., Ltd. 200,600 5,745,555
Ryohin Keikaku 74,400 6,241,101
Sanyo Shinpan Finance Co., Ltd. 69,400 4,305,796
Sumisho Lease Co., Ltd. 137,100 6,758,287
Suruga Bank Ltd. 222,000 3,001,887
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
Japan (continued)
Sysmex Corp. 134,800 $ 5,877,308
Tamron Co., Ltd. 224,400 3,661,805
Toppan Forms Co., Ltd. 240,200 4,013,541
Toshiba Machine Co., Ltd. 549,000 6,415,732
Tsumura & Co 195,000 5,137,685
Ulvac, Inc 114,100 4,742,045
Urban Corp. 406,000 6,480,265
XEBIO Co., Ltd. 137,250 4,735,977
Yaskawa Electric Corp. 285,000 3,219,148
------------
212,066,788
------------
Netherlands--4.6%
Aalberts Industries NV 84,320 6,215,025
Buhrmann NV 339,650 6,006,703
Fugro N.V 161,900 6,226,476
Koninklijke BAM Groep NV 75,050 7,609,005
Koninklijke DSM NV 115,400 5,267,062
SBM Offshore NV 42,040 4,213,883
Univar NV 96,400 5,429,773
USG People NV 72,400 5,239,963
Wolters Kluwer NV 165,270 4,119,942
------------
50,327,832
------------
Norway--2.2%
Aker Yards AS 58,900 4,395,120
Cermaq ASA 289,800 3,825,261
Tandberg Television ASA (a) 454,200 9,530,077
TGS Nopec Geophysical Company ASA (a) 93,600 5,734,664
------------
23,485,122
------------
Portugal--0.4%
Banco BPI SA 663,150 4,723,249
------------
Singapore--1.3%
Jurong Technologies Industrial 4,081,300 4,041,892
MobileOne Ltd. 2,238,600 3,256,196
Singapore Petroleum Co., Ltd. 887,000 2,854,915
STATS ChipPAC Ltd. (a) 4,403,000 3,515,641
------------
13,668,644
------------
South Korea--3.2%
Dongbu Insurance Co., Ltd. 290,200 5,616,967
Hanmi Pharm Co., Ltd. 25,800 3,572,635
Honam Petrochemical Corp. 56,900 3,456,296
Hyundai Department Store Co., Ltd. 45,100 4,216,082
Hyundai Development Company 94,700 4,333,795
Hyundai Mipo Dockyard 53,200 4,578,935
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
South Korea (continued)
Intops Co., Ltd. 111,200 $ 3,949,758
Pusan Bank 315,900 4,618,326
------------
34,342,794
------------
Spain--3.1%
ACS Actividades 174,770 6,787,067
Banco Sabadell SA 174,860 5,739,995
Enagas 199,790 3,956,792
Fadesa Immobiliaria SA 142,860 5,148,128
Immobiliaria Urbis SA 323,610 7,584,983
Union Fenosa, S.A 105,400 4,005,040
------------
33,222,005
------------
Sweden--1.5%
Eniro AB 353,200 4,083,552
Getinge AB 206,200 3,337,598
Nobia AB 210,400 5,459,740
WM-data AB 979,000 3,206,991
------------
16,087,881
------------
Switzerland--4.8%
Actelion NV (a) 30,900 3,068,203
Banque Cantonale Vaudoise (BCV) 12,200 3,928,845
Barry Callebaut AG (a) 17,000 7,012,728
Charles Voegele Holding AG (a) 41,200 3,591,811
Geberit AG 3,680 3,512,958
Georg Fischer AG (a) 7,200 3,207,484
Kuoni Reisen Holding AG (a) 10,200 5,286,919
Phonak Holding AG 57,600 3,277,043
Rieter Holding AG 13,060 5,207,177
Sika AG (a) 6,300 6,472,934
Sulzer AG 6,300 4,296,772
Syngenta AG (a) 25,150 3,532,802
------------
52,395,676
------------
United Kingdom--17.2%
Admiral Group PLC 326,300 3,558,783
Alliance Unichem PLC 240,300 3,739,268
Amlin PLC 622,400 3,004,963
Barratt Developments PLC 202,020 3,715,482
British Airways PLC (a) 893,500 5,481,527
Burren Energy PLC 274,400 4,543,909
Charter PLC (a) 430,710 5,501,643
Chemring Group PLC 220,700 4,538,150
Close Brothers Group PLC 355,560 6,585,649
Cookson Group PLC 528,500 4,745,264
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
United Kingdom (continued)
CSR PLC (a) 369,400 $ 7,698,444
EMAP PLC 260,400 3,984,205
Enterprise Inns PLC 316,600 5,234,469
First Choice Holidays PLC 1,270,414 4,749,121
Greene King Plc 385,823 5,018,740
Inchcape PLC 116,500 5,274,627
Informa PLC 559,700 4,673,039
International Power PLC 1,327,600 6,524,969
Kier Group PLC 238,010 6,944,313
Laird Group Plc 651,380 5,051,039
Michael Page International PLC 881,200 5,218,596
Morgan Sindall PLC 249,400 5,479,132
Northgate Information Solutions PLC (a) 1,619,730 2,271,485
Persimmon PLC 173,010 3,990,195
Restaurant Group PLC 1,170,014 4,124,886
Schroders PLC 224,850 4,643,009
SIG PLC 370,130 5,775,601
Speedy Hire PLC 337,530 5,422,242
Sportingbet PLC 601,950 3,920,275
The Carphone Warehouse PLC 1,349,630 7,242,658
Tomkins PLC 531,000 3,100,856
Tullow Oil PLC 684,270 4,028,580
United Business Media PLC 343,800 4,331,797
Vedanta Resources PLC 257,500 6,305,524
Victrex PLC 351,890 4,516,231
Viridian Group PLC 151,565 2,584,849
WH Smith PLC 429,390 3,077,966
Wincanton PLC 510,000 2,847,580
Wolfson Microelectronics PLC (a) 449,100 3,451,287
Wolverhampton & Dudley Brew PLC 146,600 3,256,332
-------------
186,156,685
-------------
Total Equities (Cost $748,813,473) 1,009,805,890
-------------
PREFERRED STOCKS--1.0%
Fresenius AG 27,600 4,947,918
Henkel KGaA 54,100 6,321,806
-------------
TOTAL PREFERRED STOCKS (Cost $8,084,333) 11,269,724
-------------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
----- --------- ----------
U.S. Government--0.1%
U.S. Treasury Bill (b) (c) (Cost $1,025,325) 4.480% 6/15/2006 $1,035,000 1,025,621
-------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $757,923,131) 1,022,101,235
-------------
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Rate Maturity Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
AFFILIATED INVESTMENTS--2.5%
Dreyfus Institutional Preferred Plus Money Market Fund (d)(e)(Cost $27,382,916) 4.770% 27,382,916 $ 27,382,916
--------------
TOTAL INVESTMENTS--96.6% (Cost $785,306,047) 1,049,484,151
OTHER ASSETS, LESS LIABILITIES--3.4% 36,840,097
--------------
NET ASSETS-100% $1,086,324,248
==============
Notes to Schedule of Investments:
(a) Non-income producing security
(b) Denotes all or part of security segregated as collateral.
(c) Rate noted is yield to maturity.
(d) Affiliated institutional money market fund.
(e) Stated rate is the seven day yield for the fund at March 31, 2006.
At March 31, 2006 the Portfolio held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date March 31, 2006 to Deliver Gain/(Loss)
- --------------------------------------------------------------------------------------------------
Norwegian Krone 20,000,000 4/3/2006 $3,051,944 $3,041,686 $ 10,258
Swiss Franc 3,000,000 4/3/2006 2,300,261 2,307,515 (7,254)
---------- ---------- --------
$5,352,205 $5,349,201 $ 3,004
========== ========== ========
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date March 31, 2006 to Deliver Gain/(Loss)
- --------------------------------------------------------------------------------------------------
Danish Krone 10,000,000 4/3/2006 $1,624,088 $1,624,246 $ 158
========== ========== ========
At March 31, 2006 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain/(Loss)
- ----------------------------------------------------------------------------------------------------
MSCI Pan-Euro (1,000 contracts) Long 6/16/2006 $26,868,937 $(41,568)
Topix Futures (60 contracts) Long 6/8/2006 8,323,683 467,039
--------
$425,471
========
Percentage of
Economic Sector Allocation Net Assets
------------------------------------------------------------------
Consumer Discretionary 16.4%
Consumer Staples 4.4
Energy 5.1
Financial 18.2
Health Care 5.4
Industrials 20.1
Information Technology 8.1
Materials 12.2
Telecommunications Services 2.0
Utilities 2.0
Short-term and other assets 6.1
-----
100.0%
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)
Unaffiliated issuers, at value (cost $757,923,131) $1,022,101,235
Affiliated issuers, at value (Note 1H) (cost $27,382,916) 27,382,916
Foreign currency, at value (identified cost, $38,618,630) 38,441,942
Receivable for investments sold 7,210,782
Interest and dividends receivable 2,163,670
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 10,416
Prepaid expenses 9,575
--------------
Total assets 1,097,320,536
--------------
Liabilities
Payable for investments purchased $ 10,593,718
Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 7,254
Payable for variation margin on open financial futures contracts (Note 5) 229,528
Accrued accounting, administration and custody fees (Note 2) 148,931
Accrued professional fees 13,936
Accrued trustees' fees and expenses (Note 2) 1,500
Other accrued expenses and liabilities 1,421
------------
Total liabilities 10,996,288
--------------
Net Assets (applicable to investors' beneficial interest) $1,086,324,248
==============
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $499,369) $ 4,571,616
Dividend income from affiliated investments (Note 1 H) 533,180
Interest income 61,510
Security lending income (Note 6) 3,898
--------------
Total investment Income 5,170,204
Expenses
Investment advisory fee (Note 2) $ 4,149,430
Accounting, administration and custody fees (Note 2) 287,054
Professional fees 16,791
Trustees' fees and expenses (Note 2) 26,693
Insurance expense 4,275
Miscellaneous 8,331
------------
Total expenses 4,492,574
--------------
Net investment income 677,630
--------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 47,877,608
Financial futures transactions 4,149,976
Foreign currency transactions and forward currency exchange transactions (431,283)
------------
Net realized gain (loss) 51,596,301
Change in unrealized appreciation (depreciation) on:
Investments 132,127,662
Financial futures contracts 367,799
Foreign currency translations and forward currency exchange contracts (3,912)
------------
Change in net unrealized appreciation (depreciation) 132,491,549
--------------
Net realized and unrealized gain (loss) 184,087,850
--------------
Net Increase in Net Assets from Operations $ 184,765,480
==============
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income $ 677,630 $ 5,388,858
Net realized gain (loss) 51,596,301 31,357,090
Change in net unrealized appreciation (depreciation) 132,491,549 99,455,142
-------------- --------------
Net increase (decrease) in net assets from operations 184,765,480 136,201,090
-------------- --------------
Capital Transactions
Contributions 350,307,927 353,355,799
Withdrawals (105,979,731) (51,694,287)
-------------- --------------
Net increase (decrease) in net assets from capital transactions 244,328,196 301,661,512
-------------- --------------
Total Increase (Decrease) in Net Assets 429,093,676 437,862,602
Net Assets
At beginning of period 657,230,572 219,367,970
-------------- --------------
At end of period $1,086,324,248 $ 657,230,572
============== ==============
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
For the January 28, 2003
Six Months Ended Year Ended September 30, (commencement
March 31 2006 ----------------------- of operations) to
(Unaudited) 2005 2004 September 30, 2003
---------------- -------- -------- ------------------
Total Return (a) 23.06% 40.24% 33.42%(b) 36.44%(b)(c)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 1.08%(d) 1.12% 1.20% 1.46%(d)
Net Investment Income (to average daily net assets)* 0.16%(d) 1.32% 1.06% 1.29%(d)
Portfolio Turnover 36%(c) 50% 72% 46%(c)
Net Assets, End of Year (000's omitted) $1,086,324 $657,342 $219,368 $89,545
- --------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A 1.49%(d)
Net investment income N/A N/A N/A 1.26%(d)
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements.
(b) Total return would have been lower in the absence of expense waivers.
(c) Not annualized.
(d) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
22
Mellon Institutional Funds Master Portfolio
The Boston Company 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") 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 net assets in equity securities of companies
that are located in foreign countries represented in the S&P Citigroup
Extended Market Ex-U.S. Index and, to a limited extent, emerging markets.
At March 31, 2006, there were two funds, The Boston Company International
Small Cap Fund and Dreyfus Premier International Small Cap Fund invested in
the Portfolio (the "Funds"). The value of the Funds' investment in the
Portfolio reflects the Funds' proportionate interests in the net assets of
the Portfolio. At March 31, 2006, The Boston Company International Small
Cap Fund and the Dreyfus Premier International Small Cap Fund held 68% and
32% 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.
Because foreign markets may be open at different times than the New York
Stock Exchange, the value of the Portfolio's shares may change on days when
shareholders are not able to buy or sell them. Many securities markets and
exchanges outside the U.S. close prior to the close of the New York Stock
Exchange and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect the events that occur after such
close but before the close of the New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market)
the Portfolio may value its assets by a method the Trustees believe
accurately reflects the fair value. The Trustees have adopted fair value
pricing procedures, which, among other things, require the Portfolio to
fair value such securities if there has been a movement in the U.S. market
that exceeds a specified threshold. Although the threshold may be revised
from time to time by the Trustees and the number of days on which fair
value prices will be used will depend on market activity, it is possible
that fair value prices for foreign securities will be used by the Portfolio
to a significant extent.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Portfolio
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity 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.
The Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Portfolio's books and the
U.S. dollar equivalent amounts actually received or paid.
23
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 income taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
D. Foreign currency transactions
The Portfolio maintains its records in U.S. dollars. Investment security
valuations, other assets, and liabilities initially expressed in foreign
currencies are converted into U.S. dollars based upon current currency
exchange rates. Purchases and sales of foreign investment securities and
income and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions.
E. Investment risk
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed foreign
markets.
F. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
However, based on experience, the Portfolio expects the risks of loss to be
remote.
G. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
the funds of the Trust or the portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
H. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management Company LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory
and administrative services, and general office facilities, is paid monthly
at the annual rate of 1.00% of the Portfolio's average daily net assets.
For the six months ended March 31, 2006, the Portfolio paid $4,149,430 in
investment advisory fees to TBCAM.
The Portfolio entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of TBCAM, to provide custody, administration and accounting
services for the Portfolio. For these services the Portfolio pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as
out-of-pocket expenses. Pursuant to this agreement the Portfolio was
charged $287,054 during the six months ended March 31, 2006.
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Portfolio also entered into an agreement with Mellon Bank, to perform
certain securities lending activities and to act as the Portfolio's lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. Pursuant to this agreement, Mellon Bank received $1,680, for the
six months ended March 31, 2006. See Note 6 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust.
The Fund and Portfolio Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates (the "Independent Trustees")
an annual fee and the Portfolio Trust pays each Independent Trustee 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 counsel to the
Independent Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
------------ ------------
Investments (non-U.S. Government Securities) $480,498,435 $283,511,594
============ ============
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $785,306,047
============
Unrealized appreciation $266,969,306
Unrealized depreciation (2,791,202)
------------
Net unrealized appreciation (depreciation) $264,178,104
============
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Portfolio may trade the following financial instruments with
off-balance sheet risk:
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.
During the six months ended March 31, 2006, the Portfolio held foreign
currency exchange contracts. See Schedule of Investments for further
details.
25
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Futures contracts
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the
underlying instrument or hedge other investments. In addition, there is the
risk that the Portfolio may not be able to enter into a closing transaction
because of an illiquid secondary market. Losses may arise if there is an
illiquid secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At March 31, 2006, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the six months ended March 31, 2006
and earned interest on the invested collateral of $70,333 of which $66,435
was rebated to borrowers or paid in fees. At March 31, 2006, the Portfolio
did not hold any securities loaned.
(7) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a facility fee, computed at an annual rate of 0.060 of 1%
on the committed amount, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended March
31, 2006, the expense allocated to the Portfolio was $4,507.
For the six months ended March 31, 2006, the Portfolio had average
borrowings outstanding of $2,406,000 on a total of one day and incurred
$326 of interest.
26
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
fund's advisory agreement and the related fees on an annual basis. The Fund
is not a party to an investment advisory agreement directly with any
investment adviser and does not invest directly in portfolio securities.
Instead, the Fund invests all of its investable assets in The Boston
Company International Small Cap Portfolio (the "Portfolio"), which is
managed by The Boston Company Asset Management ("TBCAM"). The Fund's Board
of Trustees determines annually whether the Fund should continue to invest
in the Portfolio. The members of the Fund's Board of Trustees also serve as
the Board of Trustees of the Portfolio. In that capacity, they consider
annually whether to continue the investment advisory agreement between the
Portfolio and TBCAM. In their most recent deliberations concerning their
decision to approve the continuation of the investment advisory agreement,
the Board of Trustees conducted the review and made the determinations that
are described below. In conducting this review and in making such
determinations, the Independent Trustees received from the Portfolio's
investment adviser, TBCAM ("the Adviser"), a broad range of information in
response to a written request prepared on their behalf by their own legal
counsel. The Independent Trustees met alone in a private session with their
legal counsel on September 22, 2005 to review these materials and to
discuss the proposed continuation of the Fund's advisory agreement.
Representatives of the Adviser attended a portion of the September meeting
to provide an overview of its organization, personnel, resources and
strategic plans, and to respond to questions and comments arising from the
Independent Trustees' review of the materials and their deliberations. The
entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and
income statements, as well as a profitability analysis of the Adviser,
including a separate presentation of the Adviser's profitability relative
to that of several publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management
fee and expense ratio compared to other funds, and the Adviser's separate
account advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the
Fund's performance (rather than the Portfolio alone), and any material
portfolio manager and strategy changes that may have affected the Fund in
the prior year, as well as the Fund's "fact sheets" prepared by the Adviser
providing salient data about the Fund and Portfolio, including Portfolio's
holdings, strategies, recent market conditions and outlook, as well as the
Adviser's views concerning the issues of breakpoints in the management fee
schedule of the Portfolio and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the
Board of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling, and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the advisory agreement
and the compensation to the Adviser provided therein were fair and
reasonable in light of the services performed, expenses incurred and such
other matters as the Trustees considered relevant in the exercise of their
reasonable judgment. The following summary does not detail all the matters
that were considered. Some of the factors that figured prominently in the
Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by the Adviser. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of
the fact that, by choosing to invest in the Fund, the Fund's shareholders
have chosen to entrust the Adviser, under the supervision of the Board, to
manage the portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment
management, administrative, compliance and related services provided by the
Adviser. The Board determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees reviewed the background and experience of the Portfolio's two
portfolio managers and also met with senior management of the Adviser to
receive an overview of its organization, personnel, resources and strategic
plans. Among other things, the Trustees considered the size, education and
experience of the Adviser's investment staff, technological infrastructure
and overall responsiveness to changes in market conditions. The Board
determined that the Adviser had the expertise and resources to manage the
Portfolio effectively.
Investment Performance
The Board considered the investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected
by the Adviser with input from the Trustees. The Board also compared the
Fund's investment performance against the average performance of a larger
universe of funds regarded by Lipper as having similar investment
objectives and considered the Fund's performance rankings against that
universe. In addition to the information received by the Board for at the
September 22, 2005 Board meeting, the Trustees received similar detailed
comparative performance information for the Fund at each regular Board
meeting during the year.
27
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2005 based on the Lipper materials
provided to the Board at the September 22, 2005 meeting. The Board found
that the Fund's performance compares favorably to its peer group of funds
as the Fund outperformed the median for the one-year period (35.85% vs.
29.34%), three-year period (29.70% vs. 24.97%) and five-year period (15.36%
vs. 7.87%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to the
Adviser. The Lipper data presenting the Portfolio's "net advisory fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Trust's
custodian. Such reporting was necessary, according to Lipper, to allow the
Board to compare the Portfolio's advisory fees to those peers that include
administrative fees within a blended advisory fee.
The Portfolio's contractual advisory fee was 1.000%, which was in the 2nd
quintile (1st being the best) of its peer group of funds and below the
median of that peer group, which was 1.030%. The Portfolio's actual
advisory fee, after giving effect to expense limitations, was 1.012%, which
was higher than the peer group median actual advisory fee of 0.893%. Based
on the Lipper data, as well as other factors discussed at the September 22,
2005 meeting, the Board determined that the Portfolio's advisory fee is
reasonable relative to its peer group averages, both with and without
giving effect to expense limitations.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed
by the Adviser with respect to the Portfolio relative to these other types
of clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board also considered the Fund's (rather than solely the Portfolio's)
expense ratio and compared it to that of its peer group of similar funds.
The Board found that the Fund's actual total expense ratio of 1.269% (after
giving effect to expense limitations) was lower than the median total
expense ratio of the peer group of 1.292% notwithstanding the fact that
most of the other funds in the peer group were larger than the Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Portfolio
and Fund and the Mellon Institutional Funds as a group, as well as the
methodology used to compute such profitability, and the various direct and
indirect expenses incurred by the Adviser or its affiliated investment
adviser, Standish Mellon Asset Management Company, LLC ("Standish Mellon")
in managing the Portfolio and other funds in the Mellon Institutional Funds
family of funds. The Independent Trustees had observed that, based on the
profitability information submitted to them by the Adviser, the Adviser
incurred losses in managing many of the investment companies in the Mellon
Institutional Funds family of funds, including the Portfolio and Fund, and
that among those funds that were profitable to the Adviser, several
generated only marginal profitability for the firm. The Trustees observed
that the Adviser had incurred losses in operating the Portfolio in 2003 but
made a modest profit in 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed
Income Portfolio, the largest fund in the complex, already had breakpoints
in its fee arrangement that reflected economies resulting from its size.
The Board concluded that, at existing asset levels and considering current
assets growth projections, the implementation of fee breakpoints or other
fee reductions with respect to the Portfolio or the Fund was not necessary
at this time. They requested, however, that management consider the issue
of future breakpoints across the Mellon Institutional Funds complex and
respond to the Independent Trustees and to present a proposal for such
breakpoints or, in each case as applicable, management's rationale as to
why such future breakpoints are not necessary or appropriate for a
particular Fund.
In response, the Adviser has subsequently proposed for the Independent
Trustees' consideration, forward-looking fee schedules for various types of
funds across the Mellon Institutional Funds complex. These schedules
contain asset-based breakpoints which vary based on the investment strategy
of fund and other factors considered by the Adviser to be relevant to the
issue of potential future economies of scale. The Independent Trustees and
their counsel have taken this proposal under advisement.
28
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Mellon Institutional Funds as a group,
including revenues received by Mellon affiliates in consideration of
custodial, administrative, transfer agency and securities lending services
provided by such affiliates to the Funds. In each case, such affiliates
were selected by the Board on the basis of a comparative analysis of their
capabilities and fees relative to those of unaffiliated competitors. In
addition, the Board, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i)
the terms of the relevant service agreement are in the best interests of
Fund shareholders; (ii) the services to be performed by the affiliate
pursuant to the agreement are required by and appropriate for the Funds;
(iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for
its services are fair and reasonable in light of the usual and customary
charges imposed by other, unaffiliated firms for services of the same
nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Portfolio's advisory
agreement and the compensation to the Adviser provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for
one-year period.
29
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 34 None Fund: $3,662
c/o Decision Resources, Inc. 11/3/1986 Resources, Inc. ("DRI") Portfolio:$250
260 Charles Street (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None Fund: $4,243
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio:$250
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None Fund: $3,662
c/o Harvard University 9/13/1989 Professor of Political Portfolio:$250
Littauer Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens House, 34 None Fund: $3,662
P.O. Box 2333 11/3/1986 Inc. (hospice) Portfolio:$250
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial Officer,
MAM
30
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund
Boston, MA 02108 Operations, Standish Mellon Asset Management,
8/19/51 LLC
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM");
One Boston Place formerly Manager of Shareholder Services, MAM,
Boston, MA 02108 and Shareholder Representative, Standish Mellon
1/19/71 Asset Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy Fund,
Boston, MA 02108 LLC; formerly Director, Blackrock, Inc., Senior
4/8/57 Vice President, State Street Research & Management
Company ("SSRM"), and Vice President, SSRM
31
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6939SA0306
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
The Boston Company
Small Cap Growth Fund
- --------------------------------------------------------------------------------
Semiannual Report
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- -------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,124.40 $5.83
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.45 $5.54
+ Expenses are equal to the Fund's annualized expense ratio of 1.10%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -------------------------------------------------------------------------------
Respironics, Inc. Health Care 1.6%
Palm, Inc. Information Technology 1.4
Oil States International, Inc. Energy 1.3
Covance, Inc. Health Care 1.2
CapitalSource, Inc. Financial 1.1
Washington Group International, Inc. Industrial 1.1
PerkinElmer, Inc. Health Care 1.1
Tektronix, Inc. Information Technology 1.1
Watson Wyatt Worldwide, Inc. Industrial 1.0
Hydril Co. Energy 1.0
----
11.9%
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- ---------------------------------------------------
Basic Materials 3.5%
Communications 0.5
Consumer Discretionary 11.3
Consumer Staple 5.8
Energy 9.8
Financial 9.7
Health Care 18.2
Industrial 14.3
Information Technology 22.3
Services 0.5
Utilities 1.0
Short-term and other assets 3.1
-----
100.0%
The Boston Company Small Cap Growth Fund invests all of its investable assets in
an interest ofThe Boston Company Small Cap Growth Portfolio (see Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap
Growth Portfolio ("Portfolio"), at value (Note 1A) $ 40,304,811
Receivable for Fund shares sold 14,098
Prepaid expenses 8,442
------------
Total assets 40,327,351
Liabilities
Accrued administrative service fees (Note 2) $ 10,766
Accrued professional fees 16,146
Accrued transfer agent fees (Note 2) 1,136
Accrued trustees' fees (Note 2) 497
Accrued chief compliance officer fee (Note 2) 278
Other accrued expenses and liabilities 2,168
--------
Total liabilities 30,991
------------
Net Assets $ 40,296,360
============
Net Assets consist of:
Paid-in capital $ 45,390,936
Accumulated net realized loss (11,536,324)
Accumulated net investment loss (34,926)
Net unrealized appreciation 6,476,674
------------
Total Net Assets $ 40,296,360
============
Shares of beneficial interest outstanding 773,979
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 52.06
============
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 97,712
Interest income Allocated from Portfolio
(including security lending income of $20,863) 65,956
Expenses allocated from Portfolio (203,844)
------------
Net investment loss allocated from Portfolio (40,176)
Expenses
Professional fees $ 9,155
Registration fees 10,297
Administrative service fee (Note 2) 22,258
Transfer agent fees (Note 2) 4,152
Insurance expense 222
---------
Total expenses 46,084
Deduct:
Reimbursement of operating expenses (Note 2) (45,366)
---------
Net expenses 718
------------
Net investment loss (40,894)
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investments 4,536,588
Financial futures transactions 93,340
---------
Net realized gain (loss) 4,629,928
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments (98,112)
Financial futures contracts 13,764
---------
Net change in net unrealized appreciation (depreciation) (84,348)
------------
Net realized and unrealized gain (loss) on investments 4,545,580
------------
Net Increase in Net Assets from Operations $ 4,504,686
============
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (40,894) $ (198,710)
Net realized gain (loss) 4,629,928 4,319,415
Change in net unrealized appreciation (depreciation) (84,348) 2,750,040
----------- -----------
Net increase (depreciation) in net assets from investment operations 4,504,686 6,870,745
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares
Institutional Class 3,903,994 18,873,206
Service Class -- 2,808,281
Cost of shares redeemed
Institutional Class (4,435,671) (4,858,947)
Service Class -- (20,103,492)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions (531,677) (3,280,952)
----------- -----------
Total Increase (Decrease) in Net Assets 3,973,009 3,589,793
Net Assets
At beginning of period 36,323,351 32,733,558
----------- -----------
At end of period [including undistributed net
investment income (loss) of $(34,926) and $5,968, respectively] $40,296,360 $36,323,351
=========== ===========
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 -------------------------------------------------------
(Unaudited) 2005 2003(a) 2002(a) 2001(a) 2004(a)
----------- -------- -------- -------- -------- --------
Net Asset Value, Beginning of Period $ 46.30 $ 37.95 $ 32.41 $ 24.78 $ 29.28 $ 60.87
-------- -------- -------- -------- -------- --------
From Investment Operations:
Net investment income* (b) (0.05) (0.20) (0.33) (0.11) (0.16) (0.19)
Net realized and unrealized gains (loss) on investments 5.81 8.55 5.87(c) 7.74(c) (4.34)(c) (25.66)
-------- -------- -------- -------- -------- --------
Total from operations 5.76 8.35 5.54 7.63 (4.50) (25.85)
-------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net realized gains on investments -- -- -- -- -- (5.74)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 52.06 $ 46.30 $ 37.95 $ 32.41 $ 24.78 $ 29.28
======== ======== ======== ======== ======== ========
Total Return (d) 12.44% 22.00% 17.09% 30.79% (15.37%) (45.36%)
Ratios/Supplemental data:
Expenses (to average daily net assets)*(e) 1.10%(f) 1.17% 1.18% 1.00% 1.00% 1.00%
Net Investment Income (to average daily net assets)* (0.22%)(f) (0.48%) (0.87%) (0.42%) (0.52%) (0.48%)
Net Assets, End of Period (000's omitted) $ 40,296 $ 36,323 $ 18,274 $ 21,168 $ 18,780 $ 31,365
- --------
* 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 (a) $ (0.11) $ (0.31) $ (0.40) $ (0.30) $ (0.25) $ (0.28)
Ratios (to average daily net assets):
Expenses (e) 1.34%(f) 1.41% 1.37% 1.66% 1.29% 1.20%
Net investment income (0.46%)(f) (0.72%) (1.06%) (1.08%) (0.81%) (0.68%)
(a) Prior to August 31, 2005, the Fund offered two classes of shares:
Institutional Class and Service Class. The financial highlights for periods
prior to the year ended September 30, 2005, represent those of the
Institutional Class.
(b) Calculated based on average shares outstanding.
(c) Amounts include litigation proceeds received by the Fund of $0.06 for the
year ended September 30, 2004, Less than $0.01 for the year ended September
30, 2003, and $0.01 for the year ended September 30, 2002.
(d) Total return would have been lower in the absence of expense waivers and
reimbursements.
(e) Includes the Fund's share of the Portfolio's allocated expenses.
(f) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Cap Growth Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund invests all of its investable assets in an interest in The Boston
Company Small Cap Growth Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and has the same investment objective as the
Fund. The Portfolio seeks to achieve its investment objective by investing,
under normal circumstances, at least 80% of its net assets in equity
securities of small cap U.S. companies. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio. As of March 31, 2006 the Fund owned 100% of the
Portfolio assets. The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio are
included elsewhere in this report and should be read in conjunction with
the Fund's financial statements.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
The Fund records its investment in the Portfolio at value. The Portfolio
values its securities at value as discussed in Note 1A of the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities transactions and income
Securities transactions in the Portfolio are recorded as of the trade date.
Currently, the Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all expenses of
the Fund determined in accordance with accounting principles generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Fund represent pro rata shares of gains and losses of the
Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. In determining
the amounts of its dividends, the Fund will take into account its share of
the income, gains or losses, expenses, and any other tax items of the
Portfolio. Dividends from net investment income and distributions from
capital gains, if any, are reinvested in additional shares of the Fund
unless a shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
reclassifications, are primarily due to differing treatments for losses
deferred due to wash sales, capital loss carryforwards and realized and
unrealized gains or losses on futures.
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income (loss), accumulated net realized
gain (loss) and paid in capital. Undistributed net investment income (loss)
and accumulated net realized gain (loss) on investments may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
D. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
funds of the Trust and portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM") for such services. See Note
2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. TBCAM voluntarily agreed to limit the
Institutional Class total annual operating expenses (excluding brokerage
commission, taxes and extraordinary expense) to 1.10% of the Institutional
Class' average daily net. Pursuant to this agreement, for the six months
ended March 31, 2006, TBCAM reimbursed the Institutional Class $45,366 for
a portion of its operating expenses. This agreement is voluntary and
temporary and may be discontinued or revised by TBCAM at any time.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund was charged
$4,152 for the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,084. No other director, officer or employee
of TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio for serving as an officer or Trustee of the Trust. The Fund pays
each Trustee who is not a director, officer or employee of TBCAM or its
affiliates an annual fee.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator a service fee in an amount of up
to 0.15% (on an annualized basis) of the Fund's average daily net assets
attributable to Fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts. For the six months
ended March 31, 2006, the Fund was charged $3,659 for fees payable to
Mellon Private Wealth Management.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2006, aggregated $3,891,224 and $4,422,979,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expense and realized and unrealized gains and losses based on
applicable tax allocation rules. Book/tax differences arise when changes in
proportionate interest for funds investing in the Portfolio occur.
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Institutional Class:
Shares sold 81,918 415,461
Shares redeemed (92,457) (112,485)
------- --------
Net increase (decrease) (10,539) 302,976
======= ========
For the
Year Ended
September 30, 2005
------------------
Service Class:*
Shares sold 67,826
Shares redeemed (452,872)
--------
Net increase (decrease) 385,046
========
* During the year ended September 30, 2005, the Fund had offered two classes
of shares: Institutional Class and Service Class. On August 31, 2005, the
Service Class was liquidated and closed.
At March 31, 2006, one shareholder of record held approximately 45% of the
total outstanding shares of the Fund. Investment activities of this
shareholder could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund received
$70 in redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See the corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
10
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--106.5%
EQUITIES--96.9%
Basic Materials--3.5%
Cleveland-Cliffs, Inc. 4,261 $ 371,218
Kinross Gold Corp. (a) 28,930 316,205
Pan American Silver Corp. (a) (b) 7,970 202,438
Silver Standard Resources, Inc. (a) 9,800 201,488
Stillwater Mining Co. (a) 18,200 299,572
----------
1,390,921
----------
Communications--0.5%
Arris Group, Inc. (a) 14,920 205,299
----------
Consumer Discretionary--11.3%
California Pizza Kitchen, Inc. (a) 11,360 368,632
Central Garden & Pet Co. (a) 6,090 323,623
Jos A Bank Clothiers, Inc. (a) 4,410 211,460
Lions Gate Entertainment Corp. (a) (b) 43,400 440,510
Penn National Gaming, Inc. (a) 9,690 408,724
Playboy Enterprises, Inc., Class B (a) 25,400 360,680
Red Robin Gourmet Burgers, Inc. (a) 9,291 438,535
Ruth's Chris Steak House, Inc. (a) 9,250 220,243
School Specialty, Inc. (a) 5,800 200,100
Steiner Leisure Ltd.--ADR (a) 8,600 348,300
The Sportsman's Guide, Inc. (a) 12,160 322,118
Too, Inc. (a) 11,640 399,834
Tractor Supply Co. (a) 2,970 197,030
Wabtec Corp. 9,400 306,440
----------
4,546,229
----------
Consumer Staple--5.8%
Church & Dwight Co., Inc. 5,330 196,784
Diamond Foods, Inc. 10,800 185,436
Hain Celestial Group, Inc. (a) 11,520 301,709
Herbalife Ltd. (a) 5,470 184,722
Inter Parfums, Inc. 16,300 324,859
Peet's Coffee & Tea, Inc. (a) 10,010 300,300
Performance Food Group Co. (a) (b) 12,540 391,123
Playtex Products, Inc. (a) 18,720 195,998
USANA Health Sciences, Inc. (a) 6,500 271,180
----------
2,352,111
----------
Energy--9.8%
Alon USA Energy, Inc. 9,570 235,613
Arena Resources, Inc. (a) 6,700 233,830
Consol Energy, Inc. (b) 3,570 264,751
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
Energy (continued)
Dril-Quip, Inc. (a) 4,870 $ 345,040
Foundation Coal Holdings, Inc. 9,370 385,482
Global Industries, Ltd. (a) 15,100 218,799
Gulf Island Fabrication, Inc. 7,400 175,158
Hydril Co. (a) 5,752 448,368
Oceaneering International, Inc. (a) 3,680 210,864
Oil States International, Inc. (a) 14,870 547,960
Penn Virginia Corp. 3,020 214,420
Superior Well Services, Inc. (a) 11,450 332,852
W-H Energy Services, Inc. (a) 7,410 329,671
----------
3,942,808
----------
Financial--9.7%
Affiliated Managers Group (a) (b) 3,350 357,144
American Equity Investment Life Holding Co. (b) 9,800 140,532
Arch Capital Group Ltd. ADR (a) 3,500 202,090
CapitalSource, Inc. 19,650 488,892
Center Financial Corp. 5,342 129,437
City National Corp., Class A 4,240 325,590
Corrections Corp. of America (a) 4,600 207,920
Crescent Real Estate Equities Co. REIT (b) 19,300 406,651
Cullen/Frost Bankers, Inc. 2,200 118,250
First Community Bancorp, Inc., Class A 4,100 236,406
First Midwest Bancorp, Inc. 8,310 303,897
Mercantile Bank Corp. 2,867 112,090
The Colonial BancGroup, Inc. 11,300 282,500
UCBH Holdings, Inc. 14,900 281,908
Waddell & Reed Financial, Inc. 13,200 304,920
----------
3,898,227
----------
Health Care--18.2%
American Medical Systems Holdings, Inc. (a) 8,930 200,925
Applera Corp.-Celera Genomics Group (a) 12,700 148,463
Array BioPharma, Inc. (a) 12,760 116,626
Community Health Systems, Inc. (a) 7,400 267,510
Covance, Inc. (a) 8,570 503,488
Coventry Health Care, Inc. (a) 3,325 179,484
Cytyc Corp. (a) 11,400 321,252
Emdeon Corp. (a) 26,090 281,772
Fisher Scientific International 6,200 421,910
Integra LifeSciences Holdings (a) 5,400 221,292
InterMune, Inc. (a) 13,900 257,706
IRIS International, Inc. (a) 5,900 92,217
Matria Healthcare, Inc. (a) 5,310 201,568
Medarex, Inc. (a) 14,610 193,144
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
Health Care (continued)
Nektar Therapeutics (a) 13,500 $ 275,130
Neurocrine Biosciences, Inc. (a) 2,700 174,258
Panacos Pharmaceuticals, Inc. (a) 13,800 104,328
PDL BioPharma, Inc. (a) (b) 9,590 314,552
Pediatrix Medical Group, Inc. (a) 2,000 205,280
PerkinElmer, Inc. 20,380 478,319
Respironics, Inc. (a) 18,210 708,551
Rigel Pharmaceuticals, Inc. (a) 11,400 130,986
Sybron Dental Specialties, Inc. (a) 5,900 243,316
Triad Hospitals (a) 4,550 190,645
VCA Antech, Inc. (a) 6,500 185,120
Vertex Pharmaceuticals, Inc. (a) (b) 5,210 190,634
Viasys Healthcare, Inc. (a) 9,880 297,190
Wellcare Group, Inc. (a) 4,600 209,024
ZymoGenetics, Inc. (a) 10,600 229,172
----------
7,343,862
----------
Industrial--14.3%
Alaska Air Group, Inc. (a) 7,910 280,410
Bucyrus International, Inc., Class A 4,770 229,866
Copart, Inc. (a) 11,180 306,891
FTI Consulting, Inc. (a) 10,710 305,556
Global Cash Access, Inc. (a) 16,890 295,913
Huron Consulting Group, Inc. (a) 12,610 381,957
Interline Brands, Inc. (a) 13,600 343,128
Jack Henry & Associates, Inc. 9,900 226,413
Kennametal, Inc. 4,860 297,140
Mobile Mini (a) 7,200 222,624
MSC Industrial Direct Co., Inc. 3,790 204,736
Old Dominion Freight Line (a) 10,660 287,287
Pacer International, Inc. 12,050 393,794
Quanta Services, Inc. (a) 25,570 409,631
Stericycle, Inc. (a) 3,100 209,622
Universal Truckload Services, Inc. (a) 10,130 253,757
Washington Group International, Inc. (a) 8,360 479,780
Watson Wyatt Worldwide, Inc. 13,790 449,278
West Corp. (a) 4,540 202,756
----------
5,780,539
----------
Information Technology--22.3%
24/7 Real Media, Inc. (a) 32,910 344,239
Akamai Technologies, Inc. (a) 8,650 284,499
AMIS Holdings, Inc. (a) 22,510 203,941
Ariba, Inc. (a) 20,844 203,854
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
Information Technology (continued)
Avid Technology, Inc. (a) 4,130 $ 179,490
BEA Systems, Inc. (a) 33,000 433,290
CACI International, Inc. (a) 4,580 301,135
Cymer, Inc. (a) 9,190 417,594
Exar Corp. (a) 31,070 443,680
Filenet Corp. (a) 14,100 380,982
Informatica Corp. (a) 12,140 188,777
Internet Security Systems (a) 8,240 197,595
JDA Software Group, Inc. (a) 11,820 170,681
LoJack Corp. (a) 7,550 181,049
ManTech International Corp., Class A (a) 10,490 348,478
Marchex, Inc. (a) (b) 14,110 303,365
Mcafee, Inc. (a) 9,040 219,943
Micrel, Inc. (a) 21,540 319,223
Mindspeed Technologies, Inc. (a) (b) 59,300 236,014
Novellus Systems, Inc. (a) 7,040 168,960
O2Micro International Ltd.--ADR (a) 14,900 158,387
Online Resources Corp. (a) 30,120 391,560
Palm, Inc. (a) (b) 27,280 631,805
Polycom, Inc. (a) 9,400 203,792
Progress Software Corp. (a) 4,610 134,105
Radyne Corp. (a) 8,900 142,133
Rudolph Technologies, Inc. (a) 17,610 300,250
Sify Ltd. ADR (a) (b) 9,560 126,574
Tektronix, Inc. 13,300 474,943
The Knot, Inc. (a) 11,513 208,385
Unica Corp. (a) 8,200 95,038
Verisign, Inc. (a) (b) 11,700 280,683
Wright Express Corp. (a) 11,400 319,770
----------
8,994,214
----------
Services--0.5%
Bright Horizons Family Solutions, Inc. (a) 4,190 162,279
SWS Group 1,400 36,610
----------
198,889
----------
Utilities--1.0%
ITC Holdings Corp 14,810 388,757
----------
TOTAL EQUITIES (COST $32,585,844) 39,041,856
----------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
----- --------- ---------
U.S. Government--0.1%
U.S. Treasury Bill (c ) (d) (Cost $59,440) 4.510% 6/15/2006 $ 60,000 59,456
----------
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Rate Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL--9.5%
BlackRock Cash Strategies L.L.C (e)(Cost 3,840,424) 4.701% $3,840,424 $ 3,840,424
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $36,485,708) 42,941,736
-----------
AFFILIATED INVESTMENTS--1.8%
Dreyfus Institutional Preferred Plus Money Market Fund (e)(f)(Cost $708,154) 4.770% 708,154 708,154
-----------
TOTAL INVESTMENTS--108.3% (Cost $37,193,862)
LIABILITIES IN EXCESS OF OTHER ASSETS--(8.3%) 43,649,890
NET ASSETS-100% (3,345,079)
-----------
$40,304,811
===========
Notes to Schedule of Investments:
REIT--Real Estate Investment Trust
(a) Non-income producing security
(b) Security, or a portion of thereof, was on loan at 3/31/2006.
(c) Denotes all or part of security segregated as collateral.
(d) Rate noted is yield to maturity.
(e) Stated yield is the seven day yield for the fund as of 3/31/2006.
(f) Affiliated institutional money market fund.
At March 31,2006, the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain
- --------------------------------------------------------------------------------------------
Russell 2000 Index (1 Contract) Long 6/15/2006 $365,250 $20,646
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)(including securities on loan, valued at $3,671,266 (Note 6))
Unaffiliated issuers, at value (cost $36,485,708) $42,941,736
Affiliated issuers, at value (Note 1F) (cost $708,154) 708,154
Receivable for investments sold 1,255,292
Interest and dividends receivable 16,958
Receivable for variation margin on open futures contracts (Note 5) 1,800
Prepaid expenses 8,466
-----------
Total assets 44,932,406
Liabilities
Payable for investments purchased $ 754,534
Collateral for securities on loan (Note 6) 3,840,424
Accrued accounting, administration and custody fees (Note 2) 21,253
Accrued trustees' fees and expenses (Note 2) 1,456
Accrued professional fees 9,808
Other accrued expenses and liabilities 120
-----------
Total liabilities 4,627,595
-----------
Net Assets (applicable to investors' beneficial interest) $40,304,811
===========
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 97,712
Dividend income from affiliated investments (Note 1F) 44,424
Interest income 669
Securitiy lending income (Note 6) 20,863
-----------
Total investment Income 163,668
Expenses
Investment advisory fee (Note 2) $ 148,787
Accounting, administration and custody fees (Note 2) 45,644
Professional fees 9,445
Trustees' fees and expenses (Note 2) 2,964
Insurance expense 1,994
Miscellaneous 678
-----------
Total expenses 209,512
Deduct:
Waiver of invesment advisory fee (Note 2) (5,668)
-----------
Net Expenses 203,844
-----------
Net investment income (40,176)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 4,536,588
Financial futures transactions 93,340
-----------
Net realized gain (loss) 4,629,928
Change in unrealized appreciation (depreciation) on:
Investments (98,112)
Financial futures contracts 13,764
-----------
Change in net unrealized appreciation (depreciation) (84,348)
-----------
Net realized and unrealized gain (loss) 4,545,580
-----------
Net Increase in Net Assets from Operations $ 4,505,404
===========
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30,2005
---------------- -----------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (40,176) $ (146,281)
Net realized gain (loss) 4,629,928 4,319,415
Change in net unrealized appreciation (depreciation) (84,348) 2,750,040
----------- -----------
Net increase (decrease) in net assets from operations 4,505,404 6,923,174
----------- -----------
Capital Transactions
Contributions 3,891,224 21,655,858
Withdrawals (4,422,979) (25,017,269)
----------- -----------
Net increase (decrease) in net assets from capital transactions (531,755) (3,361,411)
----------- -----------
Total Increase (Decrease) in Net Assets 3,973,649 3,561,763
Net Assets
At beginning of period 36,331,162 32,769,399
----------- -----------
At end of period $40,304,811 $36,331,162
=========== ===========
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 -------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
----------- -------- -------- -------- -------- --------
Total Return 12.44%(a) 22.05% 17.12%(a) 30.79%(a) (15.37)%(a) (45.36)%(a)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 1.10%(b) 1.12% 1.15% 1.00% 1.00% 1.00%
Net Investment Income (to average daily net assets)* (0.22)%(b) (0.42)% (0.83)% (0.42%) (0.51)% (0.49)%
Portfolio Turnover 83%(c) 135% 153% 261% 239% 191%
Net Assets, End of Period (000's omitted) $40,305 $36,331 $32,769 $29,910 $24,500 $37,590
- --------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses 1.13%(b) N/A 1.18% 1.28% 1.18% 1.08%
Net investment income (0.25)%(b) N/A (0.86)% (0.70)% (0.69)% (0.57)%
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absense of
expense waiver.
(b) Calculated on an annualized basis.
(c) Not annualized.
The accompanying notes are an integral part of the financial statements.
19
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, 2006, 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, 2006 was 100%.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Portfolio
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity when
required for federal income tax purposes. Dividend income is recorded on
the ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Income taxes
The Portfolio is treated as a disregarded entity for federal tax purposes.
No provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since the Portfolio's
only investor is a regulated investment company that invests all or
substantially all of its assets in the Portfolio, the Portfolio normally
must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investor to satisfy them.
D. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
However, based on experience, the Portfolio expects the risks of loss to be
remote.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
the funds of the Trust or the portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
F. Affiliated issuers
Affiliated issuers represent issuers in which the Portfolio held
investments in other investment companies advised by The Boston Company
Asset Management, LLC (TBCAM), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory
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 Fund and it's pro rata share of the
Portfolio expenses (excluding commissions, taxes and extraordinary
expenses) to 1.10% of the Fund's average daily net assets. Pursuant to this
agreement, for the six months ended March 31, 2006, TBCAM voluntarily
waived a portion of its investment advisory fee in the amount of $5,668.
This agreement is voluntary and temporary and may be discontinued or
revised by TBCAM at any time.
The Portfolio entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of TBCAM, to provide custody, administration and accounting
services for the Portfolio. For these services the Portfolio pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as
out-of-pocket expenses. Pursuant to this agreement the Portfolio was
charged $45,644 for the six months ended March 31, 2006.
The Portfolio also entered into an agreement with Mellon Bank to perform
certain securities lending activities and to act as the Portfolio's lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. Pursuant to this agreement, Mellon Bank received $8,785, for the
six months ended March 31, 2006. See Note 6 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust.
The Fund and Porfolio Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates (the "Independent Trustees")
an annual fee and the Portfolio Trust pays each Independent Trustee 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 counsel to the
Independent Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
----------- -----------
Investments (non-U.S. Government Securities) $30,334,645 $29,629,297
=========== ===========
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $37,193,862
===========
Unrealized appreciation $ 6,623,802
Unrealized depreciation (167,774)
-----------
Net unrealized appreciation (depreciation) $ 6,456,028
===========
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Portfolio may trade the following financial instruments with
off-balance sheet risk:
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, 2006, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the six months ended March 31, 2006
and earned interest on the invested collateral of $65,904 of which $45,041
was rebated to borrowers or paid in fees. At March 31, 2006, the Portfolio
had securities valued at $3,671,266 on loan. See Schedule of Investments
for further detail on the security positions on loan and collateral held.
(7) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a facility fee, computed at an annual rate of 0.060 of 1%
on the committed amount, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended March
31, 2006, the expense allocated to the Portfolio was $267.
For the six months ended March 31, 2006, the Portfolio did not borrow under
the credit facility.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
fund's advisory agreement and the related fees on an annual basis. The Fund
is not a party to an investment advisory agreement directly with any
investment adviser and does not invest directly in portfolio securities.
Instead, the Fund invests all of its investable assets in The Boston
Company Small Cap Growth Portfolio (the "Portfolio"), which is managed by
The Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the
Portfolio. The members of the Fund's Board of Trustees also serve as the
Board of Trustees of the Portfolio. In that capacity, they consider
annually whether to continue the investment advisory agreement between the
Portfolio and TBCAM. In their most recent deliberations concerning their
decision to approve the continuation of the investment advisory agreement,
the Board of Trustees conducted the review and made the determinations that
are described below. In conducting this review and in making such
determinations, the Independent Trustees received from the Portfolio's
investment adviser, TBCAM ("the Adviser"), a broad range of information in
response to a written request prepared on their behalf by their own legal
counsel. The Independent Trustees met alone in a private session with their
legal counsel on September 22, 2005 to review these materials and to
discuss the proposed continuation of the Fund's advisory agreement.
Representatives of the Adviser attended a portion of the September meeting
to provide an overview of its organization, personnel, resources and
strategic plans, and to respond to questions and comments arising from the
Independent Trustees' review of the materials and their deliberations. The
entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and
income statements, as well as a profitability analysis of the Adviser,
including a separate presentation of the Adviser's profitability relative
to that of several publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management
fee and expense ratio compared to other funds, and the Adviser's separate
account advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the
Fund's performance (rather than the Portfolio alone), and any material
portfolio manager and strategy changes that may have affected the Fund in
the prior year, as well as the Fund's "fact sheets" prepared by the Adviser
providing salient data about the Fund and Portfolio, including Portfolio's
holdings, strategies, recent market conditions and outlook, as well as the
Adviser's views concerning the issues of breakpoints in the management fee
schedule of the Portfolio and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the
Board of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling, and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the advisory agreement
and the compensation to the Adviser provided therein were fair and
reasonable in light of the services performed, expenses incurred and such
other matters as the Trustees considered relevant in the exercise of their
reasonable judgment. The following summary does not detail all the matters
that were considered. Some of the factors that figured prominently in the
Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by the Adviser. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of
the fact that, by choosing to invest in the Fund, the Fund's shareholders
have chosen to entrust the Adviser, under the supervision of the Board, to
manage the portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment
management, administrative, compliance and related services provided by the
Adviser. The Board determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees reviewed the background and experience of the Portfolio's two
portfolio managers and also met with senior management of the Adviser to
receive an overview of its organization, personnel, resources and strategic
plans. Among other things, the Trustees considered the size, education and
experience of the Adviser's investment staff, technological infrastructure
and overall responsiveness to changes in market conditions. The Board
determined that the Adviser had the expertise and resources to manage the
Portfolio effectively.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Investment Performance
The Board considered the investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected
by the Adviser with input from the Trustees. The Board also compared the
Fund's investment performance against the average performance of a larger
universe of funds regarded by Lipper as having similar investment
objectives and considered the Fund's performance rankings against that
universe. In addition to the information received by the Board for at the
September 22, 2005 Board meeting, the Trustees received similar detailed
comparative performance information for the Fund at each regular Board
meeting during the year.
The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2005 based on the Lipper materials
provided to the Board at the September 22, 2005 meeting. The Board found
that the Fund's performance compared favorably to its peer group, as the
Fund outperformed its peer group average return for the one-year period
(22.66% vs. 22.13%), three-year period (20.61% vs. 17.22%) and five-year
period (-2.54 vs. -2.63%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to the
Adviser. The Lipper data presenting the Portfolio's "net advisory fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Trust's
custodian. Such reporting was necessary, according to Lipper, to allow the
Board to compare the Portfolio's advisory fees to those peers that include
administrative fees within a blended advisory fee.
The Portfolio's contractual advisory fee was 0.800%, which was in the 3rd
quintile of its peer group of funds (1st being the best) and slightly below
the median of that peer group, which was 0.817%. The Portfolio's actual
advisory fee, after giving effect to expense limitations, was 0.611%, which
was below the peer group median actual advisory fee of 0.777%. Based on the
Lipper data, as well as other factors discussed at the September 22, 2005
meeting, the Board determined that the Portfolio's advisory fee is
reasonable relative to its peer group averages, both with and without
giving effect to expense limitations.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed
by the Adviser with respect to the Portfolio relative to these other types
of clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board also considered the Fund's (rather than solely the Portfolio's)
expense ratio and compared it to that of its peer group of similar funds.
The Board found that the Fund's actual total expense ratio of 1.180% (after
giving effect to expense limitations) was lower than the median total
expense ratio of the peer group of 1.345% notwithstanding the fact that
most of the other funds in the peer group were larger than the Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Portfolio
and Fund and the Mellon Institutional Funds as a group, as well as the
methodology used to compute such profitability, and the various direct and
indirect expenses incurred by the Adviser or its affiliated investment
adviser, Standish Mellon Asset Management Company, LLC ("Standish Mellon")
in managing the Portfolio and other funds in the Mellon Institutional Funds
family of funds. The Independent Trustees had observed that, based on the
profitability information submitted to them by the Adviser, the Adviser
incurred losses in managing many of the investment companies in the Mellon
Institutional Funds family of funds, including the Portfolio and Fund, and
that among those funds that were profitable to the Adviser, several
generated only marginal profitability for the firm. The Trustees observed
that the Adviser had incurred losses in operating the Portfolio in both
2003 and 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed
Income Portfolio, the largest fund in the complex, already had breakpoints
in its fee arrangement that reflected economies resulting from its size.
The Board concluded that, at existing asset levels and considering current
assets growth projections, the implementation of fee breakpoints or other
fee reductions with respect to the Portfolio or the Fund was not necessary
at this time. They requested, however, that management consider the issue
of future breakpoints across the Mellon Institutional Funds complex and
respond to the Independent Trustees and to present a proposal for such
breakpoints or, in each case as applicable, management's rationale as to
why such future breakpoints are not necessary or appropriate for a
particular Fund.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
In response, the Adviser has subsequently proposed for the Independent
Trustees' consideration, forward-looking fee schedules for various types of
funds across the Mellon Institutional Funds complex. These schedules
contain asset-based breakpoints which vary based on the investment strategy
of fund and other factors considered by the Adviser to be relevant to the
issue of potential future economies of scale. The Independent Trustees and
their counsel have taken this proposal under advisement.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Mellon Institutional Funds as a group,
including revenues received by Mellon affiliates in consideration of
custodial, administrative, transfer agency and securities lending services
provided by such affiliates to the Funds. In each case, such affiliates
were selected by the Board on the basis of a comparative analysis of their
capabilities and fees relative to those of unaffiliated competitors. In
addition, the Board, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i)
the terms of the relevant service agreement are in the best interests of
Fund shareholders; (ii) the services to be performed by the affiliate
pursuant to the agreement are required by and appropriate for the Funds;
(iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for
its services are fair and reasonable in light of the usual and customary
charges imposed by other, unaffiliated firms for services of the same
nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Portfolio's advisory
agreement and the compensation to the Adviser provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for
one-year period.
25
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, 34 None Fund: $403
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc. Portfolio: $250
260 Charles Street ("DRI") (biotechnology
Waltham, MA 02453 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None Fund: $441
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $250
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None Fund: $403
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $250
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens 34 None Fund: $403
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $250
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of
Asset Management, LLC Executive Officer The Boston Company
One Boston Place Asset Management, LLC;
Boston, MA 02108 formerly Senior Vice
President and Chief
7/24/65 Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
* The Fund commenced operations on December 21, 2005.
26
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global
Boston, MA 02108 Investments
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund
Boston, MA 02108 Operations, Standish Mellon Asset Management,
8/19/51 LLC
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM");
One Boston Place formerly Manager of Shareholder Services, MAM,
Boston, MA 02108 and Shareholder Representative, Standish
1/19/71 Mellon Asset Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy
Boston, MA 02108 Fund, LLC; formerly Director, Blackrock,
4/8/57 Inc., Senior Vice President, State Street
Research & Management Company ("SSRM"), and
Vice President, SSRM
27
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6941SA0306
[Logo] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Small Cap Value Fund
- --------------------------------------------------------------------------------
March 31, 2006 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- ----------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,125.10 $5.14
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.09 $4.89
- ------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.97%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -----------------------------------------------------------------------------------------------
Ralcorp Holdings, Inc. Consumer Staple 1.4%
Granite Construction, Inc. Industrial 1.3
Esterline Technologies Corp. Industrial 1.2
Option Care, Inc. Health Care 1.2
The Brink's Co. Industrial 1.2
United Rentals, Inc. Industrial 1.1
Tetra Technologies Energy 1.1
Reliance Steel & Aluminum Industrial 1.1
Laidlaw International, Inc. Industrial 1.1
Shaw Group, Inc. Industrial 1.0
11.7%
* Excluding short-term securities and cash collateral investments.
Percentage of
Economic Sector Allocation Net Assets
- ---------------------------------------------------------------------
Basic Materials 4.6%
Consumer Discretionary 12.3
Consumer Staple 4.5
Energy 6.0
Financial 17.7
Health Care 7.8
Industrial 20.7
Information Technology 17.5
Utilities 2.6
Short-term and other assets 6.3
-----
100.0%
The Boston Company Small Cap Value Fund invests all of its investable assets in
an interest of The Boston Company Small Cap Value Portfolio (See Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings maybe different than those presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap Value Portfolio ("Portfolio"), at value (Note 1A) $322,077,448
Receivable for Fund shares sold 2,729,838
Prepaid expenses 14,877
------------
Total assets 324,822,163
Liabilities
Payable for Fund shares redeemed $ 463,277
Accrued professional fees 19,430
Accrued transfer agent fees (Note 2) 4,203
Accrued trustees' fees (Note 2) 497
Accrued chief compliance officer fee (Note 2) 330
Other accrued expenses and liabilities 36,389
---------
Total liabilities 524,126
------------
Net Assets $324,298,037
------------
Net Assets consist of:
Paid-in capital $274,330,677
Accumulated net realized gain 8,390,722
Undistributed net investment income 403,483
Net unrealized appreciation 41,173,155
------------
Total Net Assets $324,298,037
============
Shares of beneficial interest outstanding 13,659,735
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 23.74
============
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $739) $ 1,512,012
Interest and securities lending income allocated from Portfolio 24,453
Expenses allocated from Portfolio (1,015,972)
------------
Net investment income allocated from Portfolio 520,493
Expenses
Transfer agent fees (Note 2) $ 10,562
Registration fees 15,591
Professional fees 16,895
Administrative service fees (Note 2) 61,167
Insurance expense 486
Trustees' fees (Note 2) 997
Miscellaneous expenses 12,688
---------
Total expenses 118,386
------------
Net investment income 402,107
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investments and financial futures transactions 8,548,539
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments and financial futures contracts 22,007,553
------------
Net realized and unrealized gain (loss) 30,556,092
------------
Net Increase in Net Assets from Operations $ 30,958,199
============
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 402,107 $ 78,684
Net realized gain (loss) 8,548,539 12,483,311
Change in net unrealized appreciation (depreciation) 22,007,553 8,515,565
------------ ------------
Net increase (decrease) in net assets from investment operations 30,958,199 21,077,560
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (77,498) --
From net realized gains on investments (13,455,548) (9,863,596)
------------ ------------
Total distributions to shareholders (13,533,046) (9,863,596)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 128,577,054 124,024,069
Value of shares issued in reinvestment of distributions 9,876,597 8,437,601
Cost of shares redeemed (21,227,949) (15,210,189)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 117,225,702 117,251,481
------------ ------------
Total Increase (Decrease) in Net Assets 134,650,855 128,465,445
Net Assets
At beginning of period 189,647,182 61,181,737
------------ ------------
At end of period (including undistributed net
investment income of $403,483 and $78,874, respectively) $324,298,037 $189,647,182
============ ============
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 ----------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
---------- -------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 22.55 $ 21.91 $ 18.49 $ 14.30 $ 13.86 $ 14.01
-------- -------- ------- ------- ------- -------
From Investment Operations:
Net investment income* (a) 0.04 0.02 (0.05) (0.01) 0.05 0.10
Net realized and unrealized gains (loss) on investments 2.64 4.29 5.27 4.24 0.75 0.31
-------- -------- ------- ------- ------- -------
Total from operations 2.68 4.31 5.22 4.23 0.80 0.41
-------- -------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.01) -- -- (0.02) (0.04) (0.06)
From net realized gains on investments (1.48) (3.67) (1.80) (0.02) (0.32) (0.50)
-------- -------- ------- ------- ------- -------
Total distributions to shareholders (1.49) (3.67) (1.80) (0.04) (0.36) (0.56)
-------- -------- ------- ------- ------- -------
Net Asset Value, End of Period $ 23.74 $ 22.55 $ 21.91 $ 18.49 $ 14.30 $ 13.86
======== ======== ======= ======= ======= =======
Total Return 12.51% 21.34% 29.92% 29.64%(b) 5.43%(b) 3.12%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (c) 0.97%(e) 1.05% 1.18% 1.15% 1.00% 1.00%
Net Investment Income (Loss) (to average daily net assets)* 0.34%(e) 0.08% (0.24%) (0.05%) 0.32% 0.68%
Portfolio Turnover (d) N/A N/A N/A 51% 164% 149%
Net Assets, End of Period (000's omitted) $324,298 $189,647 $61,182 $45,305 $35,934 $28,532
- -----------
* 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 (a) N/A N/A N/A $ (0.03) $ 0.01 $ 0.05
Ratios (to average daily net assets):
Expenses (c) N/A N/A N/A 1.28% 1.24% 1.37%
Net investment income N/A N/A N/A (0.18%) 0.08% 0.31%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers and
reimbursements.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 27, 2003. The portfolio turnover ratio
for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
(e) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Cap Value Fund (the "Fund") is a separate diversified
investment series of the Trust.
The Fund invests all of its investable assets in an interest of The Boston
Company Small Cap Value Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and has the same investment objective as the
Fund. The Portfolio seeks to achieve its objective by investing, under
normal circumstances, at least 80% of net assets in equity securities of
small cap U.S. companies. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (89% at March 31, 2006). 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 investments in the Portfolio at value. The Portfolio
values its securities at value as discussed in Note 1A of the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities transactions and income
Securities transactions in the Portfolio are recorded as of trade date.
Currently, the Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all expenses of
the Fund determined in accordance with accounting principals generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Fund represent pro rata shares of gains and losses of the
Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. In determining
the amounts of its dividends, the Fund will take into account its share of
the income, gains or losses, expenses, and any other tax items of the
Portfolio. Dividends from net investment income and distributions from
capital gains, if any, are reinvested in additional shares of the Fund
unless a shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
reclassifications, are primarily due to differing treatments for realized
and unrealized gains or losses on REITS and wash sales.
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income, accumulated net realized gain
(loss) and paid in capital. Undistributed net investment income (loss) and
accumulated net realized gain (loss) on investments may include temporary
book and tax basis differences which will reverse in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
D. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
funds of the Trust and portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
9
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"), a wholly-owned subsidiary
of Mellon Asset Management, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services the Fund pays Dreyfus
Transfer, Inc. a fixed fee plus per account and transaction based fees, as
well as, out-of-pocket expenses. Pursuant to this agreement the Fund was
charged $10,562 for the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,136. No other director, officer or employee
of TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio for serving as an officer or Trustee of the Trust. The Fund pays
each Trustee who is not a director, officer or employee of TBCAM or its
affiliates an annual fee.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator a service fee in an amount of up
to 0.15% (on an annualized basis) of the Fund's average daily net assets
attributable to Fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts. For the six months
ended March 31, 2006, the Fund was charged $17,455 for fees payable to
Mellon Private Wealth Management.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2006, aggregated $136,229,503 and $34,481,840,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expense and realized and unrealized gains and losses based on
applicable tax allocation rules. Book/tax differences arise when changes in
proportionate interest for funds investing in the Portfolio occur.
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 5,740,608 5,902,209
Shares issued to shareholders in
reinvestment of distributions 454,097 411,390
Shares redeemed (943,748) (697,539)
--------- ---------
Net increase 5,250,957 5,616,060
========= =========
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2006, two shareholders of record held approximately 27% of the
total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the six months ended March 31, 2006, the Fund received
$2,809 in redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See the corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
11
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--101.0%
EQUITIES--93.7%
Basic Materials--4.6%
Compass Minerals International, Inc. 67,300 $ 1,681,827
FMC Corp. 45,300 2,807,694
Georgia Gulf Corp. 101,700 2,643,183
Glatfelter 128,900 2,362,737
NN, Inc. 19,300 249,163
Neenah Paper, Inc. 46,300 1,516,325
RTI International Metals, Inc. (a) 66,400 3,642,040
Wausau Paper Corp. 124,400 1,762,748
----------
16,665,717
----------
Consumer Discretionary--12.3%
Big 5 Sporting Goods Corp. 134,400 2,631,552
Big Lots, Inc. (a) 88,800 1,239,648
Charming Shoppes, Inc. (a) 209,500 3,115,265
Kenneth Cole Productions, Class A Shares 46,700 1,293,590
Entercom Communications Corp. (b) 77,700 2,169,384
Hot Topic, Inc. (a) 167,400 2,427,300
Journal Communications, Inc. 111,200 1,378,880
Keystone Automotive Industries, Inc. (a) 50,500 2,131,605
Matthews International Corp., Class A 45,900 1,756,134
Modine Manufacturing Co. 47,200 1,392,400
OfficeMax, Inc. 97,700 2,947,609
Regis Corp. 80,100 2,761,848
Ruby Tuesday (b) 94,800 3,041,184
School Specialty, Inc. (a) 48,700 1,680,150
Tenneco, Inc. (a) 59,900 1,299,231
Toro Co. 48,000 2,292,000
Tuesday Morning Corp. 81,300 1,877,217
Tupperware Brands Corp. 125,400 2,581,986
Wabtec Corp. 73,400 2,392,840
Winnebago Industries, Inc. (b) 74,300 2,254,262
Zale Corp. (a) 53,800 1,508,014
----------
44,172,099
----------
Consumer Staple--4.5%
BJ'S Wholesale Club, Inc. (a) (b) 74,400 2,344,344
J & J Snack Food Corp. 36,900 1,239,471
Lance, Inc. (b) 65,700 1,478,250
Longs Drug Stores Corp. 62,000 2,869,360
Ralcorp Holdings, Inc. 137,400 5,228,070
Schweitzer-Mauduit International, Inc. 54,300 1,303,200
The Boston Beer Co., Inc. (a) 60,800 1,581,408
----------
16,044,103
----------
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
Energy--6.0%
Dril-Quip, Inc. (a) 28,500 $ 2,019,225
Foundation Coal Holdings, Inc. 61,500 2,530,110
Global Industries, Ltd. (a) 189,900 2,751,651
Oil States International, Inc. (a) 84,500 3,113,825
Tetra Technologies (a) 91,200 4,290,048
Universal Compression Holdings, Inc. (a) (b) 70,700 3,582,369
Veritas DGC, Inc. (a) 75,000 3,404,250
----------
21,691,478
----------
Financial--17.7%
Alabama National Bancorp/Del 22,600 1,545,840
American Equity Investment Life Holding Co. (b) 57,500 824,550
American Financial Realty Trust REIT 124,600 1,451,590
Annaly Mortgage Management, Inc. REIT 137,000 1,663,180
Aspen Insurance Holdings Ltd 126,100 3,109,626
Assured Guaranty Ltd 116,800 2,920,000
BankAtlantic Bancorp, Inc. 200,200 2,880,878
Capital Trust, Inc., Class A REIT 69,600 2,165,952
Corrections Corp. of America (a) 35,000 1,582,000
Education Realty Trust, Inc. REIT (b) 113,600 1,738,080
Financial Federal Corp. 118,450 3,470,585
First Potomac Realty Trust REIT 69,600 1,966,200
First Republic Bank 60,500 2,288,110
Flushing Financial Corp. 56,200 981,252
Horace Mann Educators Corp. 100,900 1,896,920
Innkeepers USA Trust REIT 145,900 2,473,005
Jones Lang Lasalle 48,900 3,742,806
Knight Capital Group, Inc. (a) 145,900 2,032,387
Lasalle Hotel Properties REIT 56,400 2,312,400
Lexington Corporate Properties Trust REIT (b) 143,300 2,987,805
Mission West Properties REIT 124,400 1,461,700
Piper Jaffray Companies, Inc. (a) 62,400 3,432,000
Provident Bankshares Corp. 46,500 1,694,925
Redwood Trust, Inc. REIT (b) 39,100 1,693,812
Scottish Annuity & Life Holding (b) 95,300 2,364,393
Sterling Bancshares, Inc. 93,600 1,689,480
Sterling Financial Corp. 55,900 1,621,100
Strategic Hotels and Resorts, Inc. REIT 91,200 2,123,136
Triad Guaranty, Inc. (a) 73,700 3,456,530
----------
63,570,242
----------
Health Care--7.8%
Amedisys, Inc. (a) (b) 74,100 2,574,975
Andrx Corp. (a) 102,300 2,428,602
Chattem, Inc. (a) 47,800 1,799,670
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
Health Care (continued)
Encore Medical Corp. (a) 215,300 $ 1,102,336
Kindred Healthcare, Inc. (a)(b) 80,800 2,032,120
Magellan Health Services, Inc. (a) 58,700 2,375,589
Medical Action Industries, Inc. (a) 34,300 822,857
Omnicell, Inc. (a)(b) 164,500 1,873,655
Option Care, Inc. 323,500 4,574,290
Orchid Cellmark, Inc. (a) 178,900 1,026,886
Pediatrix Medical Group, Inc. (a) 30,300 3,109,992
RehabCare Group, Inc. (a) 69,900 1,317,615
Res-Care, Inc. (a)(b) 160,000 2,940,800
----------
27,979,387
----------
Industrial--20.7%
Adesa, Inc. 83,300 2,227,442
AGCO Corp. (a)(b) 180,700 3,747,718
Bowne & Co., Inc. 167,800 2,797,226
Casella Waste Systems, Inc. (a) 74,100 1,052,961
Central Parking Corp. (b) 145,600 2,329,600
CIRCOR International, Inc. (b) 73,200 2,137,440
Clean Harbors, Inc. (a)(b) 78,500 2,329,095
Comfort Systems USA, Inc. 123,500 1,667,250
Consolidated Graphics, Inc. (a) 36,300 1,891,956
Courier Corp. 42,130 1,868,044
Electro Rent Corporation 67,400 1,145,800
Esterline Technologies Corp. (a) 109,200 4,668,300
Granite Construction, Inc. 99,100 4,824,188
GSI Group, Inc. (a) 199,400 2,203,370
Herley Industries, Inc. (a) 123,400 2,576,592
II-VI, Inc. (a) 138,200 2,500,038
Labor Ready (a) 106,700 2,555,465
Laidlaw International, Inc. 156,100 4,245,920
LECG Corp. (a) 139,600 2,690,092
McGrath Rentcorp. 94,800 2,849,688
Pike Electric Corp. (a) 67,500 1,418,175
Reliance Steel & Aluminum 45,500 4,273,360
Shaw Group, Inc. (a) 124,600 3,787,840
SI International, Inc. (a) 44,700 1,571,205
The Brink's Co. 87,800 4,456,728
United Rentals, Inc. (a)(b) 127,300 4,391,850
Waste Connections, Inc. (a)(b) 65,100 2,591,631
----------
74,798,974
----------
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
Information Technology--17.5%
Actel Corp. (a) 110,200 $ 1,756,588
Avid Technology, Inc. (a) 40,800 1,773,168
CSG Systems International, Inc. (a)(b) 116,400 2,707,464
Cabot Microelectronics (a)(b) 55,200 2,047,920
Carrier Access Corp. (a) 217,800 1,311,156
Cirrus Logic, Inc. (a) 160,200 1,358,496
Comtech Telecommunications Corp. (a) 81,700 2,383,189
CyberOptics Corp. (a) 68,900 1,031,433
Digi International, Inc. (a) 70,100 818,067
EPIQ Systems, Inc. (a) 79,000 1,501,000
Electronics for Imaging, Inc. (a) 79,600 2,226,412
Emulex Corp. (a) 166,200 2,840,358
Entrust, Inc. (a) 36,400 163,800
Epicor Software Corp. (a) 270,700 3,635,501
FEI Co. (a) (b) 143,100 2,840,535
Foundry Networks, Inc. (a) 127,000 2,306,320
Integrated Device Technology, Inc. (a) 174,000 2,585,640
MKS Instruments, Inc. (a)(b) 71,900 1,684,617
NIC, Inc. (a) 298,100 1,827,353
Net Gear, Inc. (a) 138,000 2,623,380
PC-Tel, Inc. (a) 50,000 476,000
Perot Systems Corp., Class A (a) 231,300 3,599,028
Phase Forward, Inc. (a) 234,600 2,613,444
Photon Dynamics, Inc. (a) 58,700 1,100,625
PLATO Learning, Inc. (a) 182,300 1,730,027
Progress Software Corp. (a) 80,900 2,353,381
RSA Security, Inc. (a) 202,000 3,623,880
SafeNet, Inc. (a)(b) 59,700 1,580,856
Sybase, Inc. (a) 103,200 2,179,584
Symmetricom, Inc. (a) 203,900 1,743,345
WebEx Communications, Inc. (a) 83,300 2,804,711
------------
63,227,278
------------
Utilities--2.6%
El Paso Electric Co. (a) 124,300 2,366,672
Infrasource Services, Inc. (a)(b) 80,000 1,376,800
PNM Resources, Inc. 135,500 3,306,200
UGI Corp. 101,700 2,142,819
------------
9,192,491
------------
TOTAL EQUITIES (Cost $293,209,230) 337,341,769
============
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.1%
U.S. Government--0.1%
U.S. Treasury Bill (c)(d)(Cost $510,180) 4.490% 6/15/2006 $ 515,000 $ 510,333
-----------
INVESTMENT OF CASH COLLATERAL--7.2%
Shares
----------
BlackRock Cash Strategies L.L.C. (e)(Cost $25,919,900) 4.701% 25,919,900 25,919,900
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $319,639,310) 363,772,002
-----------
AFFILIATED INVESTMENTS--6.1%
Dreyfus Institutional Preferred Plus Money Market Fund (e)(f)(Cost $22,101,758) 4.770% 22,101,758 22,101,758
-----------
TOTAL INVESTMENTS--107.1%(Cost $341,741,068) 385,873,760
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(7.1%) (25,731,178)
-----------
NET ASSETS--100% 360,142,582
===========
Notes to Schedule of Investments:
REIT--Real Estate Investment Trust
(a) Non-income producing security
(b) Security, or a portion of thereof, was on loan at 3/31/2006.
(c) Rate noted is yield to maturity.
(d) Denotes all or part of security segregated as collateral.
(e) Stated rate is the seven day yield for the fund at 3/31/2006.
(f) Affiliated institutional money market fund.
At March 31, 2006, the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain
- --------------------------------------------------------------------------------------------------------
Russell 2000 Index (45 Contracts) Long 6/15/2006 $ 16,849,600 $ 515,698
=========
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A) (including securities on loan, valued at $25,157,316 (Note 6))
Unaffiliated issuers, at value (cost $319,639,310) $363,772,002
Affiliated issuers, at value (Note 1F) (cost $22,101,758) 22,101,758
Receivable for investments sold 928,808
Interest and dividends receivable 355,954
Receivable for variation margin on open futures contracts (Note 5) 111,041
Prepaid expenses 4,281
------------
Total assets 387,273,844
Liabilities
Payable for investments purchased $ 1,121,760
Collateral for securities on loan (Note 6) 25,919,900
Due to Custodian 39,519
Accrued accounting, administration and custody fees (Note 2) 33,951
Accrued professional fees 14,853
Accrued trustees' fees and expenses (Note 2) 1,271
Other accrued expenses and liabilities 8
-----------
Total liabilities 27,131,262
------------
Net Assets (applicable to investors' beneficial interest) $360,142,582
============
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $830) $ 1,361,885
Dividend income from affiliated investments (Note 1F) 357,168
Interest income 9,806
Security lending income (Note 6) 17,995
------------
Total investment income 1,746,854
Expenses
Investment advisory fee (Note 2) $ 1,058,719
Accounting, administration and custody fees (Note 2) 66,770
Professional fees 14,939
Trustees' fees and expenses (Note 2) 11,004
Insurance expense 4,375
Miscellaneous 1,204
-----------
Total expenses 1,157,011
------------
Net investment income 589,843
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 8,875,956
Financial future transactions 806,559
-----------
Net realized gain (loss) 9,682,515
Change in unrealized appreciation (depreciation) on:
Investments 24,340,310
Financial futures contracts 486,866
-----------
Change in net unrealized appreciation (depreciation) 24,827,176
------------
Net realized and unrealized gain (loss) 34,509,691
------------
Net Increase in Net Assets from Operations $ 35,099,534
============
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 589,843 $ 226,171
Net realized gain (loss) 9,682,515 14,244,903
Change in net unrealized appreciation (depreciation) 24,827,176 8,955,116
------------ ------------
Net increase (decrease) in net assets from operations 35,099,534 23,426,190
------------ ------------
Capital Transactions
Contributions 143,513,975 158,240,730
Withdrawals (38,506,124) (27,943,665)
------------ ------------
Net increase (decrease) in net assets from capital transactions 105,007,851 130,297,065
------------ ------------
Total Increase (Decrease) in Net Assets 140,107,385 153,723,255
Net Assets
At beginning of period 220,035,197 66,311,942
------------ ------------
At end of period $360,142,582 $220,035,197
============ ============
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
For the January 28, 2003
Six Months Ended Year Ended September 30, (commencement
March 31 2006 ----------------------- of operations) to
(Unaudited) 2005 2004 September 30, 2003
---------------- -------- ------- ------------------
Total Return (a) 12.61% 21.45% 30.07% 29.85%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.87%(c) 0.94% 1.03% 1.10%(c)
Net Investment Income (to average daily net assets)* 0.44%(c) 0.19% (0.10%) (0.07%)(c)
Portfolio Turnover 34%(b) 70% 123% 102%(b)
Net Assets, End of Period (000's omitted) $360,142 $220,035 $66,312 $45,373
- -----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A 1.10%(b)
Net investment income N/A N/A N/A (0.07%)(b)
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
(b) Not annualized.
(c) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
20
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"), 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 net assets in equity securities of small cap
U.S. companies.
At March 31, 2006, there were two funds, The Boston Company Small Cap Value
Fund and Dreyfus Premier Small Cap Equity Fund invested in the Portfolio
(the "Funds"). The value of the Funds' investment in the Portfolio reflects
the Funds' proportionate interests in the net assets of the Portfolio. At
March 31, 2006, The Boston Company Small Cap Value Fund and the Dreyfus
Premier Small Cap Equity Fund held 89% and 11% 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 days remaining to maturity are
valued at amortized cost, which approximates market value. If the Portfolio
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity when
required for federal income tax purposes. Dividend income is recorded on
the ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost.
C. Income taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state income taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them.
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.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
the funds of the Trust or the portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management Company LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory 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 entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of TBCAM, to provide custody, administration and accounting
services for the Portfolio. For these services the Portfolio pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as
out-of-pocket expenses. Pursuant to this agreement the Portfolio was
charged $66,770 during the six months ended March 31, 2006.
The Portfolio also entered into an agreement with Mellon Bank to perform
certain securities lending activities and to act as the Portfolio's lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. Pursuant to this agreement, Mellon Bank received $7,652, for the
six months ended March 31, 2006. See Note 6 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust.
The Fund and Portfolio Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates (the "Independent Trustees")
an annual fee and the Portfolio Trust pays each Independent Trustee 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 counsel to the
Independent Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
----------- -----------
Investments (non-U.S. Government Securities) $181,576,500 $86,809,010
============ ===========
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $341,741,068
============
Unrealized appreciation $ 49,607,887
Unrealized depreciation (5,475,195)
------------
Net unrealized appreciation (depreciation) $ 44,132,692
============
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Portfolio may trade the following financial instruments with
off-balance sheet risk:
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, 2006, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the six months ended March 31, 2006
and earned interest on the invested collateral of $331,041 of which
$313,046 was rebated to borrowers or paid in fees. At March 31, 2006, the
Portfolio had securities valued at $25,157,316 on loan. See Schedule of
Investments for further detail on the security positions on loan and
collateral held.
(7) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a facility fee, computed at an annual rate of 0.060 of 1%
on the committed amount, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended March
31, 2006, the expense allocated to the Portfolio was $446.
For the six months ended March 31, 2006, the Portfolio did not borrow under
the credit facility.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
fund's advisory agreement and the related fees on an annual basis. The Fund
is not a party to an investment advisory agreement directly with any
investment adviser and does not invest directly in portfolio securities.
Instead, the Fund invests all of its investable assets in The Boston
Company Small Cap Value Portfolio (the "Portfolio"), which is managed by
The Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the
Portfolio. The members of the Fund's Board of Trustees also serve as the
Board of Trustees of the Portfolio. In that capacity, they consider
annually whether to continue the investment advisory agreement between the
Portfolio and TBCAM. In their most recent deliberations concerning their
decision to approve the continuation of the investment advisory agreement,
the Board of Trustees conducted the review and made the determinations that
are described below. In conducting this review and in making such
determinations, the Independent Trustees received from the Portfolio's
investment adviser, TBCAM ("the Adviser"), a broad range of information in
response to a written request prepared on their behalf by their own legal
counsel. The Independent Trustees met alone in a private session with their
legal counsel on September 22, 2005 to review these materials and to
discuss the proposed continuation of the Fund's advisory agreement.
Representatives of the Adviser attended a portion of the September meeting
to provide an overview of its organization, personnel, resources and
strategic plans, and to respond to questions and comments arising from the
Independent Trustees' review of the materials and their deliberations. The
entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and
income statements, as well as a profitability analysis of the Adviser,
including a separate presentation of the Adviser's profitability relative
to that of several publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management
fee and expense ratio compared to other funds, and the Adviser's separate
account advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the
Fund's performance (rather than the Portfolio alone), and any material
portfolio manager and strategy changes that may have affected the Fund in
the prior year, as well as the Fund's "fact sheets" prepared by the Adviser
providing salient data about the Fund and Portfolio, including Portfolio's
holdings, strategies, recent market conditions and outlook, as well as the
Adviser's views concerning the issues of breakpoints in the management fee
schedule of the Portfolio and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the
Board of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling, and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the advisory agreement
and the compensation to the Adviser provided therein were fair and
reasonable in light of the services performed, expenses incurred and such
other matters as the Trustees considered relevant in the exercise of their
reasonable judgment. The following summary does not detail all the matters
that were considered. Some of the factors that figured prominently in the
Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by the Adviser. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of
the fact that, by choosing to invest in the Fund, the Fund's shareholders
have chosen to entrust the Adviser, under the supervision of the Board, to
manage the portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment
management, administrative, compliance and related services provided by the
Adviser. The Board determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees reviewed the background and experience of the Portfolio's two
portfolio managers and also met with senior management of the Adviser to
receive an overview of its organization, personnel, resources and strategic
plans. Among other things, the Trustees considered the size, education and
experience of the Adviser's investment staff, technological infrastructure
and overall responsiveness to changes in market conditions. The Board
determined that the Adviser had the expertise and resources to manage the
Portfolio effectively.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Investment Performance
The Board considered the investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected
by the Adviser with input from the Trustees. The Board also compared the
Fund's investment performance against the average performance of a larger
universe of funds regarded by Lipper as having similar investment
objectives and considered the Fund's performance rankings against that
universe. In addition to the information received by the Board for at the
September 22, 2005 Board meeting, the Trustees received similar detailed
comparative performance information for the Fund at each regular Board
meeting during the year.
The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2005 based on the Lipper materials
provided to the Board at the September 22, 2005 meeting. The Board found
that the Fund's performance compared favorably to its peer group, as it
outperformed its peer group average return for the one-year period (29.28%
vs. 25.58%), three-year period (23.80% vs. 21.27%) and five-year period
(18.94% vs. 15.24%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to the
Adviser. The Lipper data presenting the Portfolio's "net advisory fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Trust's
custodian. Such reporting was necessary, according to Lipper, to allow the
Board to compare the Portfolio's advisory fees to those peers that include
administrative fees within a blended advisory fee.
The Portfolio's contractual advisory fee was 0.800%, which was in the 3rd
quintile of its peer group of funds (1st being the best) and was equal to
the median of that peer group. The Portfolio's actual advisory fee was
0.831%, which was slightly higher than the peer group median actual
advisory fee of 0.783%. Based on the Lipper data, as well as other factors
discussed at the September 22, 2005 meeting, the Board determined that the
Portfolio's advisory fee is reasonable relative to its peer group averages.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed
by the Adviser with respect to the Portfolio relative to these other types
of clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board also considered the Fund's (rather than solely the Portfolio's)
expense ratio and compared it to that of its peer group of similar funds.
The Board found that the Fund's actual total expense ratio of 1.172% was
slightly higher than the median total expense ratio of the peer group of
1.097%, largely due to its small asset size compared to its peer group.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Portfolio
and Fund and the Mellon Institutional Funds as a group, as well as the
methodology used to compute such profitability, and the various direct and
indirect expenses incurred by the Adviser or its affiliated investment
adviser, Standish Mellon Asset Management Company, LLC ("Standish Mellon")
in managing the Portfolio and other funds in the Mellon Institutional Funds
family of funds. The Independent Trustees had observed that, based on the
profitability information submitted to them by the Adviser, the Adviser
incurred losses in managing many of the investment companies in the Mellon
Institutional Funds family of funds, including the Portfolio and Fund, and
that among those funds that were profitable to the Adviser, several
generated only marginal profitability for the firm. The Trustees observed
that the Adviser had incurred losses in operating the Portfolio in 2003 but
realized a reasonable profit in 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed
Income Portfolio, the largest fund in the complex, already had breakpoints
in its fee arrangement that reflected economies resulting from its size.
The Board concluded that, at existing asset levels and considering current
assets growth projections, the implementation of fee breakpoints or other
fee reductions with respect to the Portfolio or Fund was not necessary at
this time. They requested, however, that management consider the issue of
future breakpoints across the Mellon Institutional Funds complex and
respond to the Independent Trustees and to present a proposal for such
breakpoints or, in each case as applicable, management's rationale as to
why such future breakpoints are not necessary or appropriate for a
particular Fund.
25
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
In response, the Adviser has subsequently proposed for the Independent
Trustees' consideration, forward-looking fee schedules for various types of
funds across the Mellon Institutional Funds complex. These schedules
contain asset-based breakpoints which vary based on the investment strategy
of fund and other factors considered by the Adviser to be relevant to the
issue of potential future economies of scale. The Independent Trustees and
their counsel have taken this proposal under advisement.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Mellon Institutional Funds as a group,
including revenues received by Mellon affiliates in consideration of
custodial, administrative, transfer agency and securities lending services
provided by such affiliates to the Funds. In each case, such affiliates
were selected by the Board on the basis of a comparative analysis of their
capabilities and fees relative to those of unaffiliated competitors. In
addition, the Board, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i)
the terms of the relevant service agreement are in the best interests of
Fund shareholders; (ii) the services to be performed by the affiliate
pursuant to the agreement are required by and appropriate for the Funds;
(iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for
its services are fair and reasonable in light of the usual and customary
charges imposed by other, unaffiliated firms for services of the same
nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Portfolio's advisory
agreement and the compensation to the Adviser provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for
one-year period.
26
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 34 None Fund: $2,048
c/o Decision Resources, Inc. 11/3/1986 Resources, Inc. ("DRI") Portfolio: $250
260 Charles Street (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None Fund: $2,234
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $250
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None Fund: $2,048
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $250
Littauer Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens House, Inc. 34 None Fund: $2,048
P.O. Box 2333 11/3/1986 (hospice) Portfolio: $250
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial Officer,
MAM
27
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ---------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management, LLC
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM"); formerly
One Boston Place Manager of Shareholder Services, MAM, and Shareholder
Boston, MA 02108 Representative, Standish Mellon Asset Management
1/19/71 Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy Fund, LLC;
Boston, MA 02108 formerly Director, Blackrock, Inc., Senior Vice
4/8/57 President, State Street Research & Management Company
("SSRM"), and Vice President, SSRM
28
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[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6944SA0306
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
International Core Equity Fund
- --------------------------------------------------------------------------------
March 31, 2006 (unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. Forms N-Q are available on the SEC's web site at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington D.C. Information regarding the operation of
the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a
complete list of the Fund's portfolio holdings, view the most recent quarterly
holdings report, semi-annual report or annual report on the Fund's web site at
http://melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, visit http://melloninstitutionalfunds.com or the
SEC's web site at http://www.sec.gov. You may also call 1-800-221-4795 to
request a free copy of the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2005 to March 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2005
October 1, 2005 March 31, 2006 to March 31, 2006
- ------------------------------------------------------------------------------------------
Actual $1,000.00 $1,136.80 $4.90
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.34 $4.63
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.92%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Portfolio Information as of March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -----------------------------------------------------------------------------------------------
Societe Generale France Financial 2.0%
ING Groep NV CVA Netherlands Financial 2.0
BP PLC United Kingdom Energy 1.7
Continental AG Germany Consumer Discretionary 1.7
Credit Suisse Group Switzerland Financial 1.7
Komatsu Ltd. Japan Industrial 1.5
Banque Nationale De Paris France Financial 1.5
OMV Ag Austria Energy 1.5
HBOS PLC United Kingdom Financial 1.4
Zurich Financial Services AG Switzerland Financial 1.3
-----
16.3%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- ------------------------------------------------------
Europe ex U.K. 49.1%
U.K. 22.6
Asia ex Japan 5.0
Japan 23.3
-----
100.0%
* Excludes short-term securities and cash collateral investments.
The Boston Company International Core Equity Fund invests all of its investable
assets in an interest of The Boston Company International Core Equity Portfolio
(See Note 1 of the Fund's Notes to Financial Statements). The Portfolio is
actively managed. Current holdings may be different than those presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International
Core Equity Portfolio ("Portfolio"), at value (Note 1 A) $1,165,801,884
Receivable for Fund shares sold 13,166,970
Prepaid expenses 58,112
--------------
Total assets 1,179,026,966
Liabilities
Payable for Fund shares redeemed $ 21,050
Accrued professional fees 12,881
Accrued administrative service fees (Note 2) 50,590
Accrued registration fee 45,874
Accrued transfer agent fees (Note 2) 1,859
Accrued trustees' fees (Note 2) 497
Accrued chief compliance officer fee (Note 2) 328
--------
Total liabilities 133,079
--------------
Net Assets $1,178,893,887
==============
Net Assets consist of:
Paid-in capital $1,023,819,024
Accumulated net realized gain 24,440,182
Undistributed net investment income 4,247,085
Net unrealized appreciation 126,387,596
--------------
Total Net Assets $1,178,893,887
==============
Shares of beneficial interest outstanding 31,294,331
==============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 37.67
==============
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Operations
For the Period Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net foreign witholding taxes $735,789) $ 7,177,290
Interest and securities lending income allocated from Portfolio 62,663
Expenses allocated from Portfolio (2,772,918)
-----------
Net investment income allocated from Portfolio 4,467,035
Expenses
Transfer agent fees (Note 2) $ 6,818
Registration fees 93,963
Professional fees 18,007
Insurance expense 390
Administrative service fees (Note 2) 83,056
Trustees' fees (Note 2) 997
Chief compliance officer expense 2,134
Miscellaneous expenses 13,306
-------
Total expenses 218,671
-----------
Net investment income 4,248,364
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange contracts and forward currency transactions 24,627,770
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange translations and forward currency contracts 79,670,421
------------
Net realized and unrealized gain (loss) 104,298,191
------------
Net Increase in Net Assets from Operations $108,546,555
============
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
------------- -----------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 4,248,364 $ 2,848,226
Net realized gain (loss) 24,627,770 16,706,539
Change in net unrealized appreciation (depreciation) 79,670,421 28,802,354
------------- -----------
Net increase (decrease) in net assets from investment operations 108,546,555 48,357,119
------------- -----------
Distributions to Shareholders (Note 1C)
From net investment income (413,564) (2,263,100)
From net realized gains on investments (17,704,233) (2,586,841)
------------- -----------
Total distributions to shareholders (18,117,797) (4,849,941)
------------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 810,675,482 124,417,682
Value of shares issued in reinvestment of distributions 9,684,607 4,058,519
Cost of shares redeemed (18,959,518) (9,593,513)
------------- -----------
Net increase (decrease) in net assets from Fund share transactions 801,400,571 118,882,688
------------- -----------
Total Increase (Decrease) in Net Assets 891,829,329 162,389,866
Net Assets
At beginning of period 287,064,558 124,674,692
------------- -----------
At end of period (including undistributed net
investment income of $4,247,085 and $412,285, respectively) $1,178,893,887 $287,064,558
============== ============
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2006 -----------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
----------- ---- ---- ---- ---- ----
Net Asset Value, Beginning of Period $ 34.34 $ 27.03 $ 21.62 $ 17.10 $ 18.53 $ 23.45
---------- -------- --------- -------- -------- -------
From Operations:
Net investment income *(a) 0.23 0.50 0.31 0.23 0.25 0.24
Net realized and unrealized gains
(loss) on investments 4.36 7.73 5.49 4.55 (1.48) (3.63)
---------- -------- --------- -------- -------- -------
Total from operations 4.59 8.23 5.80 4.78 (1.23) (3.39)
---------- -------- --------- -------- -------- -------
Less Distributions to Shareholders:
From net investment income (0.03) (0.39) (0.39) (0.26) (0.20) (0.20)
From net realized gains on investments (1.23) (0.53) -- -- -- (1.33)
---------- -------- --------- -------- -------- -------
Total distributions to shareholders (1.26) (0.92) (0.39) (0.26) (0.20) (1.53)
---------- -------- --------- -------- -------- -------
Net Asset Value, End of Period $ 37.67 $ 34.34 $ 27.03 $ 21.62 $ 17.10 $ 18.53
========== ======== ========= ======== ======== =======
Total Return 13.68% 31.06% 27.04% 28.23%(b) (6.77%)(b) (15.40%)(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)*(c) 0.92%(e) 1.01% 1.12% 1.16% 1.00% 1.00%
Net Investment Income (to average daily net assets)* 1.31%(e) 1.59% 1.22% 1.21% 1.29% 1.13%
Portfolio Turnover (d) N/A N/A N/A 17% 87% 74%
Net Assets, End of Period (000's omitted) $1,178,894 $287,065 $ 124,675 $ 77,727 $ 51,087 $48,227
- --------
* The investment advisor voluntarily agreed not to impose a portion of its
investment advisory fee and/or reimbursed the Fund for all or a portion of
its operating expenses. If this voluntary action had not been taken, the
investment income per share and the ratios would have been:
Net investment income per share (a) N/A N/A N/A $ 0.19 $ 0.18 $ 0.16
Ratios (to average daily net assets):
Expenses (c) N/A N/A N/A 1.34% 1.33% 1.37%
Net investment income N/A N/A N/A 1.03% 0.96% 0.76%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers and
reimbursement.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 27, 2003. The portfolio turnover ratio
for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
(e) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
8
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 92% at March 31, 2006). 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 investments in the Portfolio at value. The Portfolio
values its securities at value as discussed in Note 1A of the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities transactions and income
Securities transactions in the Portfolio are recorded as of trade date.
Currently, the Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all expenses of
the Fund determined in accordance with accounting principals generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Fund represent pro rata shares of gains and losses of the
Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. In determining
the amounts of its dividends, the Fund will take into account its share of
the income, gains or losses, expenses, and any other tax items of the
Portfolio. Dividends from net investment income and distributions from
capital gains, if any, are reinvested in additional shares of the Fund
unless a shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences which may result in
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC),
post-October loss deferrals, wash sales and capital loss carryovers.
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income, accumulated net realized gain
(loss) and paid in capital. Undistributed net investment income (loss) and
accumulated net realized gain (loss) on investments may include temporary
book and tax basis differences which will reverse in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
D. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
funds of the Trust or portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
9
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity 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"), a wholly owned subsidiary
of Mellon Asset Management, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund was charged
$6,818 during the six months ended March 31, 2006.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. For the six months ended March 31,
2006, the Fund was charged $2,134. No other director, officer or employee
of TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio for serving as an officer or Trustee of the Trust. The Fund pays
each Trustee who is not a director, officer or employee of TBCAM or its
affiliates an annual fee.
The Fund pays administrative service fees. These fees are paid to
affiliated or unaffiliated retirement plans, omnibus accounts and platform
administrators and other entities ("Plan Administrators") that provide
record keeping and/or other administrative support services to accounts,
retirement plans and their participants. As compensation for such services,
the Fund may pay each Plan Administrator a service fee in an amount of up
to 0.15% (on an annualized basis) of the Fund's average daily net assets
attributable to Fund shares that are held in accounts serviced by such Plan
Administrator. The Fund's adviser or its affiliates may pay additional
compensation from their own resources to Plan Administrators and other
entities for administrative services, as well as in consideration of
marketing or other distribution-related services. These payments may
provide an incentive for these entities to actively promote the Fund or
cooperate with the distributor's promotional efforts. For the six months
ended March 31, 2006, the Fund was charged $24,971 for fees payable to
Mellon Private Wealth Management.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2006, aggregated $808,479,612 and $37,248,672,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expense and realized and unrealized gains and losses based on
applicable tax allocation rules. Book/tax differences arise when changes in
proportionate interest for funds investing in the Portfolio occur.
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------- ------------------
Shares sold 23,186,967 3,919,181
Shares issued to shareholders
in reinvestment of distributions 283,757 138,802
Shares redeemed (535,240) (312,002)
---------- ---------
Net increase 22,935,484 3,745,981
========== =========
The Fund imposes a redemption fee of 2% of the net asset value of the shares,
with certain exceptions, which are redeemed or exchanged less than 30 days from
the day of their purchase. The redemption fee is paid directly to the Fund, and
is designed to offset brokerage commissions, market impact, and other costs
associated with short-term trading in the Fund. The fee does not apply to shares
that are acquired through reinvestment of distributions. For the six months
ended March 31, 2006, the Fund received $5,822 in redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See the corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
10
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.1%
EQUITY--98.0%
Australia--3.4%
Caltex Australia Ltd. 283,800 $ 3,899,276
Commonwealth Bank of Australia 139,800 4,531,852
Pacific Brands Ltd. 1,141,300 1,951,947
Qantas Airways Ltd. 1,745,700 4,422,249
QBE Insurance Group Ltd. 407,600 6,381,927
Rinker Group Ltd. 1,015,800 14,429,094
Telstra Corporation, Ltd. 1,299,200 3,477,106
Westpac Banking Corp. 204,000 3,477,301
------------
42,570,752
------------
Austria--2.0%
Boehler-Uddeholm 33,200 6,836,577
OMV AG 280,400 18,748,598
------------
25,585,175
------------
Belgium--2.0%
Delhaize Group 53,600 3,843,600
InBev NV 150,500 7,055,035
KBC Groupe 133,600 14,338,110
------------
25,236,745
------------
Denmark--1.1%
Danske Bank A/S 97,100 3,603,422
Novo Nordisk A/S, Class B 172,760 10,746,119
------------
14,349,541
------------
Finland--2.7%
Fortum Oyj 288,200 7,268,192
Kesko Oyj 142,200 4,435,357
Nokia Oyj 623,600 12,901,663
Rautaruukki Oyj 268,800 9,924,210
------------
34,529,422
------------
France--10.3%
Banca Intesa Spa (a) 2,019,433 12,059,467
Banque Nationale De Paris 204,900 19,024,175
Bouygues SA 171,600 9,114,621
France Telecom SA 182,300 4,098,419
Sanofi-Synthelabo SA 137,600 13,083,978
Societe Generale 174,100 26,171,118
Suez SA 120,300 4,738,795
Total SA 58,155 15,335,474
Vallourec 4,030 3,890,587
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
France (continued)
Vinci SA (b) 68,800 $ 6,779,501
Vinci SA--Rights 67,200 144,077
Vivendi Universal SA 451,900 15,512,933
------------
129,953,145
------------
Germany--5.8%
Bayerische Motoren Werke AG 70,300 3,870,267
Continental AG 196,900 21,668,177
Deutsche Bank AG Registered Shares 83,100 9,487,114
Deutsche Telekom AG 251,500 4,240,616
E.ON AG 121,000 13,309,777
Man AG 57,700 4,002,715
SAP AG 21,550 4,672,790
Schering AG 37,100 3,855,337
Thyssenkrupp AG 305,400 8,815,456
------------
73,922,249
------------
Greece--0.8%
Coca-Cola Hellenic Bottling Co. S.A 311,700 9,680,695
------------
Hong Kong--1.3%
Bank of East Asia Ltd. 1,119,000 4,045,308
China Mobile Hong Kong Ltd. 1,820,300 9,560,030
The Wharf(Holdings) Ltd. 842,000 3,092,756
------------
16,698,094
------------
Ireland--0.6%
CRH PLC 224,000 7,814,339
------------
Italy--2.0%
Capitalia Spa 1,511,300 12,558,175
Eni Spa 435,400 12,383,352
------------
24,941,527
------------
Japan--23.1%
Aeon Co., Ltd. 141,300 3,428,621
Astellas Pharma, Inc. 113,500 4,311,958
Canon, Inc. 239,800 15,876,611
Chubu Electric Power Co., Inc. 138,400 3,469,998
Dainippon Sumitomo Pharma Co., Ltd. 304,000 3,374,333
Daiwa Securities Group 784,500 10,528,009
Diamond Lease Co., Ltd. 82,700 3,872,828
East Japan Railway Co. 520 3,853,816
Eisai Co. Ltd. 191,600 8,353,799
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Japan (continued)
Fujitsu Ltd. 699,400 $ 5,902,636
Honda Motor Co., Ltd. 271,600 16,827,843
Hoya Corp. 267,500 10,799,125
Kirin Beverage Corp. 292,700 7,127,193
Kobe Steel Ltd. 1,783,800 6,776,803
Komatsu Ltd. 1,033,000 19,710,054
Kubota Corp. 1,469,000 15,856,111
Kyowa Hakko Kogyo Co., Ltd. 547,000 3,998,130
Matsushita Electric Industrial Co. Ltd. 410,000 9,112,273
Mitsubishi Corp. 635,000 14,463,709
Mitsubishi Electric Corp. 530,000 4,500,000
Mitsubishi Gas Chemical Co., Inc. 524,000 6,395,241
Mizuho Financial Group, Inc. 970 7,939,062
Nippon Steel Corp. 2,853,000 11,057,012
Nisshin Seifun Group, Inc. 411,900 4,211,420
Nomura Holdings,Inc 467,800 10,436,639
NTT Corp. 2,346 10,069,097
Sankyo Co., Ltd. 107,800 7,421,214
Sanyo Shinpan Finance Co., Ltd. 112,900 7,004,674
Sumitomo Electric Industries 513,100 8,133,023
Sumitomo Trust & Banking Co., Ltd. 921,000 10,661,244
Takeda Pharmaceutical Co., Ltd. 154,000 8,782,424
Tokyo Electron Ltd. 75,500 5,210,437
Toshiba Corporation 1,201,000 6,981,846
Toyo Suisan Kaisha Ltd. 292,800 4,471,882
Toyota Motor Corp. 210,300 11,492,682
-----------
292,411,747
-----------
Luxemburg--0.4%
Arcelor 121,100 4,771,775
-----------
Netherlands--4.3%
ASM Lithography Holding NV (b) 184,800 3,771,843
Buhrmann NV 657,900 11,634,948
Fugro N.V 96,600 3,715,118
ING Groep NV CVA 655,900 25,900,428
Koninklijke DSM NV 210,200 9,593,903
-----------
54,616,240
-----------
New Zealand--0.3%
Fletcher Building Ltd. 671,900 3,677,645
-----------
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, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Norway--2.1%
DNB NOR ASA 656,600 $ 8,842,237
Norsk Hydro ASA 54,700 7,579,137
Orkla ASA 196,000 9,720,442
-----------
26,141,816
-----------
Spain--3.2%
ACS Actividades 262,300 10,186,231
Banco Santander Central Hispano SA 253,500 3,700,128
Corp. Mapfre SA 175,300 3,569,450
Repsol YPF SA 218,100 6,192,485
Telefonica SA 813,900 12,767,108
Union Fenosa SA 108,900 4,138,035
-----------
40,553,437
-----------
Sweden--2.7%
Atlas Copco AB 210,400 5,919,223
Ericsson LM 1,449,900 5,513,211
Nordea Bank AB 449,000 5,551,648
Skandinaviska Enskilda Banken AB 508,900 12,617,247
Volvo AB, Class B 90,200 4,223,563
-----------
33,824,892
-----------
Switzerland--7.5%
Baloise Holdings 49,030 3,494,356
Compagnie Financiere Richemont AG 185,200 8,875,173
Credit Suisse Group 386,000 21,649,977
Nestle SA (a) 41,750 12,388,629
Novartis AG (a) 105,240 5,850,253
Roche Holding AG 65,400 9,733,277
Sulzer AG 14,470 9,868,935
UBS AG Registered Shares 58,750 6,450,698
Zurich Financial Services AG (b) 72,290 16,975,013
-----------
95,286,311
-----------
United Kingdom--22.4%
Alliance Unichem PLC 386,200 6,009,593
AstraZeneca PLC 78,000 3,928,415
Aviva PLC 956,100 13,275,369
Barclays PLC 987,090 11,545,670
Barratt Developments PLC 531,200 9,769,646
BHP Billition PLC 501,300 9,154,440
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------
United Kingdom (continued)
BP PLC 1,909,400 $ 21,919,123
British Airways PLC (b) 1,564,400 9,597,426
British American Tobacco PLC 513,400 12,429,208
BT Group PLC 1,602,100 6,176,855
Enterprise Inns PLC 517,900 8,562,640
GlaxoSmithKline PLC 489,700 12,799,453
Greene King PLC 447,300 5,818,426
HBOS PLC 1,094,200 18,261,856
International Power PLC 2,873,700 14,123,836
Marks & Spencer Group PLC 1,035,700 10,009,767
National Grid PLC 940,200 9,348,040
Old Mutual PLC 4,492,400 15,701,427
Royal Bank of Scotland Group PLC 356,185 11,586,125
Royal Dutch Shell PLC 202,200 6,313,870
Royal Dutch Shell PLC 171,800 5,585,394
Sage Group PLC 1,628,500 7,784,664
Schroders PLC 200,200 4,134,002
United Business Media PLC 519,700 6,548,094
Vodafone Group PLC 6,166,000 12,903,733
Wolseley PLC 450,400 11,060,445
WPP Group PLC 474,900 5,694,960
Xstrata PLC 402,700 13,029,241
-------------
283,071,718
-------------
Total Equities (Cost $1,106,862,841) 1,239,637,265
-------------
PREFERRED STOCKS--1.0%
Fresenius AG 30,300 5,431,954
Henkel KGaA 65,500 7,653,944
-------------
Total Preferred Stocks (Cost $10,826,977) 13,085,898
-------------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
------ --------- ---------
U.S. Government--0.1%
U.S. Treasury Bill (c) (d) (Cost $1,000,584) 4.47% 6/15/2006 1,010,000 1,000,847
-------------
INVESTMENT OF CASH COLLATERAL--0.0% Shares
------
BlackRock Cash Strategies L.L.C (f) (Cost $5,685) 4.701% 5,685 5,685
-------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $1,118,696,087) 1,253,729,695
-------------
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Rate Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------
AFFILIATED INVESTMENTS--1.8%
Dreyfus Institutional Preferred Plus Money Market Fund (e)(f)
(Cost $23,345,564) 4.770% 23,345,564 $ 23,345,564
--------------
TOTAL INVESTMENTS--100.9% (Cost $1,142,041,651) 1,277,075,259
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.9%) (11,527,967)
--------------
NET ASSETS--100% $1,265,547,292
==============
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at 3/31/06.
(b) Non-income producing security
(c) Denotes all or part of security segregated as collateral for futures
transactions.
(d) Rate noted is yield to maturity.
(e) Affiliated institutional money market fund.
(f) Stated rate is the seven day yield for the fund at March 31, 2006.
At March 31,2006 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain
- -----------------------------------------------------------------------------------------------
MSCI Pan-Euro (118 Contracts) Long 6/16/2006 $3,162,994 $ 1,018
Topix Futures (14 Contracts) Long 6/8/2006 2,017,118 43,290
-------
$44,308
=======
Percentage of Net
Economic Sector Allocation Investments
- --------------------------------------------------------------------------------
Consumer Discretionary 11.3%
Consumer Staples 6.8
Energy 8.0
Financials 27.9
Health Care 7.9
Industrials 11.4
Information Technology 6.3
Materials 9.2
Telecommunications Services 5.7
Utilities 4.5
Short term and other assets 1.0
-----
100.0%
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Assets and Liabilities
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)(including securities on loan, valued at $5,388 (Note 6))
Unaffiliated issuers, at value (cost $1,118,696,087) $1,253,729,695
Affiliated issuers, at value (Note 1H) (cost $23,345,564) 23,345,564
Foreign currency, at value (cost, $14,586,353) 14,628,545
Receivable for investments sold 8,286,896
Interest and dividends receivable 5,193,995
Prepaid expenses 7,683
-------------
Total assets 1,305,192,378
-------------
Liabilities
Payable for investments purchased $ 39,469,506
Payable for foreign currency exchange contracts purchased 11,603
Collateral for securities on loan (Note 6) 5,685
Accrued accounting, administration and custody fees (Note 2) 135,740
Payable for variation margin on open futures contracts (Note 5) 3,680
Accrued professional fees 16,703
Accrued trustees' fees and expenses (Note 2) 1,353
Other accrued expenses and liabilities 816
------------
Total liabilities 39,645,086
-------------
Net Assets (applicable to investors' beneficial interest) $1,265,547,292
==============
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Operations
For the Six Months Ended March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $869,173) $ 7,208,483
Dividend income from affiliated investments (Note 1 H) 595,403
Interest income 68,132
Security lending income (Note 6) 2
-----------
Total investment Income 7,872,020
Expenses
Investment advisory fee (Note 2) $ 2,733,368
Accounting, administration and custody fees (Note 2) 246,043
Professional fees 16,386
Trustees' fees and expenses (Note 2) 15,230
Insurance expense 3,416
Miscellaneous 5,894
-----------
Total expenses 3,020,337
-----------
Net investment income 4,851,683
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Investments 25,236,309
Financial futures transactions 2,522,014
Foreign currency transactions and forward foreign currency exchange transactions (915,135)
-----------
Net realized gain (loss) 26,843,188
Change in unrealized appreciation (depreciation) on:
Investments 86,716,729
Financial futures contracts 47,666
Foreign currency translations and forward foreign currency exchange contracts 276,144
-----------
Change in net unrealized appreciation (depreciation) 87,040,539
-----------
Net realized and unrealized gain (loss) 113,883,727
-----------
Net Increase in Net Assets from Operations $118,735,410
============
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2006 Year Ended
(Unaudited) September 30, 2005
---------------- ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income $ 4,851,683 $ 3,115,216
Net realized gain (loss) 26,843,188 17,557,963
Change in net unrealized appreciation (depreciation) 87,040,539 30,186,081
-------------- ------------
Net increase (decrease) in net assets from operations 118,735,410 50,859,260
-------------- ------------
Capital Transactions
Contributions 880,208,078 147,880,626
Withdrawals (41,381,455) (17,050,877)
-------------- ------------
Net increase (decrease) in net assets from capital transactions 838,826,623 130,829,749
-------------- ------------
Total Increase (Decrease) in Net Assets 957,562,033 181,689,009
Net Assets
At beginning of period 307,985,259 126,296,250
-------------- ------------
At end of period $1,265,547,292 $307,985,259
============== ============
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
For the January 28, 2003
Six Months Ended Year Ended September 30, (commencement
March 31 2006 ------------------------ of operations) to
(Unaudited) 2005 2004 September 30, 2003
---------------- ------- ------ ------------------
Total Return (a) 13.74% 31.12% 27.12%(b) 22.46%(b)(c)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.92%(d) 0.95% 1.04% 1.17%(d)
Net Investment Income (to average daily net assets)* 1.38%(d) 1.66% 1.30% 1.81%(d)
Portfolio Turnover 29%(c) 58% 80% 63%(c)
Net Assets, End of Period (000's omitted) $1,265,547 $307,985 $126,296 $77,660
- --------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A 1.20%(d)
Net investment income N/A N/A N/A 1.78%(d)
(a) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements.
(b) Total return would have been lower in the absence of expense waivers.
(c) Not annualized.
(d) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
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(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"), 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 net assets in equity securities of companies
that are located in the foreign countries represented in the MSCI Europe,
Australia, Far East Index (EAFE) and Canada.
At March 31, 2006, there were two funds, The Boston Company International
Core Equity Fund and Dreyfus Premier International Equity Fund (the
"Funds") 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, 2006, The Boston Company International Core
Equity Fund and the Dreyfus Premier International Equity Fund held
approximately 92% and 8% 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.
Because foreign markets may be open at different times than the New York
Stock Exchange, the value of the Portfolio's shares may change on days when
shareholders are not able to buy or sell them. Many securities markets and
exchanges outside the U.S. close prior to the close of the New York Stock
Exchange and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect the events that occur after such
close but before the close of the New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market)
the Portfolio may value its assets by a method the Trustees believe
accurately reflects the fair value. The Trustees have adopted fair value
pricing procedures, which, among other things, require the Portfolio to
fair value such securities if there has been a movement in the U.S. market
that exceeds a specified threshold. Although the threshold may be revised
from time to time by the Trustees and the number of days on which fair
value prices will be used will depend on market activity, it is possible
that fair value prices for foreign securities will be used by the Portfolio
to a significant extent.
Short-term instruments with less than sixty days remaining to maturity are
valued at amortized cost, which approximates market value. If the Portfolio
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period
that amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity 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.
The Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Portfolio's books and the
U.S. dollar equivalent amounts actually received or paid.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
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C. Income taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state income taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
D. Foreign currency transactions
The Portfolio maintains its records in U.S. dollars. Investment security
valuations, other assets, and liabilities initially expressed in foreign
currencies are converted into U.S. dollars based upon current currency
exchange rates. Purchases and sales of foreign investment securities and
income and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions.
E. Investment risk
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed foreign
markets.
F. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
However, based on experience, the Portfolio expects the risks of loss to be
remote.
G. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated among
the funds of the Trust or the portfolios of the Portfolio Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
H. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management Company LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory,
and administrative services, and general office facilities, is paid monthly
at the annual rate of 0.80% of the first $500 million of the Portfolio's
average daily net assets, 0.75% of the next $500 million and 0.70% on
assets over $1 billion. For the six months ended March 31, 2006, the
Portfolio was charged $2,733,368 in investment advisory fees to TBCAM.
The Portfolio entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of TBCAM, to provide custody, administration and accounting
services for the Portfolio. For these services the Portfolio pays Mellon
Bank a fixed fee plus asset and transaction based fees, as well as
out-of-pocket expenses. Pursuant to this agreement the Portfolio was
charged $246,043 during the six months ended March 31, 2006.
22
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
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The Portfolio also entered into an agreement with Mellon Bank, to perform
certain securities lending activities and to act as the Portfolio's lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. Pursuant to this agreement, Mellon Bank received $1, for the six
months ended March 31, 2006. See Note 6 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's Chief Compliance Officer. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust.
The Fund and Portfolio Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates (the "Independent Trustees")
an annual fee and the Portfolio Trust pays each Independent Trustee 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 counsel to the
Independent Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2006 were as follows:
Purchases Sales
-------------- ------------
Investments (non-U.S. Government Securities) $1,040,552,278 $204,249,199
============== ============
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2006, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $1,142,041,651
==============
Unrealized appreciation $ 141,278,186
Unrealized depreciation (6,244,578)
--------------
Net unrealized appreciation (depreciation) $ 135,033,608
==============
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Portfolio may trade the following financial instruments with
off-balance sheet risk:
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, 2006, the Portfolio did not hold any open foreign currency
exchange contracts.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
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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, 2006, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the six months ended March 31, 2006
and earned interest on the invested collateral of $25 of which $23 was
rebated to borrowers or paid in fees. At March 31, 2006, the Portfolio had
securities valued at $5,388 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
(7) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a facility fee, computed at an annual rate of 0.060 of 1%
on the committed amount, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended March
31, 2006, the expense allocated to the Portfolio was $2,213.
For the six months ended March 31, 2006, the Portfolio had average
borrowings outstanding of $68,000 on a total of one day and incurred $9 of
interest.
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in
Approving Advisory Agreement
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The 1940 Act requires that the Board of Trustees, including a majority of
its Trustees who are not affiliated with the fund's investment adviser or
underwriter (the "Independent Trustees") voting separately, approve the
fund's advisory agreement and the related fees on an annual basis. The Fund
is not a party to an investment advisory agreement directly with any
investment adviser and does not invest directly in portfolio securities.
Instead, the Fund invests all of its investable assets in The Boston
Company International Core Equity Portfolio (the "Portfolio"), which is
managed by The Boston Company Asset Management ("TBCAM"). The Fund's Board
of Trustees determines annually whether the Fund should continue to invest
in the Portfolio. The members of the Fund's Board of Trustees also serve as
the Board of Trustees of the Portfolio. In that capacity, they consider
annually whether to continue the investment advisory agreement between the
Portfolio and TBCAM. In their most recent deliberations concerning their
decision to approve the continuation of the investment advisory agreement,
the Board of Trustees conducted the review and made the determinations that
are described below. In conducting this review and in making such
determinations, the Independent Trustees received from the Portfolio's
investment adviser, TBCAM ("the Adviser"), a broad range of information in
response to a written request prepared on their behalf by their own legal
counsel. The Independent Trustees met alone in a private session with their
legal counsel on September 22, 2005 to review these materials and to
discuss the proposed continuation of the Fund's advisory agreement.
Representatives of the Adviser attended a portion of the September meeting
to provide an overview of its organization, personnel, resources and
strategic plans, and to respond to questions and comments arising from the
Independent Trustees' review of the materials and their deliberations. The
entire Board then met on October 18, 2005.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
1. Financial and Economic Data: The Adviser's audited balance sheets and
income statements, as well as a profitability analysis of the Adviser,
including a separate presentation of the Adviser's profitability relative
to that of several publicly traded investment advisers;
2. Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, investment
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
3. Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management
fee and expense ratio compared to other funds, and the Adviser's separate
account advisory fee schedules;
4. Specific Facts Relating to the Fund: The Adviser's commentary on the
Fund's performance (rather than the Portfolio alone), and any material
portfolio manager and strategy changes that may have affected the Fund in
the prior year, as well as the Fund's "fact sheets" prepared by the Adviser
providing salient data about the Fund and Portfolio, including Portfolio's
holdings, strategies, recent market conditions and outlook, as well as the
Adviser's views concerning the issues of breakpoints in the management fee
schedule of the Portfolio and potential economies of scale; and
5. Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the
Board of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling, and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the advisory agreement
and the compensation to the Adviser provided therein were fair and
reasonable in light of the services performed, expenses incurred and such
other matters as the Trustees considered relevant in the exercise of their
reasonable judgment. The following summary does not detail all the matters
that were considered. Some of the factors that figured prominently in the
Trustees' determination are described below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by the Adviser. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of
the fact that, by choosing to invest in the Fund, the Fund's shareholders
have chosen to entrust the Adviser, under the supervision of the Board, to
manage the portion of their assets invested in the Fund.
Among the specific factors the Board reviewed were the investment
management, administrative, compliance and related services provided by the
Adviser. The Board determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees reviewed the background and experience of the Portfolio's two
portfolio managers and also met with senior management of the Adviser to
receive an overview of its organization, personnel, resources and strategic
plans. Among other things, the Trustees considered the size, education and
experience of the Adviser's investment staff, technological infrastructure
and overall responsiveness to changes in market conditions. The Board
determined that the Adviser had the expertise and resources to manage the
Portfolio effectively.
25
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
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Investment Performance
The Board considered the investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected
by the Adviser with input from the Trustees. The Board also compared the
Fund's investment performance against the average performance of a larger
universe of funds regarded by Lipper as having similar investment
objectives and considered the Fund's performance rankings against that
universe. In addition to the information received by the Board for at the
September 22, 2005 Board meeting, the Trustees received similar detailed
comparative performance information for the Fund at each regular Board
meeting during the year.
The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2005 based on the Lipper materials
provided to the Board at the September 22, 2005 meeting. The Board found
that the Fund was the best performing fund in its peer group and
outperformed its peer group average return for the one-year period (27.00%
vs. 21.91%) and three-year period (21.64% vs. 15.73%), and outperformed the
average for the five-year period (9.14% vs. 1.38%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to the
Adviser. The Lipper data presenting the Portfolio's "net advisory fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Trust's
custodian. Such reporting was necessary, according to Lipper, to allow the
Board to compare the Portfolio's advisory fees to those peers that include
administrative fees within a blended advisory fee.
The Portfolio's contractual advisory fee was 0.800%, which was in the 3rd
quintile of its peer group of funds and equal to the median of that peer
group. The Portfolio's actual advisory fee, after giving effect to expense
limitations, was 0.818%, which was higher than the peer group median actual
advisory fee of 0.747%. Based on the Lipper data, as well as other factors
discussed at the September 22, 2005 meeting, the Board determined that the
Portfolio's advisory fee is reasonable relative to its peer group averages,
both with and without giving effect to expense limitations.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of the Adviser. Based on the additional
scope and complexity of the services provided and responsibilities assumed
by the Adviser with respect to the Portfolio relative to these other types
of clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board also considered the Fund's (rather than solely the Portfolio's)
expense ratio and compared it to that of its peer group of similar funds.
The Board found that the Fund's actual total expense ratio of 1.119% (after
giving effect to expense limitations) was lower than the median total
expense ratio of the peer group of 1.138% notwithstanding the fact that
most of the other funds in the peer group were larger than the Fund.
The Adviser's Profitability
The Board considered the Adviser's profitability in managing the Portfolio
and Fund and the Mellon Institutional Funds as a group, as well as the
methodology used to compute such profitability, and the various direct and
indirect expenses incurred by the Adviser or its affiliated investment
adviser, Standish Mellon Asset Management Company, LLC ("Standish Mellon")
in managing the Portfolio and other funds in the Mellon Institutional Funds
family of funds. The Independent Trustees had observed that, based on the
profitability information submitted to them by the Adviser, the Adviser
incurred losses in managing many of the investment companies in the Mellon
Institutional Funds family of funds, including the Portfolio and Fund, and
that among those funds that were profitable to the Adviser, several
generated only marginal profitability for the firm. The Trustees observed
that the Adviser had incurred losses in operating the Portfolio in 2003 but
made a modest profit in 2004.
Economies of Scale
The Board also considered the extent to which economies of scale might be
realized as the Fund grows. They observed that the Standish Mellon Fixed
Income Portfolio, the largest fund in the complex, already had breakpoints
in its fee arrangement that reflected economies resulting from its size.
The Board concluded that, at existing asset levels and considering current
assets growth projections, the implementation of additional fee breakpoints
or other fee reductions was not necessary at this time. They requested,
however, that management consider the issue of future breakpoints across
the Mellon Institutional Funds complex and respond to the Independent
Trustees and to present a proposal for such breakpoints or, in each case as
applicable, management's rationale as to why such future breakpoints are
not necessary or appropriate for a particular Fund.
In response, the Adviser subsequently proposed, and the Trustees approved
effective as of February 1, 2006, a revised fee schedule reflecting
breakpoints as follows: 0.80% of the first $500 million of average daily
net assets, 0.75% of the next $500 million of such assets, and 0.70% of
such assets over $1 billion. The net assets of the Portfolio as of March
31,2006 were $1,265,547,292.
26
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
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Other Benefits
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Mellon Institutional Funds as a group,
including revenues received by Mellon affiliates in consideration of
custodial, administrative, transfer agency and securities lending services
provided by such affiliates to the Funds. In each case, such affiliates
were selected by the Board on the basis of a comparative analysis of their
capabilities and fees relative to those of unaffiliated competitors. In
addition, the Board, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i)
the terms of the relevant service agreement are in the best interests of
Fund shareholders; (ii) the services to be performed by the affiliate
pursuant to the agreement are required by and appropriate for the Funds;
(iii) the nature and quality of the services provided by the affiliate
pursuant to the agreement are at least equal to those provided by other,
unaffiliated firms offering the same or similar services for similar
compensation; and (iv) the fees payable by the Funds to the affiliate for
its services are fair and reasonable in light of the usual and customary
charges imposed by other, unaffiliated firms for services of the same
nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Funds and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Portfolio's advisory
agreement and the compensation to the Adviser provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for
one-year period.
27
Trustees and Officers
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies; and total remuneration paid
as of the period ended March 31, 2006. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing The Mellon Institutional
Funds at P.O. Box 8585, Boston, MA 02266-8585 or calling toll free
1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2006)
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Samuel C. Fleming Trustee Trustee since Chairman Emeritus, Decision 34 None Fund: $2,328
c/o Decision Resources, Inc. 11/3/1986 Resources, Inc. ("DRI") Portfolio: $250
260 Charles Street (biotechnology research and
Waltham, MA 02453 consulting firm); formerly
9/30/40 Chairman of the Board and
Chief Executive Officer, DRI
Caleb Loring III Trustee Trustee since Trustee, Essex Street 34 None Fund: $2,587
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $250
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 34 None Fund: $2,328
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $250
Littauer Center 127 Economy, Harvard University
Cambridge, MA 02138
8/5/44
John H. Hewitt Trustee Trustee since Trustee, Mertens House, 34 None Fund: $2,328
P.O. Box 2333 11/3/1986 Inc. (hospice) Portfolio: $250
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, President Since 2003 President and Chief 34 None $0
The Boston Company and Chief Operating Officer of The
Asset Management, LLC Executive Officer Boston Company Asset
One Boston Place Management, LLC; formerly
Boston, MA 02108 Senior Vice President and
7/24/65 Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial Officer,
MAM
28
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
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Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations,
Mellon Asset Management and Secretary Mellon Asset Management ("MAM"); formerly First
One Boston Place Vice President, MAM and Mellon Global
Boston, MA 02108 Investments
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Asset Management and Treasurer since 1999; Mellon Asset Management; formerly Assistant Vice
One Boston Place Treasurer President and Mutual Funds Controller, Standish
Boston, MA 02108 since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds
Mellon Asset Management President Operations, Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund
Boston, MA 02108 Operations, Standish Mellon Asset Management,
8/19/51 LLC
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager of
Mellon Asset Management President Compliance, Mellon Asset Management ("MAM");
One Boston Place formerly Manager of Shareholder Services, MAM,
Boston, MA 02108 and Shareholder Representative, Standish Mellon
1/19/71 Asset Management Company LLC
Mary T. Lomasney Chief Since 2005 First Vice President, Mellon Asset Management
Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Funds
One Boston Place Officer Distributor and Mellon Optima L/S Strategy Fund,
Boston, MA 02108 LLC; formerly Director, Blackrock, Inc., Senior
4/8/57 Vice President, State Street Research & Management
Company ("SSRM"), and Vice President, SSRM
29
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Item 2. Code of Ethics.
Not applicable to this semi-annual filing.
Item 3. Audit Committee Financial Expert.
Not applicable to this semi-annual filing.
Item 4. Principal Accountant Fees and Services.
Not applicable to this semi-annual filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the Registrant.
Item 6. Schedule of Investments
Included as part of the Semi-Annual Report to Shareholders filed under
Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to the Registrant.
Item 8. Portfolio Managers Of Closed-End Management Companies
Not applicable to the Registrant.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to the Registrant.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes.
Item 11. Controls and Procedures.
(a) The Registrant's Principal Executive Officer and Principal
Financial Officer concluded that the Registrant's disclosure
controls and procedures are effective based on their evaluation of
the Registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this report (the
"Evaluation Date" as defined in Rule 30a-3(c) under the Investment
Company Act of 1940).
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940 that occurred during the
Registrant's first fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the Registrant's
internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable to this semi-annual filing.
(a)(2) Certifications of the Principal Executive Officer and
Principal Financial Officer of the Registrant as required by
Rule 30a-2(a) under the Investment Company Act of 1940 are
attached hereto as Exhibit 99CERT.302
(a)(3) Not applicable to the Registrant.
(b) Certifications as required by Rule 30a-2(b) under the
Investment Company Act of 1940 and pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit
99CERT.906.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Mellon Institutional Funds Investment Trust
By (Signature and Title): /s/ BARBARA A. MCCANN
---------------------
Barbara A. McCann, Vice President and Secretary
Date: June 7, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities, and on the
dates indicated.
By (Signature and Title): /s/ PATRICK J. SHEPPARD
-----------------------
Patrick J. Sheppard, President and Chief Executive
Officer
Date: June 7, 2006
By (Signature and Title): /s/ STEVEN M. ANDERSON
----------------------
Steven M. Anderson, Vice President and Treasurer
Date: June 7, 2006