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, 2007
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Item 1. Reports to Stockholders.
[LOGO] Mellon
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Mellon Institutional Funds
Semiannual Report Mellon Equity
Large Cap Growth Fund
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March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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)
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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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
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Actual $1,000.00 $1,066.80 $4.90
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.19 $4.78
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+ Expenses are 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 one-half year period).
3
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Portfolio Information as of March 31, 2007 (Unaudited)
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Percentage of
Top Ten Holdings* Sector Investments
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Microsoft Corp. Technology 3.8%
Johnson & Johnson Health Care 3.2
General Electric Corp. Financial 3.0
Cisco Systems Inc. Technology 2.7
International Business Machines Corp. Technology 2.1
Altria Group, Inc. Consumer Staples 1.9
Pepsico, Inc Consumer Staples 1.9
CVS Corp. Consumer Cyclicals 1.7
United Technologies Corp. Industrials 1.6
Amgen, Inc. Health Care 1.6
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23.5%
* Excludes short-term securities and cash collateral investments.
Percentage of
Economic Sector Allocation Net Assets
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Consumer Cyclical 12.1%
Consumer Hard Goods 1.3
Consumer Staples 7.2
Financial 9.9
Health Care 16.3
Industrials 10.6
Information 9.1
Materials 3.3
Oil & Gas Producer 3.9
Technology 23.6
Telecommunications 1.0
Utilities 0.4
Short-term and Other Assets 1.3
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100.0%
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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UNAFFILIATED INVESTMENTS--100.2%
EQUITIES--98.7%
Consumer Cyclicals--12.1%
Best Buy Co.,Inc 900 $ 43,848
Brinker International, Inc. 800 26,160
Choice Hotels International, Inc. 600 21,258
Circuit City Stores, Inc. 1,200 22,236
Claire's Stores, Inc. 1,000 32,120
Coach, Inc. (a) 1,200 60,060
Costco Wholesale Corp. 950 51,148
CVS Corp. 2,936 100,235
Hilton Hotels Corp. 900 32,364
NIKE, Inc., Class B 250 26,565
Nordstrom, Inc. 1,000 52,990
NutruSystem, Inc. 500 26,205
Office Depot, Inc. (a) 1,300 45,682
Starbucks Corp. (a) 1,850 58,016
Target Corp. 650 38,519
Tiffany & Co. 600 27,288
Wal-Mart Stores, Inc. 800 37,560
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702,254
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Consumer Hard Goods--1.3%
Harley-Davidson, Inc. 850 49,938
International Game Technology 600 24,228
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74,166
---------
Consumer Staples--7.2%
Altria Group, Inc. 1,300 114,153
Anheuser Busch Co., Inc. 600 30,276
Coca-Cola Co. 1,850 88,800
Kimberly-Clark Corp. 450 30,821
Pepsico, Inc. 1,750 111,230
Procter & Gamble Co. 650 41,054
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416,334
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Financial--9.9%
Allstate Corp. 550 33,033
Bank of America Corp. 750 38,265
Franklin Resources, Inc. 500 60,415
General Electric Corp. 5,100 180,336
Goldman Sachs Group, Inc. 400 82,652
Host Hotels and Resorts, Inc. 700 18,417
IntercontinentalExchange, Inc. (b) 300 36,663
Investment Technology Group, Inc. (a) 700 27,440
Merrill Lynch & Co., Inc. 550 44,919
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Financial (continued)
Morgan Stanley 400 $ 31,504
Wells Fargo & Company 700 24,101
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577,745
---------
Health Care--16.3%
Aetna, Inc. 1,200 52,548
Amerisourcebergen Corp. 800 42,200
Amgen, Inc. (a) 1,700 94,996
Becton Dickinson & Co. 1,000 76,890
Biogen Idec, Inc. (a) 500 22,190
C. R. Bard, Inc. 300 23,853
Cigna Corp. 250 35,665
Genentech, Inc. (a) 400 32,848
Gilead Sciences, Inc. (a) 350 26,775
Johnson & Johnson 3,150 189,819
Laboratory Corp. of America Holdings (a) 400 29,052
McKesson Corp. 600 35,124
Medtronic, Inc. 1,350 66,231
PDL BioPharma, Inc. (a) (b) 1,000 21,700
Pfizer, Inc. 1,000 25,260
UnitedHealth Group, Inc. 1,500 79,455
Wyeth 1,400 70,042
Zimmer Holdings, Inc. (a) 300 25,623
---------
950,271
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Industrials--10.6%
Burlington Northern Santa Fe Corp. 500 40,215
Cummins, Inc. 200 28,944
Emerson Electric Co. 1,100 47,399
FedEx Corp. 650 69,830
GATX Corp. 500 23,900
Graco Inc. 950 37,202
Manpower, Inc. 450 33,197
Martin Marietta Materials, Inc. 200 27,040
Parker Hannifin Corp. 350 30,209
Raytheon Co. 1,150 60,329
The Boeing Co. 950 84,465
United Technologies Corp. 1,500 97,500
Waste Management, Inc. 1,000 34,410
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614,640
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Information--9.1%
Accenture Ltd., Class A 1,050 40,467
Akamai Technologies, Inc. 800 39,936
Cognizant Technology Solutions Co. (a) 650 57,376
Equifax Inc. 950 34,628
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Information (continued)
Google, Inc. (a) 200 $ 91,632
Interpublic Group of Cos, Inc. (a) (b) 1,900 23,389
McGraw-Hill Companies, Inc. 800 50,304
Moody's Corp. 700 43,442
News Corp. 1,600 36,992
Time Warner, Inc. 1,050 20,706
Verisign, Inc. (a) 1,000 25,120
Walt Disney Co. 1,850 63,696
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527,688
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Materials--3.3%
3M Co. 500 38,215
El Du Pont de Nemours & Co. 1,600 79,088
Monsanto Co. 850 46,716
Nucor Corp. 450 29,309
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193,328
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Oil And Gas Producer--3.9%
ConocoPhillips 900 61,515
ENSCO International, Inc. 400 21,760
Exxon Mobil Corp. 600 45,270
Marathon Oil Corp. 400 39,532
Tesoro Corp. 300 30,129
Valero Energy Corp. 400 25,796
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224,002
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Technology--23.6%
Altera Corp. 1,000 19,990
Amphenol Corp. 500 32,285
Apple Computer, Inc. (a) 900 83,619
Applied Materials, Inc. 3,600 65,952
Autodesk, Inc. (a) 750 28,200
Broadcom Corp. (a) 750 24,053
Cisco Systems, Inc. (a) 6,300 160,839
Danaher Corp. 550 39,298
Dolby Laboratories, Inc., Class A (a) 700 24,157
EMC Corp. 2,800 38,780
F5 Networks, Inc. (a) 300 20,004
Harris Corp. 550 28,023
Hewlett-Packard Co. 2,100 84,294
Intel Corp. 2,650 50,695
International Business Machines Corp. 1,300 122,538
Linear Technology Corp. 850 26,852
Microsoft Corp. 8,050 224,354
Motorola, Inc. 2,150 37,991
National Semiconductor Corp. 900 21,726
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Technology (continued)
Nokia OYJ 1,400 $ 32,088
Oracle Corp. (a) 3,700 67,081
Qualcomm, Inc. 1,500 63,990
Texas Instruments, Inc. 2,550 76,755
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1,373,564
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Telecommunications--1.0%
Leap Wireless International, Inc. 300 19,794
NII Holdings, Inc. 550 40,790
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60,584
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Utilities--0.4%
Sempra Energy 400 24,404
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Total Equities (cost $5,462,154) 5,738,980
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INVESTMENT OF CASH COLLATERAL--1.5%
BlackRock Cash Strategies L.L.C. Cost ($85,500) 85,500 85,500
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TOTAL UNAFFILIATED INVESTMENTS (Cost $5,547,654) 5,824,480
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AFFILIATED INVESTMENTS--1.9%
Dreyfus Institutional Preferred Plus Money Market Fund (c) (cost $110,725) 110,725 110,725
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TOTAL INVESTMENTS--102.1% (Cost $5,658,379) 5,935,205
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LIABILITIES IN EXCESS OF OTHER ASSETS--(2.1%) (120,639)
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NET ASSETS--100.0% $5,814,566
==========
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at March 31, 2007. (c)
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, 2007 (Unaudited)
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Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $81,752 (Note 6)):
Unaffiliated investments (cost $5,547,654) $5,824,480
Affiliated investments (Note 1F) (cost $110,725) 110,725
Interest and dividends receivable 6,279
Prepaid expenses 12,643
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Total assets 5,954,127
Liabilities
Collateral for securities on loan (Note 6) $85,500
Payable for investment purchased 24,307
Accrued professional fees 17,807
Accrued accounting, custody, administration and transfer agent fees (Note 2) 9,281
Accrued shareholder reporting fee (Note 2) 850
Accrued trustees' fees (Note 2) 521
Accrued chief compliance officer fee (Note 2) 375
Accrued registration fee 50
Other accrued expenses and liabilities 870
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Total liabilities 139,561
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Net Assets $5,814,566
==========
Net Assets consist of:
Paid-in capital $5,504,420
Accumulated net realized gain 19,769
Undistributed net investment income 13,551
Net unrealized appreciation 276,826
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Total Net Assets $5,814,566
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Shares of beneficial interest outstanding 268,556
==========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 21.65
==========
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 Six Months Ended March 31, 2007 (Unaudited)
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Investment Income (Note 1B)
Dividend income $ 39,940
Dividend income from affiliated investments (Note 1F) 2,985
Securities lending income (Note 6) 20
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Total investment income 42,945
Expenses
Investment advisory fee (Note 2) $ 17,867
Accounting, custody, administration and transfer agent fees (Note 2) 25,181
Registration fees 10,959
Professional fees 17,405
Trustees' fees and expenses (Note 2) 1,295
Insurance expense 499
Miscellaneous expenses 9,615
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Total expenses 82,821
Deduct:
Waiver of invesment advisory fee (Note 2) (17,867)
Reimbursement of Fund operating expenses (Note 2) (38,840)
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Total expense deduction (56,707)
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Net Expenses 26,114
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Net investment income 16,831
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Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments 79,890
Change in unrealized appreciation (depreciation) on:
Investments 180,233
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Net realized and unrealized gain (loss) on investments 260,123
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Net Increase in Net Assets from Operations $276,954
========
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
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For the period
For the December 21, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 16,831 $ 9,098
Net realized gain (loss) 79,890 (60,121)
Change in net unrealized appreciation (depreciation) 180,233 96,593
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Net increase (decrease) in net assets from investment operations 276,954 45,570
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Distributions to Shareholders (Note 1C)
From net investment income (7,378) (5,000)
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Fund Share Transactions (Note 4)
Net proceeds from sale of shares 2,992,042 2,500,000
Dividend reinvestment 7,378 5,000
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Net increase (decrease) in net assets from Fund share transactions 2,999,420 2,505,000
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Total Increase (Deccrease) in Net Assets 3,268,996 2,545,570
Net Assets
At beginning of period 2,545,570 --
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At end of period (including net investment
income of $13,551 and $4,098, respectively) $5,814,566 $2,545,570
========== ==========
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
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For the period
For the December 21, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited)
September 30, 2006
---------------- ------------------
Net Asset Value, Beginning of Period $20.32 $20.00
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From Operations:
Net investment income* (a) 0.07 0.07
Net realized and unrealized gains (loss) on investments 1.29 0.29
------ ------
Total from operations 1.36 0.36
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Less Distributions to Shareholders:
From net investment income (0.03) (0.04)
------ ------
Total distributions to shareholders (0.03) (0.04)
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Net Asset Value, End of Period $21.65 $20.32
====== ======
Total Return (b) 6.68%(d) 1.81%(d)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.95%(c) 0.95%(c)
Net Investment Income (to average daily net assets)* 0.61%(c) 0.47%(c)
Portfolio Turnover 18%(d) 23%(d)
Net Assets, End of Period (000's omitted) $5,815 $2,546
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* 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 without waivers and
reimbursement would have been:
Net investment income (loss) per share (a) $(0.16) $(0.87)
Ratios (to average daily net assets):
Expenses 3.00%(c) 7.06%(c)
Net investment income (loss) (1.45%)(c) (5.64%)(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) 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
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
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(1) Organization and 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 operation 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 capitalization companies that have total market capitalizations
within the range of capitalizations of the companies in the top 80% 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
Fund shares are valued as of the close of regular trading (normally
4:00 p.m., Eastern Time) on each day that the New York Stock Exchange
("NYSE") is open. Securities are valued at the last sale prices on the
exchange or national securities market on which they are primarily
traded. Securities not listed on an exchange or national securities
market, or securities for which there were no reported transactions,
are valued at the last calculated mean price (average of last bid and
last offer). Securities that are fixed income securities, other than
short-term instruments with less than sixty days remaining to
maturity, for which market prices are readily available, are valued at
their current market value on the basis of quotations, which may be
furnished by a pricing service or dealers in such securities.
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. With respect to any portion of the Fund's
assets that are invested in one or more open-end regulated investment
companies ("RICs"), the Fund's net asset value ("NAV") will be
calculated based upon the NAVs of such RICs.
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. 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
the shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally
accepted in the United States of America. These differences which may
result in reclassifications, are primarily due to differing treatments
for post-October losses and capital loss carryovers Permanent book and
tax basis differences relating to shareholder distributions 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.
13
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
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.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in
Income Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold
for financial statement recognition of the benefit of positions taken
in filing tax returns (including whether an entity is taxable in a
particular jurisdiction), and requires certain expanded tax
disclosures. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as
of the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact in the financial statements has
not yet been determined.
In addition, on September 20, 2006, FASB released Statement of
Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS
157"). FAS 157 establishes an authoritative definition of fair value,
sets out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS 157
is required for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. At this time, management is
evaluating the implications of FAS 157 and its impact, if any, in the
financial statements has not yet been determined.
(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 monthly 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 six months ended March 31, 2007.
Pursuant to this arrangement, for the six months ended March 31, 2007,
Mellon Equity voluntarily waived its investment advisory fee in the
amount of $17,867 and reimbursed $38,840 of the Fund's operating
expenses. This arrangement is voluntary and temporary and may be
discontinued or revised by Mellon Equity at any time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") announced that they had entered into
a definitive agreement to merge. The new company will be called The
Bank of New York Mellon Corporation. As part of this transaction,
Mellon Equity would become an indirect wholly-owned subsidiary of The
Bank of New York Mellon Corporation. The transaction is subject to
certain regulatory approvals and the approval of BNY's and MFC's
shareholders, as well as other customary conditions to closing.
Subject to such approvals and the satisfaction of the other
conditions, MFC and BNY expect the transaction to be completed in the
third quarter of 2007.
The Trust 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 $3,027 for the six months
ended March 31, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and
an affiliate of Mellon Equity, 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 $22,154 for the six months ended March 31, 2007.
14
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Trust 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 earned $8
for the six months ended March 31, 2007. 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. For the six months
ended March 31, 2007, the Fund was charged $2,105, which is included
in miscellaneous expenses in the statement of operations. 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 Fund 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of Mellon
Equity, to provide printing and fulfillment services for the Fund.
Pursuant to this agreement, the Fund was charged $850, which is
included in miscellaneous expenses in the statement of operations, for
the six months ended March 31, 2007.
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 six months ended March 31, 2007 were
as follows:
Purchases Sales
---------- --------
Non-U.S. Government Securities $3,893,448 $968,053
========== ========
(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 December 21, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Shares sold 142,955 125,000
Shares issued to shareholders in reinvestment of distributions 339 262
------- -------
Net increase (decrease) 143,294 125,262
======= =======
At March 31, 2007, two shareholders, in the aggregate, of record
(including MBC Investments Corp., a wholly-owned subsidiary of Mellon
Financial Corporation and an affiliate of the Fund) held 99.5% 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, 2007, the Fund did not assess any redemption fees.
Mellon Institutional Funds Investment Trust Mellon Equity Large Cap
Growth Fund
15
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Code. As such and by complying with
the applicable provisions of the Code regarding the sources of its
income, the timely distributions of its income to its shareholders,
and the diversification of its assets, the Fund will not be subject to
U.S. federal income tax on its investment company taxable income and
net capital gain which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a
federal income tax basis, were as follows:
Cost for federal income tax purposes $5,658,379
Gross unrealized appreciation 408,746
Gross unrealized depreciation (131,920)
----------
Net unrealized appreciation (depreciation) $ 276,826
==========
(6) 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, 2007
and earned interest on the invested collateral of $1,435 of which
$1,415 was rebated to borrowers or paid in fees. At March 31, 2007,
the Fund had securities valued at $81,752 on loan. See Schedule of
Investments for further detail on the security positions on loan and
collateral held.
(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/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. Each
fund/portfolio also pays an annual renewal fee, computed at a rate of
0.020 of 1% of the committed amount and allocated ratably to the
participating funds/portfolios. For the six months ended March 31,
2007, the expense allocated to the Fund was $9. The facility fee and
interest expense are included in miscellaneous expenses on the
statement of operations.
For the six months ended March 31, 2007, the Fund had average
borrowings outstanding of $9,000 for a total of three days and
incurred $4 of interest expense. At March 31, 2007 the Fund had no
borrowings outstanding.
16
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $255
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $255
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $255
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $257
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office) Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive Asset Management, LLC;
Boston, MA 02108 Officer formerly Senior Vice
7/24/65 President and Chief
Operating Officer,
Mellon Asset Management
("MAM") and Vice President
and Chief Financial
Officer, MAM
17
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
18
THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6913SA0307
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
Mellon Equity
Semiannual Report Micro Cap Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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 Micro 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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- -------------------------------------------------------------------------------------
Actual $1,000.00 $1,100.30 $7.07
Hypothetical (5% return
per year before expenses) $1,000.00 $1,018.20 $6.79
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 1.35%,
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
Mellon Equity Micro Cap Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -----------------------------------------------------------------------
MarkWest Hydrocarbon, Inc. Oil and Gas Producer 0.8%
Dynamex, Inc. Industrials 0.8
LifeCell Corp. Health Care 0.7
Enzon Pharmaceuticals, Inc. Health Care 0.7
Landauer, Inc. Technology 0.6
Vital Signs, Inc. Health Care 0.6
Ansoft Corp. Technology 0.6
ASTA Funding, Inc. Financial 0.6
SPSS, Inc. Technology 0.6
Gentiva Health Services, Inc. Health Care 0.6
---
6.6%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------
Consumer Cyclicals 6.3%
Consumer Hard Goods 4.7
Consumer Staples 2.5
Financials 19.8
Health Care 19.8
Industrials 10.3
Information 8.6
Materials 4.8
Oil & Gas Producer 3.1
Technology 17.0
Telecommunications 1.3
Utilities 1.7
Short-term and Other Net Assets 0.1
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--115.4%
EQUITIES--99.9%
Consumer Cyclicals--6.3%
AFC Enterprises, Inc. 2,100 $ 42,105
Blue Nile, Inc. (a) (b) 1,400 56,924
Books-A-Million, Inc. 2,000 28,480
Casual Male Retail Group, Inc. (b) 3,400 40,222
Cherokee, Inc. (b) 1,200 51,672
ExpressJet Holdings, Inc. (a) (b) 6,000 35,040
Hibbett Sports, Inc. 1,400 40,026
Monarch Casino & Resort, Inc. 2,600 67,600
Mothers Work, Inc. (a) 1,150 38,111
O'Charleys, Inc. (a) 2,900 55,941
Stride Rite Corp. 1,800 27,702
The Marcus Corp. 1,200 27,912
Volcom, Inc. 1,800 61,848
West Marine, Inc. (a) (b) 2,000 36,420
---------
610,003
---------
Consumer Hard Goods--4.7%
Aftermarket Technology Corp. (a) 2,000 48,560
Asbury Automotive Group, Inc. 2,000 56,500
Hooker Furniture Corp. 3,300 66,165
Kimball International, Inc., Class B Shares 1,800 34,704
Midas, Inc. 1,500 32,355
Movado Group, Inc. 1,200 35,340
RC2 Corp. (a) 1,200 48,468
Steinway Musical Instruments, Inc. 1,700 54,859
Town Sports International Holdings, Inc. 1,800 39,240
Universal Electronics, Inc. (a) 1,400 39,004
---------
455,195
---------
Consumer Staples--2.5%
Coca-Cola Bottling Co. 600 33,978
Core-Mark Holding Company, Inc. 1,500 53,520
Delek US Holdings, Inc. 1,800 34,434
Imperial Sugar Co. (b) 1,800 60,354
Playtex Products, Inc. 2,500 33,925
WD-40 Co. 1,000 31,710
---------
247,921
---------
Financials--19.8%
ACA Capital Holdings, Inc. 2,500 35,050
Ameris Bancorp 2,100 51,408
ASTA Funding, Inc. (b) 1,600 69,088
Bank of Granite Corp. 2,550 45,696
BankUnited Financial Corp. 2,000 42,420
Banner Corp. 900 37,395
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------
Financials (continued)
Brookline Bancorp, Inc. (b) 3,650 $ 46,246
Cascade Bancorp (b) 1,750 45,395
Centerstate Banks of Florida, Inc. (b) 2,000 35,340
City Bank Lynnwood WA (b) 1,800 57,798
City Holding Company 1,400 56,630
CoBiz, Inc. 2,200 43,802
Columbia Bancorp (b) 1,600 38,416
Darwin Professional Underwriters, Inc. (a) 1,750 44,013
Dollar Financial Corp. 1,600 40,480
First Commonwealth Financial Corp. (b) 2,800 32,900
First Financial Bancorp 2,400 36,264
First Financial Corp. 1,500 46,425
First Financial Holdings, Inc. 1,300 44,980
First Mercury Financial Corp. 2,700 55,485
First South Bancorp, Inc. (b) 1,500 46,035
Great Southern Bancorp, Inc. (b) 1,400 40,992
Greene County Bancshares, Inc. 1,000 33,910
Hersha Hospitality Trust 3,100 36,518
Horizon Financial Corp. 2,475 54,648
Integra Bank Corp. 1,400 31,206
James River Group, Inc. 1,800 56,358
Macatawa Bank Corp. 1,400 25,760
National Penn Bancshares, Inc. (b) 2,500 47,250
NBT Bancorp, Inc. (b) 1,200 28,116
Omega Financial Corp. (b) 1,300 37,063
Pinnacle Financial Partners, Inc. (a) (b) 1,800 54,918
Preferred Bank, Los Angeles 750 29,408
QC Holdings, Inc. 2,100 27,909
Safety Insurance Group, Inc. 800 32,096
Shore Bancshares, Inc. 2,000 52,900
Southside Bancshares, Inc. (b) 1,200 27,492
Suffolk Bancorp 900 29,052
SWS Group Inc. 2,000 49,620
TierOne Corp. 1,750 47,320
Virginia Financial Group, Inc. 2,000 51,860
Washington Trust Bancorp, Inc. 1,100 29,491
West Coast Bancorp/OR (b) 1,100 35,167
Westfield Financial, Inc. 4,300 46,096
World Acceptance Corp. (a) 800 31,960
WSFS Financial Corp. 750 48,360
---------
1,936,736
---------
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------
Health Care--19.8%
Albany Molecular Research, Inc. (a) 6,800 $ 66,980
Alliance Imaging, Inc. 6,000 52,380
Amsurg Corp. (a) 1,800 44,082
Analogic Corp. 650 40,872
BioLase Technology, Inc. (b) 3,000 29,190
Cambrex Corp. 2,700 66,420
CryoLife, Inc. 6,400 53,824
Cypress Bioscience, Inc. (a) 4,000 30,400
Datascope Corp. 1,400 50,666
Emergent Biosolutions, Inc. 4,950 66,429
Enzon Pharmaceuticals, Inc. (a) (b) 9,100 74,165
Five Star Quality Care, Inc. (a) (b) 2,600 26,728
Gentiva Health Services, Inc. 3,400 68,578
Greatbatch, Inc. (a) 2,500 63,750
Infinity Pharmaceuticals, Inc. 2,100 25,284
Kensey Nash Corp. 1,700 51,850
LifeCell Corp. (a) (b) 3,150 78,656
Martek Biosciences Corp. (a) (b) 2,800 57,736
Meridian Bioscience, Inc. 1,400 38,864
Merit Medical Systems, Inc. 4,000 50,200
MWI Veterinary Supply, Inc. (a) 1,950 64,350
Nighthawk Radiology Holdings, Inc. (a) 1,700 30,923
Noven Pharmaceuticals, Inc. (a) 2,800 64,960
Omrix Biopharmaceuticals, Inc. 650 24,876
Pain Therapeutics, Inc. (a) (b) 7,300 57,232
Palomar Medical Technologies, Inc. (a) 1,250 49,938
Pozen, Inc. (a) 4,200 61,950
PRA International (a) 2,350 50,666
Prestige Brands Holdings, Inc. (a) 4,250 50,363
Quidel Corp. (a) 4,000 48,000
Radiation Therapy Services, Inc. (a) 1,400 42,896
Savient Pharmaceuticals, Inc. (a) 3,300 39,666
Sciele Pharma, Inc. (a) 2,400 56,832
SuperGen, Inc. (a) (b) 7,500 44,250
SurModics, Inc. (a) (b) 1,300 46,800
Tanox, Inc. (b) 2,400 45,024
Viropharma, Inc. (a) (b) 3,550 50,943
Vital Signs, Inc. 1,400 72,772
---------
1,939,495
---------
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------
Industrials--10.3%
American Woodmark Corp. 1,000 $ 36,760
Apogee Enterprises, Inc. 2,500 50,100
Builders FirstSource, Inc. (a) 3,000 48,210
CIRCOR International, Inc. 1,100 39,270
Comfort Systems USA, Inc. 5,200 62,192
Ducommun, Inc. 2,500 64,325
Dynamex, Inc. (a) 3,400 86,496
Electro Rent Corporation 1,800 25,920
Enersys 1,800 30,924
EnPro Industries, Inc. (a) 1,400 50,470
Freightcar America, Inc. 1,100 52,987
Heico Corp. 1,400 51,086
Heidrick & Struggles International (a) 1,000 48,450
Insteel Industries, Inc. 2,700 45,333
Kaman Corp. 1,900 44,289
Lamson & Sessions Co. 1,600 44,464
Lufkin Industries, Inc. 750 42,135
Standard Parking Corp. (a) 1,100 38,907
Tennant Co. 1,800 56,682
Volt Information Sciences, Inc. (a) 1,350 35,357
Waste Industries USA, Inc. 1,800 49,446
---------
1,003,803
---------
Information--8.6%
Ambassadors Group, Inc. (b) 1,950 64,818
Ambassadors International, Inc. 1,350 62,289
COMSYS IT Partners, Inc. 2,000 39,800
CRA International, Inc. (a) 650 33,917
Ennis, Inc. 2,100 56,196
First Advantage Corp. 2,450 58,727
GSI Commerce, Inc. (a) 2,800 63,252
HMS Holdings Corp. 2,000 43,800
Infocrossing, Inc. (a) (b) 4,600 68,402
Internet Capital Group, Inc. (a) 4,900 52,430
Interwoven, Inc. (a) 3,750 63,375
Layne Christensen Co. (a) 1,200 43,704
Lionbridge Technologies, Inc. 7,500 38,175
PAREXEL International Corp. (a) 1,700 61,149
Saga Communications, Inc., Class A 1,500 14,595
SonicWall, Inc. (a) 4,900 40,964
World Wrestling Entertainment, Inc. 1,800 29,340
---------
834,933
---------
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------
Materials--4.8%
Brush Engineered Materials, Inc. (a) 1,200 $ 58,164
Buckeye Technologies, Inc. 2,400 31,152
Koppers Holdings, Inc. 2,000 51,320
Pioneer Companies, Inc. (a) 2,400 66,336
Quaker Chemical Corp. 1,500 35,715
Schnitzer Steel Industries, Inc. 1,600 64,272
Schulman A, Inc. 2,800 65,968
Spartech Corp. 1,200 35,208
Wausau Paper Corp. 4,300 61,748
---------
469,883
---------
Oil And Gas Producer--3.1%
Callon Petroleum Co. (a) 3,700 50,209
Dawson Geophysical Co. 1,250 61,913
MarkWest Hydrocarbon, Inc. (b) 1,400 86,800
Rosetta Resources, Inc. (a) 3,000 61,620
Trico Marine Services, Inc. (a) 1,000 37,260
---------
297,802
---------
Technology--17.0%
Actel Corp. (a) 1,700 28,084
Ansoft Corp. (a) 2,200 69,608
Cabot Microelectronics (a) 1,800 60,318
Captaris, Inc. 4,000 23,160
Cirrus Logic, Inc. (a) 7,200 55,152
Coinstar, Inc. (a) 1,600 50,080
Computer Programs & Systems, Inc. 1,450 38,889
Comtech Telecommunications Corp. 1,100 42,603
CPI International, Inc. 2,200 42,284
CTS Corp. 4,350 60,117
Digi International, Inc. (a) 5,300 67,310
EMS Technologies, Inc. (a) 3,000 57,810
Epicor Software Corp. 4,200 58,422
EPIQ Systems, Inc. 2,700 55,026
Exar Corp. (a) 3,000 39,720
i2 Technologies, Inc. 1,800 43,200
Integral Systems, Inc. 2,200 53,174
Inter-Tel, Inc. 2,200 52,008
Landauer, Inc. 1,450 73,196
LTX Corp. (a) 10,000 61,200
Manhattan Associates, Inc. 2,200 60,346
Methode Electronics, Inc. 4,400 64,988
Micrel, Inc. 4,000 44,080
OYO Geospace Corp. 950 67,374
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------
Technology (continued)
Packeteer, Inc. (a) 4,900 $ 60,858
Park Electrochemical Corp. 2,100 56,952
Radyne Corp. (a) 3,000 27,360
ScanSource, Inc. (a)(b) 1,500 40,260
SPSS, Inc. (a) 1,900 68,590
Supertex, Inc. (a) 850 28,229
Vignette Corp. 2,400 44,568
Zygo Corp. (a) 3,900 62,439
----------
1,657,405
----------
Telecommunication Services--1.3%
North Pittsburgh Systems, Inc. 2,100 45,717
NTELOS Holdings Corp. 2,200 42,284
Oplink Communications, Inc. (a) 2,200 39,534
----------
127,535
----------
Utilities--1.7%
Central Vermont Public Service Corp. 1,450 41,789
Laclede Group Inc. (b) 1,050 32,634
PICO Holdings, Inc. 1,500 64,065
UIL Holdings Corp. 750 26,019
----------
164,507
----------
Total Equities (Cost $9,445,016) 9,745,218
----------
INVESTMENT OF CASH COLLATERAL--15.5%
BlackRock Cash Strategies L.L.C. (Cost $1,512,789) 1,512,789 1,512,789
----------
TOTAL UNAFFILIATED INVESTMENTS--(Cost $10,957,805) 11,258,007
----------
AFFILIATED INVESTMENTS--0.2%
Dreyfus Institutional Preferred Plus Money Market Fund (c)(Cost $20,227) 20,227 20,227
----------
TOTAL INVESTMENTS--115.6% (Cost $10,978,032) 11,278,234
----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(15.6%) (1,524,241)
----------
NET ASSETS--100% $9,753,993
==========
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at March 31, 2007.
(c) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Statement of Assets and Liabilities March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on
loan, valued at $1,403,362 (Note 6)):
Unaffiliated investments (cost $10,957,805) $11,258,007
Affiliated investments (Note 1F) (cost $20,227) 20,227
Receivable for investments sold 51,058
Interest and dividends receivable 8,755
Prepaid expenses 14,940
-----------
Total assets 11,352,987
Liabilities
Collateral for securities on loan (Note 6) $ 1,512,789
Payable for investments purchased 56,843
Accrued professional fees 14,367
Accrued accounting, custody, administration and transfer agent fees (Note 2) 10,300
Accrued shareholder reporting fee (Note 2) 500
Accrued trustees' fees (Note 2) 642
Accrued chief compliance officer fee (Note 2) 375
Other accrued expenses and liabilities 3,178
-----------
Total liabilities 1,598,994
-----------
Net Assets $ 9,753,993
===========
Net Assets consist of:
Paid-in capital $ 9,270,711
Accumulated net realized gain 193,510
Accumulated net investment loss (10,430)
Net unrealized appreciation 300,202
-----------
Total Net Assets $ 9,753,993
===========
Shares of beneficial interest outstanding 475,626
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.51
===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 45,903
Dividend income from affiliated investments (Note 1F) 765
Securities lending income (Note 6) 7,142
--------
Total investment income 53,810
Expenses
Investment advisory fee (Note 2) $ 47,584
Accounting, custody, administration and transfer agent fees (Note 2) 28,164
Registration fees 9,439
Professional fees 8,954
Trustees' fees and expenses (Note 2) 1,450
Insurance expense 496
Miscellaneous expenses 13,117
--------
Total expenses 109,204
Deduct:
Waiver of invesment advisory fee (Note 2) (44,964)
--------
Net Expenses 64,240
--------
Net investment loss (10,430)
--------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 612,328
Change in unrealized appreciation (depreciation) on:
Investments 281,617
--------
Net realized and unrealized gain (loss) on investments 893,945
--------
Net Increase in Net Assets from Operations $883,515
========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
For the May 1, 2006
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (10,430) $ (6,221)
Net realized gain (loss) 612,328 (418,818)
Change in net unrealized appreciation (depreciation) 281,617 18,585
---------- ----------
Net increase (decrease) in net assets from investment operations 883,515 (406,454)
---------- ----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 50,002 9,226,930
---------- ----------
Net increase (decrease) in net assets from Fund share transactions 50,002 9,226,930
---------- ----------
Total Increase (Decrease) in Net Assets 933,517 8,820,476
Net Assets
At beginning of period 8,820,476 -
---------- ----------
At end of period [including net investment (loss) of ($10,430) and $0, $9,753,993 $8,820,476
respectively] ========== ==========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
For the May 1, 2006
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Net Asset Value, Beginning of Period $ 18.64 $ 20.00
------- -------
From Operations:
Net investment income (loss)* (a) (0.02) (0.01)
Net realized and unrealized gains (loss) on investments 1.89 (1.35)
------- -------
Total from operations 1.87 (1.36)
------- -------
Net Asset Value, End of Period $ 20.51 $ 18.64
======= =======
Total Return (b) 10.03%(d) (6.80%)(d)
Ratios/Supplemental data:
`Expenses (to average daily net assets)* 1.35%(c) 1.35%(c)
Net Investment Income (Loss) (to average daily net assets)* (0.22%)(c) (0.18%)(c)
Portfolio Turnover 83%(d) 103%(d)
Net Assets, End of Period (000's omitted) $ 9,754 $ 8,820
- ---------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the Fund
for all or a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income (loss) per share (a) $ (0.12) $ (0.19)
Ratios (to average daily net assets):
Expenses 2.29%(c) 3.72%(c)
Net investment income (loss) (1.16%)(c) (2.55%)(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) Calculated on an annualized basis.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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 Micro Cap Fund (the "Fund"), which commenced operations on
May 1, 2006, 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 micro cap
U.S. companies with total market capitalizations equal to or less than $1
billion at the time of investment.
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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities
not listed on an exchange or national securities market, or securities for
which there were no reported transactions, are valued at the last
calculated mean price (average of last bid and last offer). Securities that
are fixed income securities, other than short-term instruments with less
than sixty days remaining to maturity, for which market prices are readily
available, are valued at their current market value on the basis of
quotations, which may be furnished by a pricing service or dealers in such
securities. 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. With respect to any portion of the Fund's
assets that are invested in one or more open ended regulated investment
companies ("RICs"), the Fund's net asset value ("NAV") will be calculated
based upon the NAVs of such RICs.
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. 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 the shareholder elects
to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences which may result in reclassifications, are primarily due
to post-October losses.
Permanent book and tax basis differences relating to shareholder
distributions 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 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.
15
Mellon Institutional Funds Investment Trust
Mellon Equity Micro 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.
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.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" (the "Interpretation"). The
Interpretation establishes for all entities, including pass-through
entities such as the Fund, a minimum threshold for financial statement
recognition of the benefit of positions taken in filing tax returns
(including whether an entity is taxable in a particular jurisdiction), and
requires certain expanded tax disclosures. Adoption of FIN 48 is required
for fiscal years beginning after December 15, 2006 and is to be applied to
all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and its impact in the financial
statements has not yet been determined.
In addition, on September 20, 2006, the FASB released Statement of
Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS
157"). FAS 157 establishes an authoritative definition of fair value, sets
out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS 157 is
required for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. At this time, management is evaluating
the implications of FAS 157 and its impact, if any, in the financial
statements has not yet been determined.
(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
monthly at the annual rate of 1.00% 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 1.35% of the Fund's average daily net assets for the six month
period ended March 31, 2007. Pursuant to this arrangement, for the six
month period ended March 31, 2007, Mellon Equity voluntarily reimbursed
$44,964 of the Fund's operating expenses. This arrangement is voluntary and
temporary and may be discontinued or revised by Mellon Equity at any time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, Mellon Equity
would become an indirect wholly-owned subsidiary of The Bank of New York
Mellon Corporation. The transaction is subject to certain regulatory
approvals and the approval of BNY's and MFC's shareholders, as well as
other customary conditions to closing. Subject to such approvals and the
satisfaction of the other conditions, MFC and BNY expect the transaction to
be completed in the third quarter of 2007.
The Trust 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 $3,134 for the six months ended March 31, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of Mellon Financial Corporation and an affiliate
of Mellon Equity, 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 $25,030 for the
six months ended March 31, 2007.
The Trust 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 earned $2,634 for the six
months ended March 31, 2007. See Note 6 for further details.
16
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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,
2007, the Fund was charged $2,105, which is included as miscellaneous
expenses in the statement of operations. 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 Fund 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of Standish
Mellon, to provide printing and fulfillment services for the Fund. Pursuant
to this agreement, the Fund was charged $500, which is included as
miscellaneous expenses in the statement of operations, for the six months
ended March 31, 2007.
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 six months ended March 31, 2007 were as follows:
Purchases Sales
----------- -----------
Non-U.S. Government Securities $ 7,911,721 $ 7,883,111
=========== ===========
(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
For the May 1, 2006
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Shares sold 2,520 473,106
----- -------
Net increase (decrease) 2,520 473,106
===== =======
At March 31, 2007, two shareholders of record (including MBC Investments
Corp., a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of the Fund) held in the aggregate 99.2% 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, 2007, the Fund did not
assess any redemption fees.
17
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $10,978,032
-----------
Gross unrealized appreciation 706,587
Gross unrealized depreciation (406,385)
-----------
Net unrealized appreciation (depreciation) $ 300,202
===========
(6) 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, 2007 and
earned interest on the invested collateral of $25,537 of which $18,395 was
rebated to borrowers or paid in fees. At March 31, 2007, the Fund had
securities valued at $1,403,362 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
(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/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. Each fund/portfolio also pays an annual renewal fee, computed
at a rate of 0.020 of 1% of the committed amount and allocated ratably to
the participating funds/portfolios. For the six months ended March 31,
2007, the expense allocated to the Fund was $58. The facility fee and
interest expense are included in miscellaneous expenses on the statement of
operations.
For the six months ended March 31, 2007, the Fund had average borrowings
outstanding of $1,000 for a total of one day and incurred $0 of interest
expense. At March 31, 2007, the Fund had no borrowings outstanding.
18
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $264
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $264
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $264
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $268
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $ 0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive Asset Management, LLC;
Boston, MA 02108 Officer formerly Senior Vice
7/24/65 President and Chief
Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
19
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
20
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[LOGO]Mellon
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Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6915SA0307
[LOGO] Mellon
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Mellon Institutional Funds
Semiannual Report Mellon Institutional
Market Neutral Fund
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March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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)
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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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
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Actual $1,000.00 $1,007.40 $6.26
Hypothetical (5% return
per year before expenses) $1,000.00 $1,018.70 $6.29
- ----------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.25% (excluding
fees in lieu of dividends), 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
Mellon Institutional Market Neutral Fund
Portfolio Information as of March 31, 2007 (Unaudited)
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Percentage of
Top Ten Long Holdings* Sector Net Assets
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NutruSystem, Inc. Consumer Discretionary 2.0%
XTO Energy, Inc. Energy 1.9
Walgreen Co. Consumer Staples 1.8
Chesapeake Energy Corp. Energy 1.7
Wellcare Group, Inc. Health Care 1.6
Bank of America Corp. Financials 1.6
Ohio Casualty Corp. Financials 1.5
Kohl's Corp. Consumer Discretionary 1.5
Terex Corp. Industrials 1.4
Quest Diagnostics, Inc. Health Care 1.3
----
16.3%
* Excluding short-term investments.
Percentage of
Top Ten Short Holdings* Sector Net Assets
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RH Donnelley Corp. Consumer Discretionary 1.6%
Urban Outfitters, Inc. Consumer Discretionary 1.6
AON Corp. Financials 1.6
Panera Bread Co. Consumer Discretionary 1.6
Owens-Illinois, Inc. Materials 1.6
Scientific Games Corp. Consumer Discretionary 1.5
Equitable Resources, Inc. Utilities 1.5
Lamar Advertising Co. Consumer Discretionary 1.5
Shaw Group, Inc. Industrials 1.4
Vulcan Materials Co. Materials 1.3
----
15.2%
* Excluding short-term investments.
Net Equity
Economic Sector Allocation* Long% Short% Exposure%
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Consumer Discretionary 17.9 (22.5) (4.6)
Consumer Staples 8.5 (6.7) 1.8
Energy 7.2 (5.5) 1.7
Financials 11.4 (9.5) 1.9
Health Care 10.5 (9.3) 1.2
Industrials 9.5 (10.8) (1.3)
Information Technology 18.2 (13.4) 4.8
Materials 6.8 (8.5) (1.7)
Telecommunication Services 0.6 (2.7) (2.1)
Utilities 7.2 (9.1) (1.9)
---- ----- ----
97.8% (98.0%) (0.2%)
* Excluding short-term investments.
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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EQUITIES--97.8%(a)
Consumer Discretionary--17.9%
Aeropostale, Inc. (b) 300 $ 12,069
American Eagle Outfitters 700 20,993
Big Lots, Inc. 200 6,256
Brinker International, Inc. 700 22,890
CBS Corp., Class B 400 12,236
Circuit City Stores, Inc. 1,600 29,648
Darden Restaurants, Inc. 500 20,595
Dillard's Inc. 200 6,546
Family Dollar Stores, Inc. 600 17,772
Gentex Corp. 400 6,500
Harley-Davidson, Inc. 200 11,750
ITT Educational Services, Inc. 100 8,149
Kohl's Corp. (b) 500 38,305
Mattel, Inc. 1,100 30,327
Meredith Corp. 500 28,695
Netflix, Inc. 300 6,957
NutruSystem, Inc. 1,000 52,410
Omnicom Group 100 10,238
Pool Corp. 800 28,640
Sherwin-Williams Corp. 300 19,812
Starwood Hotels & Resorts Worldwide, Inc. 100 6,485
The DIRECTV Group, Inc. (b) 1,200 27,684
The McClatchy Co. 600 18,966
TJX Cos, Inc. 800 21,568
----------
465,491
----------
Consumer Staples--8.5%
Alberto-Culver Co. 600 13,728
Corn Products International, Inc. 200 7,118
Estee Lauder Companies, Class A 200 9,770
Hormel Foods Corp. 300 11,157
McCormick & Co., Inc. 700 26,964
Pepsi Bottling Group, Inc. 900 28,701
Safeway, Inc. 600 21,984
Sysco Corp. 900 30,447
The Kroger Co. 900 25,425
Walgreen Co. 1,000 45,890
----------
221,184
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Energy--7.2%
Anadarko Petroleum Corp. 200 8,596
Chesapeake Energy Corp. 1,400 43,232
Exxon Mobil Corp. 200 15,090
Holly Corp. 500 29,650
Patterson-UTI Energy, Inc. 900 20,196
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Energy (continued)
Superior Energy Services, Inc. (b) 300 $ 10,341
Tidewater, Inc. 200 11,716
XTO Energy, Inc. 900 49,329
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188,150
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Financials--11.4%
AmeriCredit Corp. (b) 700 16,002
Bank of America Corp. 800 40,816
CB Richard Ellis Group, Inc., Class A Shares 100 3,418
Cincinnati Financial Corp. 800 33,920
CIT Group, Inc. 300 15,876
HCC Insurance Holdings, Inc. 600 18,480
IndyMac Bancorp, Inc. 200 6,410
Jones Lang Lasalle 100 10,428
Lehman Brothers Holdings, Inc. 300 21,021
National City Corp. 300 11,175
Ohio Casualty Corp. 1,300 38,935
Reinsurance Group of America 100 5,772
SAFECO Corp. 300 19,929
StanCorp Financial Group, Inc. 400 19,668
Wells Fargo & Co. 700 24,101
Whitney Holding Corp. 300 9,174
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295,125
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Health Care--10.5%
AmeriSource Bergen Corp. 600 31,650
Cytyc Corp. (b) 400 13,684
Edwards Lifesciences Corp. (b) 200 10,140
Forest Laboratories, Inc. (b) 200 10,288
Health Management Associates, Inc. 1,000 10,870
Humana, Inc. 100 5,802
Kinetic Concepts, Inc. (b) 300 15,192
Lifepoint Hospitals, Inc. (b) 400 15,288
Lincare Holdings, Inc. (b) 300 10,995
McKesson Corp. 200 11,708
Mylan Laboratories, Inc. 1,400 29,596
Pfizer, Inc. 300 7,578
Quest Diagnostics Inc. 700 34,909
Schering-Plough Corp. 600 15,306
Ventana Medical systems, Inc. 200 8,380
Wellcare Group, Inc. (b) 500 42,625
----------
274,011
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Industrials--9.5%
Allied Waste Industries, Inc. (b) 2,400 30,216
AMR Corp. 600 18,270
Continental Airlines, Inc. (b) 700 25,473
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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Industrials (continued)
CSX Corp. 300 $ 12,015
Gardner Denver, Inc. (b) 600 20,910
Jacobs Engineering Group, Inc. 200 9,330
Korn/Ferry International (b) 500 11,470
Lockheed Martin Corp. 200 19,404
Manpower, Inc. 300 22,131
Paccar, Inc. 100 7,340
Terex Corp. 500 35,880
The Manitowoc Co., Inc. 400 25,412
Thomas & Betts Corp. (b) 200 9,764
----------
247,615
----------
Information Technology--18.2%
Advent Software Inc. (b) 200 6,974
Alliance Data Systems Corp. (b) 200 12,324
Apple Computer, Inc. 300 27,873
AVX Corp. 500 7,600
BEA Systems, Inc. 600 6,954
Convergys Corp. (b) 400 10,164
CSG Systems International , Inc. (b) 300 7,506
Dolby Laboratories, Inc., Class A 200 6,902
Fiserv, Inc. (b) 400 21,224
Ingram Micro, Inc., Class A (b) 1,000 19,310
Intersil Corp., Class A Shares 900 23,841
Jabil Circuit, Inc. 800 17,128
Jack Henry & Associates, Inc. 700 16,835
Lam Research Corp. (b) 400 18,936
Lexmark International, Inc. (b) 200 11,692
Mentor Graphics Corp. 1,100 17,974
Mettler-Toledo International, Inc.--ADR (b) 100 8,957
Molex, Inc. 800 22,560
MPS Group, Inc. (b) 800 11,320
National Instruments Corp. 1,000 26,230
Network Appliance, Inc. 800 29,216
Newport Corp. (b) 400 6,548
Novellus Systems, Inc. (b) 700 22,414
Polycom, Inc. 700 23,331
SRA International, Inc. 600 14,616
Synopsys, Inc. 1,200 31,476
Total System Services, Inc. 900 28,665
Western Digital Corp. 400 6,724
XILINX, Inc. 300 7,719
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473,013
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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, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Materials--6.8%
Alcoa, Inc. 600 $ 20,340
Bemis Co. 600 20,034
Crown Holdings, Inc. 500 12,230
Eagle Materials, Inc. 300 13,389
Ecolab, Inc. 600 25,800
International Paper Co. 200 7,280
Nucor Corp. 100 6,513
Olin Corp. 1,100 18,634
Packaging Corp. of America 500 12,200
Rohm & Haas Co. 200 10,344
Steel Dynamics, Inc. 300 12,960
Valspar Corp. 600 16,698
----------
176,422
----------
Telecommunication Services--0.6%
Centurytel, Inc. 100 4,519
Telephone & Data Systems, Inc. 200 11,924
----------
16,443
----------
Utilities--7.2%
AGL Resources, Inc. 400 17,088
Allegheny Energy, Inc. (b) 200 9,828
CenterPoint Energy, Inc. 1,100 19,734
Duke Energy Corp. 800 16,232
Energy East Corp. 900 21,924
NRG Energy, Inc. (b) 400 28,816
Oneok, Inc. 200 9,000
P G & E Corp. 600 28,962
Sierra Pacific Resources (b) 1,000 17,380
Westar Energy, Inc. 700 19,264
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188,228
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TOTAL EQUITIES (Cost $2,374,706) 2,545,682
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Short-Term Investments--14.4% Rate Par Value
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Bear Stearns Companies Inc. Repo Due 4/2/2007 (Dated 3/30/2007,
collateralized by U.S. Treasury Strip 7.50% due 11/15/2016
valued of $424,104 Repurchase proceeds are $373,871) (Cost $373,691) 5.26% 373,691 373,691
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TOTAL INVESTMENTS--112.2% (Cost $2,748,397) 2,919,373
----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(12.2)% (319,934)
----------
NET ASSETS--100% $2,599,439
==========
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 Sold Short--March 31, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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EQUITIES SOLD SHORT--(98.0%)
Consumer Discretionary--(22.5%)
Advance Auto Parts, Inc. (100) $ (3,855)
Apollo Group, Inc., Class A (200) (8,780)
Barnes & Noble, Inc. (100) (3,945)
Borders Group, Inc. (1,100) (22,462)
BorgWarner, Inc. (100) (7,542)
Boyd Gaming Corp. (300) (14,292)
Career Education Corp. (700) (21,350)
Chico's FAS, Inc. (b) (800) (19,544)
Coldwater Creek, Inc. (b) (700) (14,196)
Eastman Kodak Co. (1,400) (31,584)
Entercom Communications Corp. (200) (5,636)
Federated Department Stores, Inc. (300) (13,515)
H&R Block, Inc. (1,000) (21,040)
Johnson Controls, Inc. (100) (9,462)
Lamar Advertising Co. (600) (37,782)
Liz Claiborne, Inc. (100) (4,285)
MGM Mirage (200) (13,904)
Newell Rubbermaid, Inc. (200) (6,218)
Pacific Sunware of California (b) (300) (6,249)
Panera Bread Co. (b) (700) (41,342)
Penn National Gaming, Inc. (300) (12,726)
Polo Ralph Lauren Corp. (200) (17,630)
RadioShack Corp. (500) (13,515)
Regis Corp. (500) (20,185)
RH Donnelley Corp. (b) (600) (42,534)
Scientific Games Corp. (b) (1,200) (39,396)
Starbucks Corp. (b) (700) (21,952)
The Cheesecake Factory (b) (200) (5,330)
The Stanley Works (100) (5,536)
The Timberland Co. (b) (500) (13,015)
Tiffany & Co. (100) (4,548)
Tractor Supply Co. (500) (25,750)
Tupperware Brands Corp. (500) (12,465)
Urban Outfitters, Inc. (b) (1,600) (42,416)
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(583,981)
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Consumer Staples --(6.7)%
Avon Products, Inc. (300) (11,178)
BJ'S Wholesale Club, Inc. (b) (200) (6,766)
Dean Foods Corp. (300) (14,022)
Energizer Holdings, Inc. (100) (8,533)
Hansen Natural Corp. (500) (18,940)
Ruddick Corp. (800) (24,064)
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 Sold Short--March 31, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Consumer Staples (continued)
Sara Lee Corp. (1400) $ (23,688)
Supervalu, Inc. (300) (11,721)
The Hershey Co. (500) (27,330)
Tyson Foods, Inc., Class A Shares (1400) (27,174)
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(173,416)
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Energy-- (5.5)%
Diamond Offshore Drilling, Inc. (400) (32,380)
Massey Energy (700) (16,793)
Pride International, Inc. (b) (300) (9,030)
Range Resources Corp. (300) (10,020)
Schlumberger Ltd (300) (20,730)
Southwestern Energy Co. (b) (700) (28,686)
Transocean, Inc. (b) (300) (24,510)
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(142,149)
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Financials--(9.5)%
AON Corp. (1100) (41,756)
City National Corp., Class A (100) (7,360)
Conseco, Inc. (b) (2000) (34,600)
First American Corp. (300) (15,216)
First Horizon National Corp. (300) (12,459)
Forest City Enterprises, Inc. (300) (19,854)
Mercury General Corp. (400) (21,216)
Nuveen Investments, Class A (600) (28,380)
People's Bank/Bridgeport CT (500) (22,200)
The PMI Group, Inc. (200) (9,044)
The Travelers Cos, Inc. (200) (10,354)
Wilmington Trust Corp. (200) (8,434)
Zions Bancorporation (200) (16,904)
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(247,777)
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Health Care-- (9.3)%
Abbott Laboratories (500) (27,900)
Abraxis Bioscience, Inc. (b) (200) (5,342)
Allergan, Inc. (200) (22,164)
Barr Pharmaceuticals, Inc. (b) (500) (23,175)
Boston Scientific Corp. (b) (700) (10,178)
Bristol-Myers Squibb Co. (1000) (27,760)
Covance, Inc. (b) (100) (5,934)
Omnicare, Inc. (700) (27,839)
Pediatrix Medical Group, Inc. (b) (500) (28,530)
PerkinElmer, Inc. (700) (16,954)
Pharmaceutical Product Development, Inc. (400) (13,476)
Resmed, Inc. (b) (200) (10,074)
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 Sold Short--March 31, 2007 (Unaudited)
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Value
Security Shares (Note 1A)
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Health Care (continued)
Respironics, Inc. (b) (100) $ (4,199)
St. Jude Medical, Inc. (300) (11,283)
Watson Pharmaceuticals, Inc. (300) (7,929)
----------
(242,737)
----------
Industrials-- (10.8)%
AGCO Corp. (b) (200) (7,394)
AirTran Holdings, Inc. (b) (1,100) (11,297)
Alaska Air Group, Inc. (200) (7,620)
Alexander & Baldwin, Inc. (600) (30,264)
DRS Technologies, Inc. (300) (15,651)
Expeditors International Washington, Inc. (500) (20,660)
Flowserve Corp. (200) (11,438)
Fluor Corp. (100) (8,972)
GATX Corp. (600) (28,680)
General Dynamics Corp. (100) (7,640)
HNI Corp. (600) (27,558)
Hubbell, Inc. (500) (24,120)
Rockwell Automation, Inc. (100) (5,987)
Shaw Group, Inc. (b) (1,200) (37,524)
Stericycle, Inc. (b) (300) (24,450)
The Brink's Co. (200) (12,690)
----------
(281,945)
----------
Information Technology-- (13.4)%
Adobe Systems, Inc. (b) (700) (29,190)
Adtran, Inc. (200) (4,870)
Advanced Micro Devices, Inc. (1,300) (16,978)
Avid Technology, Inc. (b) (400) (13,952)
CA, Inc. (1,000) (25,910)
Ciena Corp. (300) (8,385)
Dell, Inc. (b) (500) (11,605)
Electronic Arts, Inc. (b) (500) (25,180)
Hewitt Associates, Inc., Class A Shares (b) (1,100) (32,153)
Intel Corp. (800) (15,304)
Iron Mountain, Inc. (b) (600) (15,678)
Linear Technology Corp. (200) (6,318)
Microsoft Corp. (700) (19,509)
National Semiconductor Corp. (200) (4,828)
Sandisk Corp. (b) (600) (26,280)
Silicon Laboratories, Inc. (b) (900) (26,928)
Tech Data Corp. (b) (100) (3,581)
The Bisys Group, Inc. (2,300) (26,358)
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 Sold Short--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Information Technology (continued)
VeriFone Holdings, Inc. (200) $ (7,346)
Zebra Technologies Corp. (700) (27,027)
----------
(347,380)
----------
Materials--(8.5)%
Bowater, Inc. (900) (21,438)
Cytec Industries, Inc. (400) (22,496)
Glatfelter (1,400) (20,874)
Martin Marietta Materials, Inc. (100) (13,520)
Monsanto Co. (100) (5,496)
Owens-Illinois, Inc. (b) (1,600) (41,232)
RPM International, Inc. (400) (9,240)
Smurfit-Stone Container Corp. (b) (900) (10,134)
The Mosaic Co. (b) (1,000) (26,660)
Vulcan Materials Co. (300) (34,944)
Weyerhaeuser Co. (189) (14,126)
----------
(220,160)
----------
Telecommunication Services-- (2.7)%
AT&T, Inc. (400) (15,772)
NII Holdings, Inc. (b) (200) (14,836)
SBA Communications Corp. (b) (1,000) (29,550)
Sprint Nextel Corp. (500) (9,480)
----------
(69,638)
----------
Utilities-- (9.1)%
Black Hills Corp. (600) (22,062)
Dominion Resource, Inc.--VA (300) (26,631)
DPL, Inc. (1,000) (31,090)
Equitable Resources, Inc. (800) (38,656)
Exelon Corp. (400) (27,484)
FPL Group, Inc. (100) (6,117)
Integrys Energy Group (400) (22,204)
National Fuel Gas Co. (400) (17,304)
Progress Energy, Inc. (200) (10,088)
Public Service Enterprise Group, Inc. (300) (24,912)
Questar Corp. (100) (8,921)
----------
(235,469)
----------
Total Equities Sold Short (Proceeds $2,408,793) (2,544,652)
----------
Notes to Schedule of Investments:
ADR--American Depository Receipts
(a) Securities are pledged as collateral for short sales.
(b) Non-income producing security.
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, 2007 (Unaudited)
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Assets
Investment in securities, at value (Note 1A):
Unaffiliated investments (cost $2,748,397) $2,919,373
Receivable from brokers for proceeds on securities sold short (Note 1F) 2,408,793
Receivable for investments sold 140,100
Receivable from advisor 38,863
Interest and dividends receivable 8,933
Prepaid expenses 12,949
----------
Total assets 5,529,011
Liabilities
Due to prime broker $ 229,434
Securities sold short, at value (proceeds $2,408,793) (Note 1F) 2,544,652
Payable for investments purchased 103,875
Accrued professional fees 24,674
Accrued accounting, custody, administration and transfer agent fees (Note 2) 22,305
Accrued chief compliance officer fee (Note 2) 714
Accrued trustees' fees (Note 2) 572
Accrued shareholder reporting expenses (Note 2) 950
Other accrued expenses and liabilities 2,396
----------
Total liabilities 2,929,572
----------
Net Assets $2,599,439
==========
Net Assets consist of:
Paid-in capital $2,612,566
Accumulated net realized loss (67,966)
Undistributed net investment income 19,722
Net unrealized appreciation 35,117
----------
Total Net Assets $2,599,439
==========
Shares of beneficial interest outstanding 130,637
==========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 19.90
==========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $65,032
Dividend income 15,097
Dividend income from affiliated investments (Note 1G) 2,060
-------
Total investment income 82,189
Expenses
Investment advisory fee (Note 2) $ 12,911
Accounting, custody, administration and transfer agent fees (Note 2) 35,375
Professional fees 24,640
Dividends on securities sold short (Note 1F) 20,245
Registration fees 11,412
Trustees' fees and expenses (Note 2) 1,296
Insurance expense 534
Miscellaneous expenses 12,238
--------
Total expenses 118,651
Deduct:
Waiver of invesment advisory fee (Note 2) (12,911)
Reimbursement of Fund operating expenses (Note 2) (69,355)
--------
Total expense deduction (82,266)
--------
Net expenses 36,385
-------
Net investment income 45,804
-------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 170,393
Short sales (207,740)
--------
Net realized gain (loss) (37,347)
Change in unrealized appreciation (depreciation) on:
Investments 147,566
Short sales (136,846)
--------
Change in net unrealized appreciation (depreciation) 10,720
-------
Net realized and unrealized gain (loss) on investments (26,627)
-------
Net Increase in Net Assets from Operations $19,177
=======
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
For the December 21, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- -------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 45,804 $ 65,436
Net realized gain (loss)
Investments 170,393 48,267
Short sales (207,740) (76,103)
Change in net unrealized appreciation (depreciation)
Investments 147,566 23,410
Short sales (136,846) 987
---------- ----------
Net increase (decrease) in net assets from investment operations 19,177 61,997
---------- ----------
Distributions to Shareholders (Note 1C)
From net investment income (94,301) --
---------- ----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 767 2,520,514
Value of shares issued to shareholders in reinvestment of distributions 94,301 --
Cost of shares redeemed (net of redemption fee of $1 and $0, respectively) (3,016) --
---------- ----------
Net increase (decrease) in net assets from Fund share transactions 92,052 2,520,514
---------- ----------
Total Increase (Decrease) in Net Assets 16,928 2,582,511
Net Assets
At beginning of period 2,582,511 --
---------- ----------
At end of period (including net investment
income of $19,722 and $68,219, respectively) $2,599,439 $2,582,511
========== ==========
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
For the December 21, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Net Asset Value, Beginning of Period $20.50 $20.00
------ ------
From Operations:
Net investment income* (a) 0.36 0.52
Net realized and unrealized gains (loss) on investments (0.21) (0.02)
------ ------
Total from operations 0.15 0.50
------ ------
Less Distributions to Shareholders:
From net investment income (0.75) --
------ ------
Net Asset Value, End of Period $19.90 $20.50
====== ======
Total Return (b) (d) 0.74% 2.50%
Ratios/Supplemental data:
Expenses (to average daily net assets)
including dividends on securities sold short* 2.82%(c) 2.57%(c)
Expenses (to average daily net assets)
excluding dividends on securities sold short* 1.25%(c) 1.39%(c)
Net Investment Income (to average daily net assets)* 3.55%(c) 3.30%(c)
Portfolio Turnover 164%(d) 341%(d)
Net Assets, End of Period (000's omitted) $2,599 $2,583
- ---------------
* 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 excluding waivers and reimbursement would have been:
Net investment income (loss) per share (a) $(0.28) $(0.57)
Ratios (to average daily net assets):
Expenses including dividends on securities sold short 9.19%(c) 9.45%(c)
Expenses excluding dividends on securities sold short 7.62%(c) 8.27%(c)
Net investment income (loss) (2.82%)(c) (3.58%)(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) Calculated 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) Organization and 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.
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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities
not listed on an exchange or national securities market, or securities for
which there were no reported transactions, are valued at the last
calculated mean price (average of last bid and last offer). Securities that
are fixed income securities, other than short-term instruments with less
than sixty days remaining to maturity, for which market prices are readily
available, are valued at their current market value on the basis of
quotations, which may be furnished by a pricing service or dealers in such
securities. 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. With respect to any portion of the Fund's
assets that are invested in one or more open-end regulated investment
companies ("RICs"), the Fund's net asset value ("NAV") will be calculated
based upon the NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange.
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. 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 the shareholder elects
to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences which
may result in reclassifications, are primarily due to post-October losses.
Permanent book and tax basis differences relating to shareholder
distributions 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.
17
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
F. Securities Sold Short
The Fund sells 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. 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. Dividends paid by the issuer of
the security sold short are paid by the Fund to the lender, recorded on the
ex-date of the dividend and recorded 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.
H. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold for
financial statement recognition of the benefit of positions taken in filing
tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact in
the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
18
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to Franklin Portfolio for overall
investment advisory and 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 six
months ended March 31, 2007. Pursuant to this arrangement, for the six
months ended March 31, 2007, Franklin Portfolio voluntarily waived its
investment advisory fee in the amount of $12,911 and reimbursed the Fund
for $69,355 of its operating expenses. This arrangement is voluntary and
temporary and may be discontinued or revised by Franklin Portfolio at any
time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, Franklin
Portfolio would become an indirect wholly-owned subsidiary of The Bank of
New York Mellon Corporation. The transaction is subject to certain
regulatory approvals and the approval of BNY's and MFC's shareholders, as
well as other customary conditions to closing. Subject to such approvals
and the satisfaction of the other conditions, MFC and BNY expect the
transaction to be completed in the third quarter of 2007.
The Trust 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 $3,624 for the six months ended March 31, 2007.
Prior to January 1, 2007, The Trust compensated Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon Financial Corporation and an
affiliate of Franklin Portfolio, for custody services for the Fund. For
these services the Fund paid 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 $7,211 for the six months ended March 31,
2007.
Effective January 1, 2007, The Trust entered into an agreement with
Custodial Trust Company ("CTC") to provide custody services for the Fund.
For these services, the Fund pays a fixed fee plus asset and transaction
based fees, as well as out-of-pocket expenses. CTC is not an affiliate of
the Fund.
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,
2007, the Fund was charged $2,106, which is included in miscellaneous
expenses in the statement of operations. No other director, officer or
employee of Franklin Portfolio or its affiliates receives any compensation
from the Trust or the Fund for serving as an officer or Trustee of the
Trust. The Fund pays each Trustee who is not a director, officer or
employee of Franklin Portfolio 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of Franklin
Portfolio, to provide printing and fulfillment services for the Fund.
Pursuant to this agreement, the Fund was charged $950, which is included in
miscellaneous expenses in the statement of operations, for the six months
ended March 31, 2007.
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, 2007, the Fund was not charged an administrative
service fee.
(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, 2007 were as follows:
Covers on Securities
Purchases Securities Sold Short Sales Sold Short
---------- --------------------- ---------- ----------
Non-U.S. Government Securities $1,918,633 2,268,957 $2,268,845 2,061,217
========== ========= ========== =========
19
Mellon Institutional Funds Investment Trust
Mellon Institutional Market Neutral 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
For the (commencement of
Six Months Ended operations) to
March 31, 2007 September 30, 2006
---------------- ------------------
Shares sold 39 125,986
Shares issued to shareholders
in reinvestment of distributions 4,765 --
Shares redeemed (153) --
----- -------
Net increase (decrease) 4,651 125,986
===== =======
At September 30, 2006, one shareholder of record (MBC Investments Corp., a
wholly-owned subsidiary of Mellon Financial Corporation and an affiliate of
the Fund) held 99.3% 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, 2007, the Fund received
$1 in redemption fees and is reflected in the cost of shares redeemed.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $5,157,190
----------
Gross unrealized appreciation $ 316,358
Gross unrealized depreciation (281,241)
----------
Net unrealized appreciation (depreciation) $ 35,117
==========
(6) 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, 2007, the Fund was not
charged a commitment fee.
During the six months ended March 31, 2007, the Fund did not borrow under
the credit facility.
20
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $254
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $254
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $254
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $255
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive Asset Management, LLC;
Boston, MA 02108 Officer formerly Senior Vice
President and Chief
Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
21
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
6911SA0307
[LOGO Mellon
---------------------------
Mellon Institutional Funds]
Semiannual Report Newton
International Equity Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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 (October 1, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- -----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,113.90 $6.06
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.20 $5.79
- ----------
+ Expense are 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 one half year period).
3
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- ----------------------------------------------------------------------------------------------------------
Novartis AG Switzerland Healthcare 2.7%
Nestle SA Switzerland Consumer Staples 2.6
Toyota Motor Corp. Japan Consumer Discretionary 2.3
GlaxoSmithKline PLC United Kingdom Healthcare 2.2
E On AG Germany Utilities 2.1
Roche Holding AG Switzerland Healthcare 2.1
ICAP PLC United Kingdom Financials 1.9
Deutsche Boerse AG Germany Financials 1.7
British American Tobacco PLC United Kingdom Consumer Staples 1.7
Standard Chartered PLC United Kingdom Financials 1.7
----
21.0%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------
Europe ex U.K. 48.7%
U.K. 14.7
Far East ex Japan 16.5
Japan 11.1
Latin America 7.9
North America 0.4
Middle East/Africa 0.7
-----
100.0%
* Excludes short-term securities.
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.5%
Equities--98.6%
Argentina--0.3%
Pampa Holding SA--GDR 7,171 $ 139,316
-----------
Australia--3.2%
ABC Learning Centres Ltd. 44,516 262,048
Telstra Corp.--IR 69,312 179,907
Telstra Corp. Ltd. 145,581 548,560
Transurban Group 64,089 402,142
-----------
1,392,657
-----------
Belgium--0.7%
KBC Groupe 2,545 316,490
-----------
Brazil--6.4%
All America Latina Logistica 46,739 566,960
Companhia de Bebidas das Americas ADR (a) 8,573 471,172
Diagnosticos da America SA 21,179 467,948
Gafisa SA 24,832 313,520
Natura Cosmeticos SA 33,800 380,790
Petroleo Brasileiro SA 6,326 565,228
-----------
2,765,618
-----------
Canada-- 0.4%
Oncolytics Biotech Inc 93,674 170,434
-----------
Chile--0.6%
Empresa Nacional de Telecomunicaciones SA 17,289 248,327
-----------
China--0.8%
Jiangsu Expressway Co., Ltd. 468,000 365,386
-----------
Colombia--0.6%
Suramericana de Inversiones 31,144 260,205
-----------
Finland--0.7%
Elisa Oyj 10,817 313,359
-----------
France--9.4%
Alcatel SA 43,212 508,460
AXA SA 8,566 363,129
L'Oreal SA 3,195 348,762
Sanofi-Synthelabo SA 5,722 497,514
Societe Generale 3,131 540,995
Thales SA 7,097 411,947
Total SA 7,892 552,852
Veolia Environnement 4,954 368,278
Vivendi SA 12,299 499,695
-----------
4,091,632
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
Germany--12.7%
Allianz SE 2,520 $ 517,344
Comdirect Bank AG 29,485 469,018
Deutsche Boerse AG 3,177 727,709
Deutsche Post AG 13,961 422,525
Deutsche Postbank AG 5,127 446,944
Deutsche Wohnen AG 7,113 373,925
E On AG 6,752 917,849
Fresenius Medical Care AG & Co. KGaA 2,425 352,773
K+S AG 2,478 272,514
Praktiker Bau und Heimwerkermaerkte Holding AG 13,339 471,044
Symrise AG 20,394 529,511
-----------
5,501,156
-----------
Hong Kong--2.2%
Esprit Holdings Ltd. 47,000 551,324
Shanghai Real Estates Ltd. 1,638,000 408,813
-----------
960,137
-----------
Indonesia--1.3%
Astra International Tbk 172,500 249,671
Bank Central Asia Tbk 538,500 301,135
-----------
550,806
-----------
Ireland--1.1%
Irish Life & Permanent Plc 16,932 464,725
-----------
Italy--2.4%
UniCredito Italiano SpA 64,272 608,808
Unipol SA 120,895 441,613
-----------
1,050,421
-----------
Japan--11.1%
Canon, Inc 8,900 478,121
Japan Tobacco, Inc 104 511,041
Kao Corp. 12,000 351,354
Mitsubishi UFJ Financial Group, Inc 28 316,049
Mizuho Financial Group, Inc 76 489,553
Nippon System Development Co., Ltd. 18,000 278,639
NTT Data Corp. 63 320,266
The Daimaru, Inc 29,000 375,821
Toyota Motor Corp. 15,800 1,012,391
Yamada Denki Co., Ltd. 7,280 678,388
-----------
4,811,623
-----------
Kazakhstan--0.7%
Kazkommertsbank 15,751 305,569
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
Malaysia--1.4%
AMMB Holdings Berhad 231,000 $ 251,319
Bursa Malaysia Bhd 107,700 345,911
-----------
597,230
-----------
Netherlands--3.9%
Philips Electronics NV 17,102 653,037
Reed Elsevier NV 24,470 432,711
Royal Numico NV 12,082 623,039
-----------
1,708,787
-----------
Norway--1.1%
Statoil ASA 16,846 458,864
-----------
Russia--0.8%
AFK Sistema--GDR 12,257 348,099
-----------
Singapore--2.5%
DBS Group Holdings, Ltd. 33,000 465,708
Singapore Airlines Ltd. 55,000 602,084
-----------
1,067,792
-----------
South Africa--0.7%
MTN Group Ltd. 21,399 291,032
-----------
South Korea--2.2%
Hana Financial Group, Inc 5,710 295,669
LG Telecom Ltd. 28,560 324,925
Samsung Fire & Marine Insurance Co., Ltd. 1,940 324,880
-----------
945,474
-----------
Sweden--3.3%
Nordea Bank AB 21,861 349,257
Skandinaviska Enskilda 10,600 339,456
Tele2 AB 18,631 305,663
Telefonaktiebolaget LM Ericsson 117,263 431,812
-----------
1,426,188
-----------
Switzerland--11.4%
Compagnie Financiere Richemont AG 7,518 420,347
Nestle SA 2,873 1,118,775
Nobel Biocare Holding AG 1,339 488,091
Novartis AG 20,212 1,159,201
Roche Holding AG 5,121 905,961
Syngenta AG 2,324 444,606
Synthes, Inc 3,361 414,836
-----------
4,951,817
-----------
Taiwan--0.7%
Fubon Financial Holding Co., Ltd. 334,000 300,837
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
Thailand--1.5%
Bangkok Bank Public Company Ltd. 90,900 $ 318,502
Bank of Ayudhya PCL 511,400 342,519
-----------
661,021
-----------
United Kingdom--14.5%
Anglo American PLC 13,310 700,930
BP PLC 60,812 660,354
British American Tobacco PLC 23,164 724,079
Cable & Wireless PLC 109,637 359,319
GlaxoSmithKline PLC 34,180 939,327
ICAP PLC 78,239 816,502
Smith & Nephew PLC 36,944 469,488
Standard Chartered PLC 25,004 720,110
Vodafone Group PLC 212,860 567,390
Xstrata PLC 7,246 372,323
-----------
6,329,822
-----------
Total Equities (Cost $38,016,831) 42,794,824
-----------
Preferred Stocks--0.9%
Germany
Henkel KGaA
(Cost $312,830) 2,641 390,375
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $38,329,661) 43,185,199
-----------
Affiliated Investments--0.2%
Dreyfus Institutional Preferred Plus Money Market Fund (b) (Cost $84,967) 84,967 84,967
-----------
TOTAL INVESTMENTS--99.7% ( Cost $38,414,628) 43,270,166
-----------
OTHER ASSETS, LESS LIABILITIES--0.3% 131,271
-----------
NET ASSETS--100% $43,401,437
===========
Notes to Schedule of Investments:
ADR--American Depository Receipts
GDR--Global Depository Receipts
IR--Installment Receipts
(a) Non-income producing.
(b) 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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2007 the Fund held the following forward foreign currency exchange
contracts:
Local Unrealized
Principal Contract Value at USD Amount Appreciation/
Contracts to Deliver Amount Value Date March 31, 2007 to Receive (Depreciation)
- ------------------------------------------------------------------------------------------------------------------
Euro $ 1,177,097 5/15/2007 $1,575,073 $1,565,284 $ (9,789)
Japanese Yen 7,668,283 4/2/2007 65,108 65,454 346
Japanese Yen 17,091,046 4/3/2007 145,133 145,510 377
Norwegian Krone 2,634,000 4/13/2007 433,698 431,340 (2,358)
Singapore Dollar 358,000 5/15/2007 236,801 235,387 (1,414)
Swedish Krona 1,865,000 6/15/2007 268,379 269,105 726
Swiss Franc 382,172 6/15/2007 316,569 317,480 911
---------- ---------- --------
$3,040,761 $3,029,560 ($11,201)
========== ========== ========
Local Unrealized
Principal Contract Value at USD Amount Appreciation/
Contracts to Receive Amount Value Date March 31, 2007 to Deliver (Depreciation)
- ------------------------------------------------------------------------------------------------------------------
British Pound $ 167,932 4/2/2007 $ 330,353 $ 330,003 $ 350
Euro 1,177,097 5/15/2007 1,575,073 1,527,000 48,073
Norwegian Krone 5,173,150 4/13/2007 851,778 785,000 66,778
Singapore Dollar 993,367 5/15/2007 657,067 653,000 4,067
Swedish Krona 2,854,615 6/15/2007 410,787 413,000 (2,213)
Swedish Krona 1,910,816 6/15/2007 274,972 283,000 (8,028)
Swiss Franc 382,172 6/15/2007 316,569 325,000 (8,431)
---------- ---------- --------
$4,416,599 $4,316,003 $100,596
========== ========== ========
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------
Consumer Discretionary 13.6%
Consumer Staples 11.3
Energy 5.2
Financials 28.5
Health Care 13.5
Industrials 6.4
Information Technology 5.4
Materials 5.3
Telecommunication Services 7.3
Utilities 3.0
Short-term and Other Assets 0.5
-----
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A):
Unaffiliated investments (cost $38,329,661) $43,185,199
Affiliated investments (Note 1H) (cost $84,967) 84,967
Foreign currency, at value (cost $70,420) 70,604
Receivable for investments sold 402,646
Interest and dividends receivable 158,903
Unrealized appreciation on forward currency exchange contracts (Note 6) 121,628
Prepaid expenses 11,351
-----------
Total assets 44,035,298
Liabilities
Payable for investments purchased $ 336,151
Bank loan payable (Note 7) 200,000
Unrealized depreciation on forward currency exchange contracts (Note 6) 32,233
Accrued professional fees 22,318
Accrued accounting, custody, administration and transfer agent fees (Note 2) 22,173
Accrued trustees' fees (Note 2) 1,061
Accrued shareholder reporting expenses (Note 2) 750
Accrued chief compliance officer fee (Note 2) 375
Other accrued expenses and liabilities 18,800
----------
Total liabilities 633,861
-----------
Net Assets $43,401,437
===========
Net Assets consist of:
Paid-in capital $37,141,263
Accumulated net realized gain 1,265,452
Undistributed net investment income 47,648
Net unrealized appreciation 4,947,074
-----------
Total Net Assets $43,401,437
===========
Shares of beneficial interest outstanding 1,821,153
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 23.83
===========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign witholding taxes $33,695) $ 311,910
Dividend income from affiliated investments (Note 1H) 10,546
-----------
Total investment income 322,456
Expenses
Investment advisory fee (Note 2) $ 162,977
Accounting, custody, administration and transfer agent fees (Note 2) 69,918
Professional fees 26,424
Registration fees 11,129
Trustees' fees and expenses (Note 2) 2,140
Insurance expense 1,247
Miscellaneous expenses 17,398
----------
Total expenses 291,233
Deduct:
Waiver of invesment advisory fee (Note 2) (57,029)
----------
Net Expenses 234,204
-----------
Net investment income 88,252
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 1,405,947
Foreign currency transactions and forward foreign currency
exchange transactions (137,080)
----------
Net realized gain (loss) 1,268,867
Change in unrealized appreciation (depreciation) on:
Investments 2,708,322
Foreign currency translations and forward foreign currency exchange contracts 174,585
----------
Change in net unrealized appreciation (depreciation) 2,882,907
-----------
Net realized and unrealized gain (loss) on investments 4,151,774
-----------
Net Increase in Net Assets from Operations $ 4,240,026
===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
For the December 31, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 88,252 $ 413,018
Net realized gain (loss) 1,268,867 326,318
Change in net unrealized appreciation (depreciation) 2,882,907 2,064,167
----------- -----------
Net increase (decrease) in net assets from investment operations 4,240,026 2,803,503
----------- -----------
Distributions to Shareholders (Note 1C)
From investment income (4,670) (464,918)
From net realized gains on investments (228,378) --
----------- -----------
Total distributions to Shareholders (233,048) (464,918)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 6,000,045 31,000,100
Dividend reinvestment 40,913 14,918
Cost of shares redeemed -- (102)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions 6,040,958 31,014,916
----------- -----------
Total Increase in Net Assets 10,047,936 33,353,501
Net Assets
At beginning of period 33,353,501 --
----------- -----------
At end of period [including undistibuted net investment income
(loss) of $47,648 and ($35,934), respectively] $43,401,437 $33,353,501
=========== ===========
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
For the December 31, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Net Asset Value, Beginning of Period $ 21.51 $ 20.00
From Operations:
Net investment income* (a) 0.05 0.27
Net realized and unrealized gains (loss) on investments 2.40 1.54
------- -------
Total from operations 2.45 1.81
------- -------
Less Distributions to Shareholders:
From net investment income (0.00)(b) (0.30)
From net realized gains on investments (0.13) --
------- -------
Total distributions to shareholders (0.13) (0.30)
------- -------
Net Asset Value, End of Period $ 23.83 $ 21.51
======= =======
Total Return (c) 11.39% 9.15%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.15%(d) 1.15%(d)
Net Investment Income (to average daily net assets)* 0.43%(d) 1.63%(d)
Portfolio Turnover 48%(e) 84%(e)
Net Assets, End of Period (000's omitted) $43,401 $33,354
- ----------
* 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
excluding waivers and reimbursement would have been:
Net investment income per share (a) $ 0.02 $ 0.21
Ratios (to average daily net assets):
Expenses 1.43%(d) 1.53%(d)
Net investment income 0.15%(d) 1.25%(d)
(a) Calculated based on average shares outstanding.
(b) Amount represents less than $0.01 per share.
(c) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(d) Computed on an annualized basis.
(e) 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) Organization and 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 operation 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 (such as convertible preferred stocks,
warrants and convertible bonds) of foreign companies and depositary
receipts evidencing ownership in such securities. At least 75% of the
Fund's net assets will be 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 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities
not listed on an exchange or national securities market, or securities for
which there were no reported transactions, are valued at the last
calculated mean price (average of last bid and last offer). Securities that
are fixed income securities, other than short-term instruments with less
than sixty days remaining to maturity, for which market prices are readily
available, are valued at their current market value on the basis of
quotations, which may be furnished by a pricing service or dealers in such
securities. 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. With respect to any portion of the Fund's
assets that are invested in one or more open ended management investment
companies ("RICS"), the Fund's net asset value ("NAV") will be calculated
based upon the NAVs of such RICs.
Non-exchange traded derivatives are normally valued on the basis of quotes
obtained from brokers and dealers, including counterparties or pricing
services.
Because foreign markets may be open at different times than the NYSE, 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 NYSE 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 NYSE. 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 remaining to maturity.
Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities sold are recorded on the identified cost basis.
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.
14
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
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 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.
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. Foreign 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.
15
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
I. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" (the "Interpretation"). The
Interpretation establishes for all entities, including pass-through
entities such as the Portfolio, a minimum threshold for financial statement
recognition of the benefit of positions taken in filing tax returns
(including whether an entity is taxable in a particular jurisdiction), and
requires certain expanded tax disclosures. Adoption of FIN 48 is required
for fiscal years beginning after December 15, 2006 and is to be applied to
all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and its impact, if any, in the
financial statements has not yet been determined.
In addition, on September 20, 2006, the FASB released Statement of
Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS
157"). FAS 157 establishes an authoritative definition of fair value, sets
out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS 157 is
required for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. At this time, management is evaluating
the implications of FAS 157 and its impact, if any, in the financial
statements has not yet been determined.
(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 six month ended March
31, 2007. Pursuant to this agreement, for the six month ended March 31,
2007, Newton voluntarily waived $57,029 of its investment advisory fee.
This arrangement is voluntary and temporary and may be discontinued or
revised by Newton at any time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, Newton would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $3,555, for the six months ended March 31, 2007.
The Trust 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, 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 $66,363 for the six months
ended March 31, 2007.
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,
2007, the Fund was charged $2,105, which is included in miscellaneous
expenses in the statement of operations. 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
Fund 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of Standish
Mellon, to provide printing and fulfillment services for the Fund. Pursuant
to this agreement, the Fund was charged $750, which is included in
miscellaneous expenses in the statement of operations, for the six months
ended March 31, 2007.
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, 2007, the Fund was not charged an administrative
service fee.
16
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Purchases and Sales of Investments
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2007 were as follows:
Purchases Sales
------------ ------------
Non-U.S. Government Securities $24,900,934 $19,284,289
=========== ===========
(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
For the December 31, 2005
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Shares sold 268,939 1,549,732
Shares issued to shareholders
in reinvestment of distributions 1,746 741
Shares redeemed -- (5)
------- ---------
Net increase (decrease) 270,685 1,550,468
======= =========
At March 31, 2007, three shareholders of record, in the aggregate held
approximately 97% 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, 2007, the
Fund did not assess any redemption fees.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $38,414,628
-----------
Gross unrealized appreciation 5,506,145
Gross unrealized depreciation ( 650,607)
-----------
Net unrealized appreciation (depreciation) $ 4,855,538
===========
(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:
17
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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 appreciation or depreciation are recorded for financial
statement purposes as unrealized until the contract settlement date or upon
the closing of the contract. Forward currency exchange contracts are used
by the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
At March 31, 2007, the Fund held foreign currency exchange contracts. See
schedule of investments for further details.
(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/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. The participating portfolios and funds also pay an annual
renewal fee, computed at a rate of 0.020 of 1% of the committed amount and
allocated ratably to the participating portfolios/funds. For the six months
ended March 31, 2007, the expense allocated to the Fund was $797. The
facility fee and interest expense are included in miscellaneous expenses on
the statement of operations.
For the six months ended March 31, 2007, the Fund had average borrowings
outstanding of $212,500 for a total of nine days and incurred $1,524 of
interest expense. At March 31, 2007, the Fund had a $200,000 loan balance
outstanding.
18
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $305
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $305
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $305
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $322
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, President Since 2003 President and Chief 30 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
7/24/65 and Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
19
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
20
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[LOGO Mellon
---------------------------
Mellon Institutional Funds]
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6912SA0307
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Emerging Markets Core Equity Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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 Emerging Markets 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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- -------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,226.50 $8.05
Hypothetical (5% return
per year before expenses) $1,000.00 $1,017.70 $7.29
- ----------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.45%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
3
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -------------------------------------------------------------------------------------------------------
China Mobile Ltd. Hong Kong Telecommunications 3.1%
Oao Gazprom ADR Russia Energy 3.0
Ishares MSCI Emerging Markets Index N/A N/A 2.9
Samsung Electronics Co., Ltd. South Korea Information Technology 2.7
Companhia Paranaense de Energia-Copel Brazil Materials 2.6
GMK Norilsk Nickel ADR Russia Materials 2.4
Lukoil--ADR Russia Energy 2.3
Shinhan Financial Group Co., Ltd. South Korea Financials 2.1
China Petroleum & Chemical Co. China Energy 2.0
Hyundai Heavy Industries South Korea Industrials 1.9
----
25.0%
- ----------------
* Excludes short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- ----------------------------------------------------------
Europe ex U.K. 14.9%
Asia ex Japan 54.7
Americas ex U.S. 15.9
Middle East/Africa 14.5
-----
100.0%
* Excludes short-term securities and cash collateral investments.
The Fund is actively managed. Current holdings may be different than those
presented above.
4
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENT--101.5%
EQUITIES--95.6%
Brazil--9.0%
Banco DO Brasil SA (a) 3,600 $ 116,690
Brasil Telecom SA 13,300,000 69,429
Companhia Paranaense de Energia-Copel (a) 8,200,000 95,566
Companhia Vale do Rio Doce Preferred A (a) 6,600 205,118
Petroleo Brasileiro SA 3,700 82,793
Usinas Siderurgicas de Minas Gerais Prefunded 3,000 145,360
----------
714,956
----------
Chile--1.0%
Lan Airlines SA ADR 1,200 82,680
----------
China--4.7%
China Petroleum & Chemical Co. 182,000 153,975
Huaneng Power International, Inc 66,000 57,442
Ping An Insurance Group Co. 15,000 73,530
Yanzhou Coal Mining Co. Ltd. 91,000 87,120
----------
372,067
----------
Czech Republic--1.4%
CEZ 2,460 110,493
----------
Egypt--1.2%
Commercial International Bank 5,600 54,470
Telecom Egypt 15,300 43,568
----------
98,038
----------
Hong Kong--4.7%
China Mengniu Dairy Co. Ltd. 15,000 42,909
China Mobile Ltd. 26,500 240,983
China Overseas Land & Investment Ltd. 36,000 45,247
Shenzhen Investment Ltd. 92,000 46,983
----------
376,122
----------
Hungary--1.4%
MOL Hungarian Oil and Gas Nyrt 516 59,502
OTP Bank Nyrt 1,170 53,589
----------
113,091
----------
India--7.7%
Bharat Petroleum Corp., Ltd. 8,381 58,871
Bharti Airtel Ltd. 3,230 57,248
Dr. Reddy's Laboratories Ltd. 3,030 51,197
Grasim Industries Ltd. 2,090 101,489
Hindustan Petroleum Corp. Ltd. 7,000 40,246
Mahindra & Mahindra Ltd. 7,600 137,611
Oil and Natural Gas Corp. Ltd. 2,751 56,220
Tata Consultancy Services, Ltd. 3,800 108,785
----------
611,667
----------
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Indonesia--1.5%
Astra Agro Lestari Tbk PT 33,000 $ 45,592
Astra International Tbk 28,000 40,526
PT Bank Pan Indonesia Tbk 582,000 35,099
----------
121,217
----------
Israel--3.4%
Bank of Hapoalim BM 18,475 88,773
Nice Systems Ltd. ADR (a) 2,800 95,256
Orbotech Ltd. ADR 1,400 30,842
Teva Pharmaceutical ADR 1,500 56,145
----------
271,016
----------
Malaysia--4.9%
Bumiputra-Commerce Holdings BHD 24,000 69,097
Digi.com BHD (a) 22,700 122,827
Kuala Lumpur Kepong Berhad 34,800 120,833
RHB Capital BHD 58,100 80,358
----------
393,115
----------
Mexico--5.7%
Alfa SA de CV 16,900 124,044
America Movil S.A. ADR 2,000 95,580
Fomento Economico Mexicano ADR 1,000 110,390
Grupo Televisa S.A. ADR 1,900 56,620
Wal-Mart de Mexico SA de CV 14,900 63,661
----------
450,295
----------
Netherlands--0.5%
Zentiva NV 610 42,020
----------
Poland--1.5%
BRE Bank SA (a) 715 118,392
----------
Russia--8.7%
GMK Norilsk Nickel ADR 1,000 190,000
Lukoil--ADR 2,100 181,650
Mobile TeleSystems ADR 1,600 89,536
Oao Gazprom ADR 5,600 234,640
----------
695,826
----------
South Africa--9.7%
ABSA Group, Ltd. 2,100 40,452
Anglo Platinum Ltd. 751 118,677
Investec Ltd. 6,130 78,968
Metropolitan Holdings Ltd. 28,142 57,702
Mittal Steel South Africa Ltd. 7,516 122,446
Naspers Ltd. 3,500 84,812
Remgro Ltd. 3,190 79,722
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
South Africa (continued)
Telkom SA Ltd. 4,769 $ 109,309
Truworths International Ltd. 16,219 79,499
----------
771,587
----------
South Korea--16.5%
GS Engineering and Construction Corp. 1,303 116,653
Honam Petrochemical Corp. 850 73,658
Hynix Semiconductor, Inc. (a) 1,860 64,077
Hyundai Department Store Co., Ltd. 650 54,599
Hyundai Heavy Industries 729 145,722
Industrial Bank of Korea 3,900 78,166
Jusung Engineering Co., Ltd. 3,500 41,680
Korea Electric Power Corp. 900 35,933
KT&G Corp. 770 50,351
POSCO 220 92,398
Samsung Electronics Co., Ltd. 356 213,108
Shinhan Financial Group Co., Ltd. 2,800 160,766
SK Corp. 1,130 111,018
Woori Finance Holdings Co., Ltd. 3,000 72,568
----------
1,310,697
----------
Taiwan--9.8%
Asia Cement Corp. 147,640 142,798
Asustek Computer, Inc 19,000 44,794
Catcher Technology Co., Ltd. 7,271 57,139
D-Link Corp. 25,000 43,902
First Financial Holding Co. Ltd. 77,000 53,994
Hung Poo Real Estate Development Corp. 36,000 35,744
MediaTek, Inc 7,000 80,399
Powertech Technology, Inc 15,000 58,032
ProMOS Technologies, Inc 200,000 77,679
Taiwan Semiconductor Manufacturing Co. Ltd. ADR 5,400 58,050
Wistron Corp. 47,211 71,633
Yuanta Core Pacific Securities Co. 80,000 55,614
----------
779,778
----------
Thailand--1.2%
Electricity Generating Public Co., Ltd. 12,200 37,073
Thai Airways International Public Company Ltd. 40,600 55,078
----------
92,151
----------
Turkey--1.1%
Tupras-Turkiye Petrol Rafine AS 3,750 83,633
----------
TOTAL EQUITIES (Cost $6,480,189) 7,608,841
----------
EXCHANGE TRADED FUNDS--2.9%
Ishares MSCI Emerging Markets Index (a) (b) 2,000 232,580
----------
Total Exchange Traded Funds (Cost $228,229)
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL--3.0%
BlackRock Cash Strategies L.L.C (Cost $238,000) 238,000 $ 238,000
----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $6,946,418) 8,079,421
----------
AFFILIATED INVESTMENTS--0.8%
Dreyfus Institutional Preferred Plus Money Market Fund (c) (Cost $58,114) 58,114 58,114
----------
TOTAL INVESTMENTS--102.3% (Cost $7,004,532) 8,137,535
----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(2.3%) (181,753)
----------
NET ASSETS--100.0% $7,955,782
==========
Notes to Schedule of Investments:
ADR--American Depository Receipts
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at March 31, 2007.
(c) Affiliated institutional money market fund.
Percentage of
Economic Sector Allocation Net Assets
--------------------------------------------------------
Consumer Discretionary 5.7%
Consumer Staples 5.5
Energy 11.5
Exchange trade fund 2.9
Financials 18.8
Health Care 1.9
Industrials 6.6
Information Technology 13.1
Materials 17.9
Telecommunication Services 10.4
Utilities 4.2
Short-term and Other Assets 1.5
-----
100.0%
=====
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $232,580 (Note 7)):
Unaffiliated investments (cost $6,946,418) $8,079,421
Affiliated investments (Note 1H) (cost $58,114) 58,114
Foreign currency, at value (cost $76,380) 76,521
Receivable for investments sold 23,248
Interest and dividends receivable 16,848
Receivable for fund shares sold 1,400
Receivable from advisor 818
Prepaid expenses 16,089
----------
Total assets 8,272,459
Liabilities
Collateral for securities on loan (Note 7) $238,000
Payable for investment purchased 40,780
Due to custodian 1,681
Accrued accounting, custody, administration and transfer agent fees (Note 2) 16,627
Accrued professional fees 16,560
Accrued shareholder reporting expenses (Note 2) 775
Accrued trustees' fees (Note 2) 934
Other accrued expenses and liabilities 1,320
--------
Total liabilities 316,677
----------
Net Assets $7,955,782
==========
Net Assets consist of:
Paid-in capital $6,510,141
Accumulated net realized gain 308,237
Undistributed net investment income 4,059
Net unrealized appreciation 1,133,345
----------
Total Net Assets $7,955,782
==========
Shares of beneficial interest outstanding 317,485
==========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 25.06
==========
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Statements of Operation
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign witholding taxes $5,836) $ 52,145
Dividend income from affiliated investments (Note 1H) 3,179
Securities lending income (Note 7) 838
----------
Total investment income 56,162
Expenses
Investment advisory fee (Note 2) $ 37,478
Accounting, custody, administration and transfer agent fees (Note 2) 50,158
Professional fees 12,529
Registration fees 8,947
Trustees' fees and expenses (Note 2) 1,298
Miscellaneous expenses 12,587
---------
Total expenses 122,997
Deduct:
Waiver of invesment advisory fee (Note 2) (37,478)
Reimbursement of Fund operating expenses (Note 2) (36,115)
---------
Total expense deduction (73,593)
---------
Net Expenses 49,404
----------
Net investment income 6,758
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 368,102
Foreign currency transactions and forward foreign currency exchange transactions (4,524)
---------
Net realized gain (loss) 363,578
Change in unrealized appreciation (depreciation) on:
Investments 963,970
Foreign currency translations 385
---------
Change in net unrealized appreciation (depreciation) 964,355
----------
Net realized and unrealized gain (loss) on investments 1,327,933
----------
Net Increase in Net Assets from Operations $1,334,691
==========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
For the July 10, 2006
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 6,758 $ 15,955
Net realized gain (loss) 363,578 (35,973)
Change in net unrealized appreciation (depreciation) 964,355 168,990
---------- ----------
Net increase (decrease) in net assets from investment operations 1,334,691 148,972
---------- ----------
Distributions to Shareholders (Note 1C)
From net investment income (38,022) --
---------- ----------
Total distributions to shareholders (38,022) --
---------- ----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 1,127,098 5,544,154
Value of shares issued to shareholders in reinvestment of distributions 37,802 --
Cost of shares redeemed (198,913) --
---------- ----------
Net increase (decrease) in net assets from Fund share transactions 965,987 5,544,154
---------- ----------
Total Increase (Decrease) in Net Assets 2,262,656 5,693,126
Net Assets
At beginning of period 5,693,126 --
---------- ----------
At end of period (including net investment income of $4,059 and $35,323, respectively) $7,955,782 $5,693,126
========== ==========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
For the July 10, 2006
Six Months Ended (commencement of
March 31, 2007 operations) to
(Unaudited) September 30, 2006
---------------- ------------------
Net Asset Value, Beginning of Period $20.55 $20.00
------ ------
From Operations:
Net investment income (loss)* (a) 0.02 0.06
Net realized and unrealized gains (loss) on investments 4.63 0.49
------ ------
Total from operations 4.65 0.55
------ ------
Less Distributions to Shareholders:
From net investment income (0.14) --
------ ------
Total distributions to shareholders (0.14) --
------ ------
Net Asset Value, End of Period $25.06 $20.55
====== ======
Total Return (b) 22.65% 2.75%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.45%(c) 1.45%(c)
Net Investment Income (loss) (to average daily net assets)* 0.20%(c) 1.31%(c)
Portfolio Turnover 51%(d) 31%(d)
Net Assets, End of Period (000's omitted) $7,956 $5,693
- ----------------
* 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 (loss) per share and the ratios without waivers and reimbursements would have been:
Net investment income (loss) per share (a) $(0.23) $(0.27)
Ratios (to average daily net assets):
Expenses 3.60%(c) 8.64%(c)
Net investment income (loss) (1.96%)(c) (5.88%)(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) 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
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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 Emerging Markets Core Equity Fund (the
"Fund"), which commenced operation on July 10, 2006, 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 Emerging Market (MSCI EM) Index.
The Fund may also enter into equity index futures contracts based
primarily on the indices of the countries included in the MSCI EM Index
and Canada.
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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange
("NYSE") is open. Securities are valued at the last sale prices on the
exchange or national securities market on which they are primarily
traded. Securities not listed on an exchange or national securities
market, or securities for which there were no reported transactions, are
valued at the last calculated mean price (average of last bid and last
offer). Securities that are fixed income securities, other than
short-term instruments with less than sixty days remaining to maturity,
for which accurate market prices are readily available, are valued at
their current market value on the basis of quotations, which may be
furnished by a pricing service or dealers in such securities. 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. With respect to any portion of the Fund's assets that are
invested in one or more open-end regulated investment companies
("RICs"), the Fund's net asset value ("NAV") will be calculated based
upon the NAVs of such RICs.
Non-exchange traded derivatives are normally valued on the basis of
quotes obtained from brokers and dealers, including counterparties or
pricing servicees.
Because foreign markets may be open at different times than the NYSE,
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 NYSE 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 NYSE.
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 the trade date. Interest
income is determined on the basis of coupon interest earned, adjusted
for accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on the ex-dividend date. Realized gains and losses from
securities sold are recorded on the identified cost basis. 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.
13
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
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, losses deferred due to
wash sales and post-October losses.
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. Foreign 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.
I. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including
14
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
whether an entity is taxable in a particular jurisdiction), and requires
certain expanded tax disclosures. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to
all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and its impact, if any, in the
financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS
157 establishes an authoritative definition of fair value, sets out a
framework for measuring fair value, and requires additional disclosures
about fair-value measurements. The application of FAS 157 is required
for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. At this time, management is evaluating the
implications of FAS 157 and its impact, if any, in the financial
statements has not yet been determined.
(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 1.10% 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 1.45% of the Fund's average daily net assets
for the six months ended March 31, 2007. For the six months ended March
31, 2007, TBCAM voluntarily waived its investment advisory fee in the
amount of $37,478 and reimbursed the Fund for $36,115 of its operating
expenses. This arrangement is voluntary and temporary and may be
discontinued or revised by TBCAM at any time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank
of New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York
Mellon Corporation. The transaction is subject to certain regulatory
approvals and the approval of BNY's and MFC's shareholders, as well as
other customary conditions to closing. Subject to such approvals and the
satisfaction of the other conditions, MFC and BNY expect the transaction
to be completed in the third quarter of 2007.
The Trust 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 $2,828, for the six months ended March
31, 2007.
The Trust 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
$47,330 for the six months ended March 31, 2007.
The Trust 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 earned $354 for the
six months ended March 31, 2007. 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, 2007, the Fund was charged $1,413, which is included in
miscellaneous expenses in the statement of operations. 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 Fund 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $775, which is included in miscellaneous
expenses in the statement of operations for the six months ended March
31, 2007.
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.
15
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended March 31, 2007 were as follows:
Purchases Sales
----------- ----------
Non-U.S. Government Securities $ 4,359,233 $3,439,466
=========== ==========
(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
July 10, 2006
For the (commencement of
Six Months Ended operations) to
March 31, 2007 September 30, 2006
---------------- ------------------
Shares sold 47,693 277,002
Shares issued to shareholders in reinvestment of distributions 1,599 --
Shares redeemed (8,809) --
------ -------
Net increase (decrease) 40,483 277,002
====== =======
At March 31, 2007, one shareholder of record (MBC Investments Corp., a
wholly-owned subsidiary of Mellon Financial Corporation and an affiliate
of the Fund) held 79% 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, 2007,
the Fund did not assess any redemption fees.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Code. As such and by complying with
the applicable provisions of the Code regarding the sources of its
income, the timely distributions of its income to its shareholders, and
the diversification of its assets, the Fund will not be subject to U.S.
federal income tax on its investment company taxable income and net
capital gain which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $7,004,532
----------
Gross unrealized appreciation 1,253,696
Gross unrealized depreciation (120,693)
----------
Net unrealized appreciation (depreciation) $1,133,003
==========
16
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity 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:
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 appreciation or
depreciation are recorded for financial statement purposes as unrealized
until the contract settlement date or upon the closing of the contract.
Forward currency exchange contracts are used by the Fund primarily to
protect the value of the Fund's foreign securities from adverse currency
movements. Unrealized appreciation and depreciation of forward currency
exchange contracts is included in the Statement of Assets and
Liabilities.
At March 31, 2007, the Fund did not hold foreign currency exchange
contracts.
(7) Security Lending:
The Fund may lend its securities to financial institutions which the
Fund deems to be creditworthy. The loans are collateralized at all times
with cash or securities with a market value at least equal to the market
value of the securities on loan. The market value of securities loaned
is determined daily and any additional required collateral is allocated
to the Fund on the next business day. For the duration of a loan, the
Fund receives the equivalent of the interest or dividends paid by the
issuer on the securities loaned and also receives compensation from the
investment of the collateral. As with other extensions of credit, the
Fund bears the risk of delay in recovery or even loss of rights in its
securities on loan should the borrower of the securities fail
financially or default on its obligations to the Fund. In the event of
borrower default, the Fund generally has the right to use the collateral
to offset losses incurred. The Fund may incur a loss in the event it was
delayed or prevented from exercising its rights to dispose of the
collateral. The Fund also bears the risk in the event that the interest
and/or dividends received on invested collateral is not sufficient to
meet the Fund's obligations due on the loans.
The Fund loaned securities during the six months ended March 31, 2007
and earned interest on the invested collateral of $2,554 of which $1,716
was rebated to borrowers or paid in fees. At March 31, 2007, the Fund
had securities valued at $232,580 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. Each fund/portfolio also
pays an annual renewal fee, computed at a rate of 0.020 of 1% of the
committed amount and allocated ratably to the participating
funds/portfolios. For the six months ended March 31, 2007, the expense
allocated to the Fund was $111. The facility fee and interest expense
are included in miscellaneous expenses on the statement of operations.
For the six months ended March 31, 2007, the Fund had average borrowings
outstanding of $47,750 for a total of four days and incurred $31 of
interest expense. At March 31, 2007 the Fund had no borrowings
outstanding.
17
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- ----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $259
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $259
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $259
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $262
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive Asset Management, LLC;
Boston, MA 02108 Officer formerly Senior Vice
7/24/65 President and Chief
Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
18
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
19
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6914SA0307
[GRAPHIC] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
International Core Equity Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,154.40 $4.19
Hypothetical (5% return
per year before expenses) $1,000.00 $1,021.04 $3.93
- -----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.78%,
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 International Core Equity Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
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 below.
Percentage of
Top Ten Holdings* Country Sector Investments
- ------------------------------------------------------------------------------------------------------------------------------
Societe Generale France Financials 1.9%
Toyota Motor Corp. Japan Consumer Discretionary 1.8
Royal Dutch Shell PLC United Kingdom Energy 1.7
ING Groep NV CVA Netherlands Financials 1.7
HBOS PLC United Kingdom Financials 1.6
Royal Bank of Scotland Group PLC United Kingdom Financials 1.6
International Power PLC United Kingdom Utilities 1.4
InBev NV Belgium Consumer Staples 1.4
Vivendi SA France Consumer Discretionary 1.4
Roche Holding AG Switerland Health Care 1.4
----
15.9%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- ------------------------------------------------------------------------
Europe ex U.K. 49.6%
U.K. 21.3
Asia ex Japan 8.0
Japan 21.1
-----
100.0%
* Excludes short-term securities and cash collateral investments.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International
Core Equity Portfolio ("Portfolio"), at value (Note 1A) $2,705,540,497
Receivable for Fund shares sold 1,791,713
Prepaid expenses 73,451
--------------
Total assets 2,707,405,661
Liabilities
Payable for Fund shares redeemed $39,759
Accrued administrative service fees (Note 2) 169,942
Accrued professional fees 20,181
Accrued transfer agent fees (Note 2) 19,383
Accrued shareholder reporting fees (Note 2) 8,000
Accrued registration fee 5,897
Accrued trustees' fees (Note 2) 498
Accrued chief compliance officer fee (Note 2) 420
Other accrued expenses and liabilities 782
--------------
Total liabilities 264,862
--------------
Net Assets $2,707,140,799
==============
Net Assets consist of:
Paid-in capital $2,217,219,214
Accumulated net realized gain 64,112,756
Undistributed net investment income 10,095,406
Net unrealized appreciation 415,713,423
--------------
Total Net Assets $2,707,140,799
==============
Shares of beneficial interest outstanding 61,729,430
==============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $43.85
==============
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 Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net foreign witholding taxes $1,776,398) $ 21,504,623
Interest and securities lending income allocated from Portfolio 285,335
Expenses allocated from Portfolio (8,709,348)
------------
Net investment income allocated from Portfolio 13,080,610
Expenses
Administrative service fees (Note 2) $319,462
Registration fees 189,172
Transfer agent fees (Note 2) 44,547
Professional fees 40,684
Shareholder reporting expense (Note 2) 26,750
Insurance expense 2,156
Chief compliance officer expense (Note 2) 2,121
Trustees' fees (Note 2) 997
Miscellaneous expenses 47,463
--------------
Total expenses 673,352
------------
Net investment income 12,407,258
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities, futures transactions, foreign currency
exchange transactions and foreign currency transactions 79,244,104
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments securities, futures contracts, foreign currency
exchange translations and foreign currency contracts 245,334,494
------------
Net realized and unrealized gain (loss) 324,578,598
------------
Net Increase in Net Assets from Operations $336,985,856
------------
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, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 12,407,258 $ 21,200,780
Net realized gain (loss) 79,244,104 38,731,387
Change in net unrealized appreciation (depreciation) 245,334,494 123,661,754
--------------- ---------------
Net increase (decrease) in net assets from investment operations 336,985,856 183,593,921
--------------- ---------------
Distributions to Shareholders (Note 1C)
From net investment income (8,492,019) (15,633,628)
From ner realized gains on investments (55,518,833) (17,704,234)
--------------- ---------------
Total distributions to shareholders (64,010,852) (33,337,862)
--------------- ---------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 500,401,735 1,655,730,693
Value of shares issued in reinvestment of distributions 35,427,127 16,673,962
Cost of shares redeemed (116,750,980) (94,637,359)
--------------- ---------------
Net increase (decrease) in net assets from Fund share transactions 419,077,882 1,577,767,296
--------------- ---------------
Total Increase (Decrease) in Net Assets 692,052,886 1,728,023,355
Net Assets
At beginning of period 2,015,087,913 287,064,558
--------------- ---------------
At end of period (including undistributed net
investment income of $10,095,406 and $6,180,167, respectively) $ 2,707,140,799 $ 2,015,087,913
=============== ===============
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, 2007 -------------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
---------------- ---------- -------- -------- ------- -------
Net Asset Value, Beginning of Period $ 39.01 $ 34.34 $ 27.03 $ 21.62 $ 17.10 $ 18.53
---------- ---------- -------- -------- ------- -------
From Investment Operations:
Net investment income (loss)* (a) 0.22 0.71 0.50 0.31 0.23 0.25
Net realized and unrealized gain (loss) on investments 5.75 5.59 7.73 5.49 4.55 (1.48)
---------- ---------- -------- -------- ------- -------
Total from operations 5.97 6.30 8.23 5.80 4.78 (1.23)
---------- ---------- -------- -------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.15) (0.40) (0.39) (0.39) (0.26) (0.20)
From net realized gains on investments (0.98) (1.23) (0.53) -- -- --
---------- ---------- -------- -------- ------- -------
Total distributions to shareholders (1.13) (1.63) (0.92) (0.39) (0.26) (0.20)
---------- ---------- -------- -------- ------- -------
Net Asset Value, End of Period $ 43.85 $ 39.01 $ 34.34 $ 27.03 $ 21.62 $ 17.10
========== ========== ======== ======== ======= =======
Total Return 15.44%(f) 19.01% 31.06% 27.04% 28.23%(b) (6.77%)(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (c) 0.78%(d) 0.88% 1.01% 1.12% 1.16% 1.00%
Net Investment Income (to average daily net assets)* 1.03%(d) 1.91% 1.59% 1.22% 1.21% 1.29%
Portfolio Turnover N/A N/A N/A N/A 17%(e) 87%(e)
Net Assets, End of Period (000's omitted) $2,707,141 $2,015,088 $287,065 $124,675 $77,727 $51,087
- ---------
* 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 without waivers and reimbursement would have been:
Net investment income per share (a) N/A N/A N/A N/A $ 0.19 $ 0.18
Ratios (to average daily net assets):
Expenses (c) N/A N/A N/A N/A 1.34% 1.33%
Net investment income N/A N/A N/A N/A 1.03% 0.96%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Includes the Fund's share of the Portfolio's allocated expenses.
(d) Calculated on an annualized basis.
(e) 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.
(f) Not annualized.
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) Organization and 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 object 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
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 represented in the MSCI Europe, Australia, Far East (EAFE) 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. As of
March 31, 2007 the Fund owned 89% 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. 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
The Fund's investment in the Portfolio is recorded on settlement date. The
Portfolio's securities transactions are recorded as of the trade date as
discussed in Note 1B of the Portfolio's Notes to Financial Statements,
which are included elsewhere in this report. 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 are 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 and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions 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 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/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 Core 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. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM"), a wholly-owned subsidiary
of Mellon Financial Corporation, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $44,547 for the six months ended March 31, 2007.
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,
2007, the Fund was charged $2,121. No other director, officer or employee
of TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio Trust 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $8,000, which is included as miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
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, 2007, the Fund was charged $74,977 for fees
payable to Mellon Private Wealth Management.
10
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2007 aggregated $549,448,606 and $182,221,859,
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, 2007 September 30, 2006
---------------- ------------------
Shares sold 12,009,648 45,334,340
Shares issued to shareholders
in reinvestment of distributions 843,302 479,216
Shares redeemed (2,775,678) (2,520,245)
---------- ----------
Net increase (decrease) 10,077,272 43,293,311
========== ==========
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 year ended March 31, 2007, the Fund received $18,771
in redemption fees and is reflected in the cost of shares redeemed.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
See the corresponding master portfolio for tax basis unrealized
appreciation (depreciation) information.
11
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--98.1%
Common Equities--96.9%
Australia--5.3%
BHP Billiton Ltd. 950,500 $ 22,972,686
BlueScope Steel Ltd. 2,213,900 18,796,675
Coca-Cola Amatil Ltd. 1,342,800 9,554,935
Commonwealth Bank of Australia 725,500 29,484,491
Pacific Brands Ltd. 4,336,400 10,764,688
QBE Insurance Group Ltd. 1,377,900 35,140,920
Telstra Corp. Ltd. 5,001,800 18,847,163
Woolworths Ltd. 692,500 15,225,190
---------------
160,786,748
---------------
Austria--1.0%
Boehler-Uddeholm 215,500 20,723,170
Voestalpine AG 143,000 10,370,800
---------------
31,093,970
---------------
Belgium--2.5%
Delhaize Group 104,510 9,604,744
InBev NV 599,300 43,262,976
KBC Groupe 259,800 32,308,135
---------------
85,175,855
---------------
Denmark--1.5%
Carlsberg AS 188,900 20,562,803
Danske Bank AS 579,500 26,968,231
---------------
47,531,034
---------------
Finland--2.3%
KCI Konecranes Oyj 417,700 14,002,791
Metso Corp. 285,600 15,086,243
Neste Oil Oyj 286,300 9,865,463
Nokia Oyj 586,900 13,505,971
Rautaruukki Oyj 367,800 17,139,143
---------------
69,599,611
---------------
France--10.4%
Air France-KLM 277,300 12,647,858
BNP Paribas 398,400 41,605,137
Bouygues SA (a) 315,270 24,359,166
Cap Gemini SA 269,250 20,494,191
Compagnie Generale de Geophysique SA (b) 47,970 10,058,791
Lafarge SA 60,760 9,550,668
Sanofi-Synthelabo SA 216,700 18,841,536
Societe Generale 339,000 58,574,648
Suez SA 293,300 15,465,559
Total SA (a) 452,820 31,721,046
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------------
France (continued)
Vinci SA 185,700 $ 28,775,387
Vivendi SA 1,058,100 42,989,494
---------------
315,083,4810
---------------
Germany--6.9%
Basf AG 99,900 11,245,180
Bayerische Motoren Werke AG 245,400 14,476,993
Beiersdorf AG 159,800 10,895,544
Deutsche Bank AG 259,300 34,923,018
E On AG 223,800 30,422,783
Man AG 184,800 21,497,924
Merck KGaA 121,800 15,701,495
MTU Aero Engines Holding AG 188,100 11,252,429
Porsche AG 13,221 20,195,947
Siemens AG 123,560 13,205,439
Thyssenkrupp AG 518,100 25,630,730
---------------
209,447,482
---------------
Greece--0.4%
Coca-Cola Hellenic Bottling Co. SA 281,100 11,826,271
---------------
Hong Kong--1.3%
China Mobile Ltd. 3,539,100 32,183,519
The Wharf(Holdings) Ltd. 2,478,400 9,199,114
---------------
41,382,633
---------------
Ireland--1.6%
Allied Irish Banks PLC (AIB) 815,200 24,170,941
CRH PLC 549,300 23,476,643
---------------
47,647,584
---------------
Italy--2.2%
Banca Popolare di Milano Scarl (BPM) 544,000 8,420,905
Enel Spa 2,109,500 22,567,760
Eni Spa 1,066,100 34,685,794
---------------
65,674,459
---------------
Japan--20.7%
Canon, Inc 749,950 40,288,411
Daiichi Sankyo Co., Ltd. 333,300 10,211,432
Mitsubishi UFJ Lease & Finance Co., Ltd. 214,860 10,740,265
Honda Motor Co., Ltd. 1,175,300 40,995,358
Ibiden Co., Ltd. 200,300 10,386,430
Kenedix, Inc 1,894 9,676,551
Komatsu Ltd. 1,418,600 29,857,659
Makita Corp. 518,800 19,240,906
Meiji Dairies Corp. 1,108,871 8,704,962
Mitsubishi Corp. 619,900 14,388,751
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------------
Japan (continued)
Mitsubishi Electric Corp. 2,351,000 $ 24,222,303
Mitsubishi Gas Chemical Co., Inc 2,071,200 19,862,989
Mitsui & Co., Ltd. 1,311,000 24,477,637
Mitsui OSK Lines., Ltd. 1,512,000 16,784,316
Nichirei Corp. 1,491,000 8,718,484
Nikon Corp. 796,000 16,787,406
Nippon Suisan Kaisha Ltd. 2,232,600 14,608,628
NTT Corp. 4,565 24,136,425
Olympus Corp. 264,000 9,029,279
Orix Corp. 117,120 30,515,013
Sony Corp. 240,300 12,215,879
Sumco Corp. 651,500 27,092,846
Sumitomo Metal Industries, Ltd. 5,018,000 25,935,348
Sumitomo Trust & Banking Co., Ltd. 3,412,000 35,588,118
Takeda Chemical Industries 501,800 32,919,579
TDK Corp. 127,700 11,076,076
Tokyo Electric Power Co. 674,600 23,072,545
Tokyo Electron Ltd. 214,400 14,993,261
Tokyo Tatemono Co. 634,000 9,566,766
Toyota Motor Corp. 825,300 52,881,397
---------------
628,975,020
---------------
Netherlands--3.1%
ASM Lithography Holding NV (b) 647,800 15,997,579
DSM NV 382,500 17,134,479
Fugro NV 188,200 9,551,677
Ing Groep NV CVA 1,216,500 51,423,572
---------------
94,107,307
---------------
Norway--1.6%
DNB NOR ASA 1,170,500 16,529,057
Orkla ASA 331,500 23,378,882
Telenor ASA 428,800 7,621,982
---------------
47,529,921
---------------
Singapore--1.1%
Chartered Semiconductor Manufacturing Ltd. 0,625,500 10,160,231
DBS Group Holdings, Ltd. 1,733,300 24,460,973
---------------
34,621,204
---------------
Spain--3.2%
ACS Actividades 481,800 29,246,715
Banco Santander Central 1,254,700 22,388,385
Corporacion Mapfre SA 1,703,900 8,738,799
Repsol YPF SA 424,000 14,293,271
Telefonica SA 1,034,500 22,797,690
---------------
97,464,860
---------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------------
Sweden--3.1%
Nordea Bank AB 1,285,600 $ 20,539,095
Skandinaviska Enskilda 1,044,100 33,436,453
Svenska Cellulosa AB (SCA), Class B 243,800 13,064,894
Volvo AB, B Shares (b) 312,500 26,328,610
---------------
93,369,052
---------------
Switzerland--7.5%
Baloise Holdings 153,920 16,021,460
Credit Suisse Group 552,100 39,614,186
Nestle SA 50,727 19,753,602
Roche Holding AG (a) 235,410 41,646,630
Sulzer AG 10,421 14,637,248
Swiss Re 348,100 31,793,878
The Swatch Group AG 85,337 22,557,814
Zurich Financial Services AG 140,490 40,547,081
---------------
226,571,899
---------------
United Kingdom--20.9%
AstraZeneca PLC 408,700 21,981,212
Aviva PLC 1,859,800 27,384,610
Barclays PLC 1,920,090 27,233,620
Barratt Developments PLC 1,033,300 22,461,421
BP PLC 3,110,200 33,773,488
British Airways PLC (b) 3,043,000 29,092,881
BT Group PLC 3,604,900 21,540,611
Dairy Crest Group PLC 714,400 9,366,776
De La Rue PLC 722,800 10,166,529
Enterprise Inn PLC 1,247,800 16,409,483
George Wimpey PLC 793,500 9,919,985
GlaxoSmithKline PLC 676,100 18,580,434
Greene King PLC 448,000 9,720,801
HBOS PLC 2,328,500 47,959,146
International Power PLC 5,590,200 43,603,269
Kelda Group PLC 487,900 9,002,895
Marks & Spencer Group PLC 1,095,900 14,584,356
National Grid PLC 2,039,800 32,001,239
Next PLC 341,100 15,091,058
Reckitt Benckiser PLC 483,000 25,141,170
Royal Bank of Scotland Group PLC 1,202,285 46,924,279
Royal Dutch Shell PLC 1,532,500 50,979,152
Tesco PLC 1,265,000 11,055,197
Vodafone Group PLC 11,650,537 31,055,159
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
United Kingdom (continued)
WPP Group PLC 605,000 $ 9,164,202
Xstrata PLC 783,500 40,258,788
--------------
634,451,761
--------------
Total Common Equities (Cost $2,501,640,183) 2,942,340,152
--------------
PREFERRED STOCKS--1.1%
Germany
Fresenius AG (Cost $24,940,465) 41,440 35,139,401
--------------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.1%
U.S. Treasury Bill (c)(d) (Cost $2,474,531) 4.89% 6/14/2007 2,500,000 2,475,211
--------------
INVESTMENT OF CASH COLLATERAL--0.0% Shares
---------
BlackRock Cash Strategies L.L.C. (cost $6,836) 6,836 6,836
--------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $2,529,062,015) 2,979,961,600
--------------
AFFILIATED INVESTMENTS--0.9%
Dreyfus Institutional Preferred Plus Money Market Fund (e) (Cost $27,479,439) 27,479,439 27,479,439
--------------
Total Investments--99.0% (cost $2,556,541,454) 3,007,441,039
--------------
OTHER ASSETS, LESS LIABILITIES--1.0% 29,075,012
--------------
Net Assets--100.0% $3,036,516,051
==============
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at March 31, 2007.
(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.
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2007, 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, 2007 to Deliver Appreciation
- ------------------------------------------------------------------------------------------------------------------------------------
Euro 9,930,215 4/2/2007 $13,264,396 $13,239,956 $ 24,440
--------
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Deliver Amount Value Date March 31, 2007 to Receive (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
Australian Dollar 7,348,516 4/2/2007 $ 5,941,496 $ 5,929,518 $(11,978)
British Pound 802,333 4/2/2007 1,578,339 1,574,579 (3,760)
Swedish Krona 88,335,556 4/2/2007 12,659,287 12,628,385 (30,902)
--------
$(46,640)
========
At December 31, 2006 the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- ------------------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (979 Contracts) Long 6/15/2007 $30,394,155 $1,367,126
Topix Futures (73 Contracts) Long 6/7/2007 10,489,247 226,091
----------
$1,593,217
==========
Percentage of Net
Economic Sector Allocation Assets
- ------------------------------------------------------------------------
Consumer Discretionary 11.5%
Consumer Staples 8.0
Energy 6.4
Financials 28.0
Health Care 6.7
Industrials 11.0
Information Technology 5.4
Materials 9.1
Telecommunication Services 6.1
Utilities 5.8
Short-term and Other Assets 2.0
-----
100.0%
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 Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A) (including securities on loan, valued at $6,485 (Note 6):
Unaffiliated issuers, at value (cost $2,529,062,015) $2,979,961,600
Affiliated issuers, at value (Note 1H) (cost $27,479,439) 27,479,439
Foreign currency, at value (cost, $18,024,600) 18,244,094
Receivable for investments sold 43,637,734
Interest and dividends receivable 13,348,899
Unrealized appreciation on forward currency exchange contracts (Note 5) 24,440
Receivable for variation margin on open futures contracts (Note 5) 4,439
Prepaid expenses 55,341
--------------
Total assets 3,082,755,986
Liabilities
Payable for investments purchased $ 45,918,598
Accrued accounting, administration and custody fees (Note 2) 226,322
Unrealized depreciation on forward currency exchange contracts (Note 5) 46,640
Collateral for securities on loan (Note 6) 6,836
Accrued professional fees 19,705
Accrued trustees' fees and expenses (Note 2) 17,869
Other accrued expenses and liabilities 3,965
--------------
Total liabilities 46,239,935
--------------
Net Assets (applicable to investors' beneficial interest) $3,036,516,051
==============
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $1,983,512) $ 23,071,198
Dividend income from affiliated investments (Note 1H) 912,927
Interest income 312,034
Securitiy lending income (Note 6) 36
--------------
Total investment Income 24,296,195
Expenses
Investment advisory fee (Note 2) $ 8,899,785
Accounting, administration and custody fees (Note 2) 675,332
Trustees' fees and expenses (Note 2) 50,222
Professional fees 20,797
Insurance expense 19,192
Miscellaneous expenses 10,945
--------------
Total expenses 9,676,273
--------------
Net investment income 14,619,922
--------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Investments 85,006,400
Financial futures transactions 2,822,970
Foreign currency transactions and forward currency exchange transactions 253,676
--------------
Net realized gain (loss) 88,083,046
Change in unrealized appreciation (depreciation) on:
Investments 269,286,540
Financial futures contracts 1,174,078
Foreign currency translations and forward currency exchange contracts 622,921
--------------
Change in net unrealized appreciation (depreciation) 271,083,539
--------------
Net realized and unrealized gain (loss) 359,166,585
--------------
Net Increase in Net Assets from Operations $ 373,786,507
==============
The accompanying notes are an integral part of the financial statements.
19
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, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 14,619,922 $ 23,902,726
Net realized gain (loss) 88,083,046 42,315,209
Change in net unrealized appreciation (depreciation) 271,083,539 133,681,063
--------------- ---------------
Net increase (decrease) in net assets from operations 373,786,507 199,898,998
--------------- ---------------
Capital Transactions
Contributions 675,026,058 1,834,896,418
Withdrawals (208,073,781) (147,003,408)
--------------- ---------------
Net increase (decrease) in net assets from capital transactions 466,952,277 1,687,893,010
--------------- ---------------
Total Increase (Decrease) in Net Assets 840,738,784 1,887,792,008
Net Assets
At beginning of period 2,195,777,267 307,985,259
--------------- ---------------
At end of period $ 3,036,516,051 $ 2,195,777,267
=============== ===============
The accompanying notes are an integral part of the financial statements.
20
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 2007 --------------------------------- of operations) to
(Unaudited) 2006 2005 2004 September 30, 2003
---------------- ----- ------ ------ -------------------
Total Return (a) 15.50%(c) 18.99% 31.12% 27.12% 22.46%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.72%(d) 0.83% 0.95% 1.04% 1.17%(d)
Net Investment Income (to average daily net assets)* 1.09%(d) 1.97% 1.66% 1.30% 1.81%(d)
Portfolio Turnover 31%(c) 51% 58% 80% 63%(c)
Net Assets, End of Period (000's omitted) $3,036,516 $2,195,777 $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
ratios without waivers and reimbursement would have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A N/A 1.20%(d)
Net investment income N/A 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) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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 represented in the MSCI Europe, Australia, Far East Index (EAFE)
and Canada.
At March 31, 2007, there were two funds, The Boston Company International
Core Equity Fund and Dreyfus Premier International Equity Fund (the "Feeder
Funds") invested in the Portfolio. The value of the Feeder Funds'
investment in the Portfolio reflects the Feeder Funds' proportionate
interests in the net assets of the Portfolio. At March 31, 2007, The Boston
Company International Core Equity Fund (the "Fund") and the Dreyfus Premier
International Equity Fund held approximately 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 are valued at the last sale prices on the exchange or national
securities market on which they are primarily traded. Securities not listed
on an exchange or national securities market, or securities for which there
were no reported transactions, are valued at the last calculated mean price
(average of last bid and last offer). Securities that are fixed income
securities, other than short-term instruments with less than sixty days
remaining to maturity, for which market prices are readily available, are
valued at their current market value on the basis of quotations, which may
be furnished by a pricing service or dealers in such securities. 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. With respect to any portion of the Portfolio's assets that are
invested in one or more open-end regulated investment companies ("RICs"),
the Portfolio's net asset value ("NAV") will be calculated based upon the
NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange. Non-exchange traded derivatives are
normally valued on the basis of quotes obtained from brokers and dealers,
counterparties or pricing services.
Because foreign markets may be open at different times than the New York
Stock Exchange ("NYSE"), 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 NYSE
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 NYSE.
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 the trade date. Interest income
is determined on the basis of coupon interest earned, adjusted for
accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on 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.
22
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Portfolio's books and the
U.S. dollar equivalent amounts actually received or paid.
C. Income taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state income taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them.
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 books and 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. Foreign 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.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
I. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -
an Interpretation of FASB Statement No. 109" (the "Interpretation"). The
Interpretation establishes for all entities, including pass-through entities
such as the Portfolio, a minimum threshold for financial statement recognition
of the benefit of positions taken in filing tax returns (including whether an
entity is taxable in a particular jurisdiction), and requires certain expanded
tax disclosures. Adoption of FIN 48 is required for fiscal years beginning after
December 15, 2006 and is to be applied to all open tax years as of the effective
date. At this time, management is evaluating the implications of FIN 48 and its
impact, if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework for
measuring fair value, and requires additional disclosures about fair-value
measurements. The application of FAS 157 is required for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. At this
time, management is evaluating the implications of FAS 157 and its impact, if
any, in the financial statements has not yet been determined.
(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% of the
next $500 million, 0.60% of the next $500 millon, and 0.50% on assets over
$2 billion.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Portfolio Trust 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 $675,332 for the six months ended March 31, 2007.
The Portfolio Trust 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 earned $15, for
the six months ended March 31, 2007. See Note 6 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's and Portfolio 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 Trust 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, 2007 were as follows:
Purchases Sales
-------------- ------------
Non-U.S. Government Securities $1,268,021,863 $810,566,503
============== ============
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $2,556,541,454
--------------
Gross unrealized appreciation 468,165,883
Gross unrealized depreciation (17,266,298)
--------------
Net unrealized appreciation (depreciation) $ 450,899,585
==============
(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 appreciation or depreciation 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, 2007, the Portfolio held open foreign currency exchange
contracts. See Schedule of Investments for further details.
Futures contracts
The Portfolio may enter into financial futures contracts for the purchase
or sale 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, known as variation
margin, 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 appreciation or
depreciation 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 also 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, 2007, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
25
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities for the six months ended March 31, 2007 and
earned interest on the invested collateral of $246 of which $210 was
rebated to borrowers or paid in fees. At March 31, 2007, the Portfolio had
securities valued at $6,485 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. The participating portfolios
and funds also pay an annual renewal fee, computed at a rate of 0.020 of 1%
of the committed amount and allocated ratably to the participating
portfolio/fund. For the six months ended March 31, 2007, the expense
allocated to the Portfolio was $7,121. The facility fee and interest
expense is aggregated with miscellaneous expenses on the Statement of
Operations.
For the six months ended March 31, 2007, the Portfolio did not borrow from
the line of credit during the period.
26
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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 LLC ("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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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 the
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
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 and overall responsiveness to
changes in market conditions.
The Board determined that the Adviser had the expertise and resources to
manage the Portfolio effectively.
27
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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 at the
September 28, 2006 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, 2006 based on the Lipper materials
provided to the Board at the September 28, 2006 meeting. The Board found
that the Fund outperformed its peer group average returns for the one-year
period (24.65% vs. 22.50%), three-year period (27.11% vs. 21.60%) and
five-year period (15.50% vs. 9.94%).
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 management fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Portfolio'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 0.744% (based on the following
breakpoints: 0.800% of the first $500 million; 0.750% of the next $500
million; and 0.700% over $1 billion), in the 2nd quintile (1st being the
best) of its peer group of funds, the median fee of which was 0.818%. The
Portfolio's net management fee was 0.908% (which included 0.111% in
administrative service fees under Lipper's calculation methodology), higher
than the peer group median net management fee of 0.672%. Based on the
Lipper data, as well as other factors discussed at the September 28, 2006
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 relative to the nature and quality of the
services provided.
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 actual net expense ratio of 1.013% was slightly
higher than the median net expense ratio of the peer group of 1.007%.
However, 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 the Adviser,
based on profitability information submitted to them by the Adviser,
incurred marginal profitability in managing most of the investment
companies in the Mellon Institutional Funds family of funds. The Trustees
observed that the Adviser had experienced profits in operating the
Portfolio in both 2004 and 2005 and concluded these were not excessive.
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 Fund and the Standish
Mellon Fixed Income Portfolio, two of the largest funds in the complex,
already had breakpoints in their fee arrangements that reflected economies
resulting from their size. The Board also noted that at the March 7, 2006
meeting, management had presented a Breakpoint Discussion Memorandum that
had proposed a framework for future breakpoints. The Board concluded that,
at existing asset levels and considering current asset growth projections,
the implementation of additional fee breakpoints or other fee reductions
was not necessary at this time.
28
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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.
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 a
one-year period.
29
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of
Principal Portfolios in
Name (Age) 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 (66) Trustee Trustee since Chairman Emeritus, 30
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30
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 (72) Trustee Trustee since Trustee, Mertens 30
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, President Since 2003 President and Chief 30
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
7/24/65 and Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
Trustee
Other Remuneration
Name (Age) Directorships (period ended
Address, and Held by March 31,
Date of Birth Trustee 2007)
- --------------------------------------------------------------------------------
Samuel C. Fleming (66) None Fund: $250
c/o Decision Resources, Inc. Portfolio: $6,092
61 Meadowbrook Road
Weston, MA 02493
9/30/40
Benjamin M. Friedman (62) None Fund: $250
c/o Harvard University Portfolio: $6,092
Littauer Center 127
Cambridge, MA 02138
8/5/44
John H. Hewitt (72) None Fund: $250
P.O. Box 2333 Portfolio: $6,092
New London, NH 03257
4/11/35
Caleb Loring III (63) None Fund: $250
c/o Essex Street Associates Portfolio: $7,178
P.O. Box 5600
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) None $0
The Boston Company
Asset Management, LLC
One Boston Place
Boston, MA 02108
7/24/65
30
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
31
[GRAPHIC] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6924SA0307
[Logo]Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
International Small Cap Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,185.70 $6.05
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.40 $5.59
- ---------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.11%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period). The example reflects the
combined expenses of the Fund and the master portfolio in which it invests
all its assets.
3
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
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 below:
Percentage of
Top Ten Holdings* Country Sector Investments
- -------------------------------------------------------------------------------------------------------------
Actelion Limited Switzerland Health Care 1.0%
Deutsche Boerse AG Germany Financials 1.0
Rautaruukki Oyj Finland Materials 1.0
Inmet Mining Corp. Canada Materials 1.0
TGS Nopec Geophysical Co. ASA Norway Energy 0.9
Sika AG Switzerland Materials 0.9
Kenedix, Inc. Japan Financials 0.8
International Power PLC United Kingdom Utilities 0.8
Fresenius AG Germany Health Care 0.8
Julius Baer Holding Ltd. Switzerland Financials 0.8
----
9.0%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- -------------------------------------------------------------------------
Europe ex U.K. 50.0%
U.K. 19.0
Asia ex Japan 9.7
Japan 15.7
Americas ex U.S. 5.6
----
100%
* Excludes short-term securities.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International
Small Cap Portfolio ("Portfolio"), at value (Note 1A) $869,095,149
Receivable for Fund shares sold 620,540
Receivable from Investment Advisor 30,822
Prepaid expenses 25,132
------------
Total assets 869,771,643
Liabilities
Payable for Fund shares redeemed $ 98,508
Accrued administrative service fees (Note 2) 78,884
Accrued professional fees 17,286
Accrued transfer agent fees (Note 2) 15,477
Accrued shareholder reporting fee (Note 2) 3,500
Accrued registration fee 917
Accrued trustees' fees (Note 2) 498
Accrued chief compliance officer fee (Note 2) 375
Accrued accounting, administration and custody fees (Note 2) 64
Other accrued expenses and liabilities 473
----------
Total liabilities 215,982
------------
Net Assets $869,555,661
============
Net Assets consist of:
Paid-in capital $566,049,195
Accumulated net realized gain 80,140,010
Distributions in excess of net investment income (1,146,878)
Net unrealized appreciation 224,513,334
------------
Total Net Assets $869,555,661
============
Shares of beneficial interest outstanding 33,983,988
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 25.59
============
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net foreign witholding taxes $400,550) $ 4,460,602
Interest and security lending income allocated from Portfolio 117,487
Expenses allocated from Portfolio (4,392,543)
--------------
Net investment income (loss) allocated from Portfolio 185,546
Expenses
Administrative service fee (Note 2) $ 51,468
Registration fees 31,147
Professional fees 26,368
Transfer agent fees (Note 2) 24,702
Insurance expense 1,339
Trustees' fees (Note 2) 997
Miscellaneous expenses 35,908
---------
Total expenses 171,929
--------------
Net investment income 13,617
--------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities, futures transactions, foreign currency
exchange transactions and forward currency transactions 97,090,123
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments securities, futures contracts, foreign currency
exchange translations and forward currency contracts 41,682,528
--------------
Net realized and unrealized gain (loss) on investments 138,772,651
--------------
Net Increase in Net Assets from Operations $ 138,786,268
==============
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, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 13,617 $ 5,296,981
Net realized gain (loss) 97,090,123 61,512,475
Change in net unrealized appreciation (depreciation) 41,682,528 63,997,049
------------ ------------
Net increase (decrease) in net assets from investment operations 138,786,268 130,806,505
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (1,106,888) (5,719,295)
From net realized gains on investments (85,487,253) (33,657,881)
------------ ------------
Total distributions to shareholders (86,594,141) (39,377,176)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 51,844,128 225,167,277
Value of shares issued in reinvestment of distributions 57,005,255 25,672,328
Cost of shares redeemed (50,176,388) (108,488,250)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 58,672,995 142,351,355
------------ ------------
Total Increase (Decrease) in Net Assets 110,865,122 233,780,684
Net Assets
At beginning of period 758,690,539 524,909,855
------------ ------------
At end of period [including distributions in excess of net
investment income of ($1,146,878) and ($53,607), respectively] $869,555,661 $758,690,539
============ ============
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
March 31, 2007 Year Ended September 30,
------------------------
(Unaudited) 2006 2005
---------------- -------- --------
Net Asset Value, Beginning of Period $ 24.03 $ 20.84 $ 15.93
---------- -------- --------
From Investment Operations:
Net investment income* (a) 0.00(b) 0.18 0.23
Net realized and unrealized gains
(loss) on investments 4.32 4.52 5.86
---------- -------- --------
Total from operations 4.32 4.70 6.09
---------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.04) (0.19) (0.17)
From net realized gains on investments (2.72) (1.32) (1.01)
---------- -------- --------
Total distributions to shareholders (2.76) (1.51) (1.18)
---------- -------- --------
Net Asset Value, End of Period $ 25.59 $ 24.03 $ 20.84
========== ======== ========
Total Return 18.57%(h) 23.72% 40.20%
Ratios/Supplemental data:
Expenses (to average daily net assets)* (d) 1.11%(e) 1.11% 1.16%
Net Investment Income (to average daily net assets)* 0.00%(e)(f) 0.79% 1.26%
Portfolio Turnover N/A N/A N/A
Net Assets, End of Period (000's omitted) $ 869,556 $758,691 $524,910
Year Ended September 30,
------------------------
2004 2003 2002
-------- -------- ----------
Net Asset Value, Beginning of Period $ 12.05 $ 8.91 $ 8.55
-------- -------- ----------
From Investment Operations:
Net investment income* (a) 0.14 0.10 0.09
Net realized and unrealized gains
(loss) on investments 3.86 3.13 0.38
-------- -------- ----------
Total from operations 4.00 3.23 0.47
-------- -------- ----------
Less Distributions to Shareholders:
From net investment income (0.12) (0.09) (0.11)
From net realized gains on investments -- -- --
-------- -------- ----------
Total distributions to shareholders (0.12) (0.09) (0.11)
-------- -------- ----------
Net Asset Value, End of Period $ 15.93 $ 12.05 $ 8.91
======== ======== ==========
Total Return 33.35% 36.47%(c) 5.39%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (d) 1.27% 1.39% 1.25%
Net Investment Income (to average daily net assets)* 0.99% 1.01% 0.96%
Portfolio Turnover N/A 15%(g) 69%(g)
Net Assets, End of Period (000's omitted) $212,032 $ 89,570 $ 33,770
- -----------
* 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 without waivers and
reimbursement would have been:
Net investment income per share (a) N/A N/A N/A N/A $ 0.08 $ 0.04
Ratios (to average daily net assets):
Expenses (d) N/A N/A N/A N/A 1.65% 1.82%
Net investment income N/A N/A N/A N/A 0.75% 0.39%
(a) Calculated based on average shares outstanding.
(b) Amount represents less than $.01 per share.
(c) Total return would have been lower in the absence of expense waivers.
(d) Includes the Fund's share of the Portfolio's allocated expenses.
(e) Calculated on an annualized basis.
(f) Amount represents less than .01%.
(g) 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.
(h) Not annualized.
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) Organization and 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 object 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
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 of
companies represented in the Citigroup World Extended Market Ex. U.S. (EMI
Ex-U.S.) Index. 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, 2007 the Fund owned 69% 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. 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
The Fund's investment in the Portfolio is recorded on settlement date. The
Portfolio's securities transactions are recorded as of the trade date as
discussed in Note 1B of the Portfolio's Notes to Financial Statements,
which are included elsewhere in this report. 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 are 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 and losses deferred due to wash sales
Permanent book and tax basis differences relating to shareholder
distributions 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 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/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.
F. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM"), a wholly-owned subsidiary
of Mellon Financial Corporation, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $24,702 for the six months ended March 31, 2007.
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,
2007, the Fund was charged $2,111, which is included as miscellaneous
expenses in the statement of operations. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio Trust 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $3,500, which is included as miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
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, 2007, the Fund was charged $55,726 for fees
payable to Mellon Private Wealth Management.
10
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2007 aggregated $108,750,979 and $136,762,398,
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, 2007 September 30, 2006
---------------- ------------------
Shares sold 2,081,455 9,977,957
Shares issued to shareholders in
reinvestment of distributions 2,343,003 1,232,495
Shares redeemed (2,010,181) (4,831,166)
---------- ----------
Net increase (decrease) 2,414,277 6,379,286
========== ==========
At March 31, 2007, three shareholders of record held, in the aggregate,
approximately 38% 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, 2007, the received $2,683
in redemption fees and is reflected in the cost of shares redeemed.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--98.6%
COMMON EQUITIES--96.6%
Australia--4.2%
Australian Worldwide Exploration Ltd. 1,819,200 $ 4,192,365
Babcock & Brown Ltd. 259,600 5,766,298
Challenger Financial Services Group Ltd. 1,348,100 5,199,651
Cochlear Ltd. 84,100 4,401,171
Computershare Ltd. 438,700 3,848,851
Downer EDI Ltd. 760,100 4,191,687
Goodman Fielder Ltd. 2,568,500 5,067,609
Incitec Pivot Ltd. 147,800 5,915,798
Jubilee Mines NL 216,595 3,068,430
Pacific Brands Ltd. 1,971,800 4,894,800
Record Investments Ltd. 615,100 5,570,542
------------
52,117,202
------------
Austria--1.2%
Andritz AG 22,200 5,568,034
Boehler-Uddeholm 95,340 9,168,199
------------
14,736,233
------------
Belgium--2.2%
Colruyt SA 20,800 4,759,074
Mobistar SA 74,900 6,332,307
NV Union Miniere SA 47,860 8,507,994
Omega Pharma SA 50,200 3,865,937
Telenet Group Holding NV 133,100 4,291,328
------------
27,756,640
------------
Canada--5.5%
Astral Media, Inc. 143,700 5,009,953
Axcan Pharma, Inc. (a) 228,100 3,772,682
Canaccord Captial, Inc. 231,200 4,430,899
Gildan Activewear, Inc. (a) 77,400 4,560,042
Inmet Mining Corp. 217,300 11,926,837
Kingsway Financial Services 198,900 3,723,990
MEGA Brands, Inc. (a) 159,000 3,526,599
Methanex Corp. 166,900 3,722,064
Metro, Inc. 140,000 4,427,309
Northbridge Financial 104,500 2,954,284
Quebecor, Inc. 149,800 5,029,241
Sherritt International Corp. 524,500 7,552,582
Trican Well Service Ltd. 202,500 3,991,401
WestJet Airlines Ltd. (a) 330,300 4,421,361
-----------
69,049,244
------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Denmark--0.4%
Sydbank A/S 82,200 $ 4,422,366
-------------
Finland--2.8%
Cargotec Corp. 73,000 4,407,921
Elisa Oyj 115,300 3,340,145
KCI Konecranes Oyj 198,900 6,667,836
Nokian Renkaat Oyj 162,100 4,438,266
Rautaruukki Oyj 256,200 11,938,685
Wartsila Oyj 74,600 4,612,139
-------------
35,404,992
-------------
France--9.1%
Air France-KLM 130,400 5,947,641
Alstom 29,200 3,788,803
Bonduelle S.C.A 29,800 3,438,000
Ciments Francais 34,250 7,220,738
CNP Assurances 54,140 6,303,932
Compagnie Generale de Geophysique SA (a) 36,000 7,548,811
Compagnie Generale des Etablissements Michelin 58,600 6,470,263
Euler Hermes SA 69,860 9,838,081
Eutelsat Communications 184,400 4,167,136
Groupe Steria SCA 65,300 4,274,391
Icade 72,200 5,303,668
Iliad SA 44,900 4,673,341
Ipsen SA 81,400 3,997,555
Natixis 208,800 5,078,282
Nexans SA 67,430 8,915,891
Nexity 62,700 5,342,747
Pierre & Vacances 32,600 4,484,678
Pinguely-Haulotte 165,400 5,299,589
Rhodia SA 1,011,600 3,715,506
Silicon-On-Insulator Technologies (SOITEC) (a) 135,500 3,232,192
Sodexho Alliance SA 74,900 5,482,997
-------------
114,524,242
Germany--7.4% -------------
Aareal Bank AG 170,300 8,233,787
Deutsche Boerse AG 53,870 12,339,214
Deutsche Postbank AG 71,590 6,240,830
Hannover Rueckversicheru 80,800 3,599,015
Hypo Real Estate Holding 76,290 4,864,368
IKB Deutsche Industriebank AG 94,700 3,775,467
Lanxess 116,900 6,020,436
Leoni AG 33,690 1,387,238
Man AG 72,500 8,433,980
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, 2007 (Unaudited)
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Germany (continued)
MPC Capital AG 19,815 $ 1,674,964
MTU Aero Engines Holding AG 112,600 6,735,904
Salzgitter AG 54,300 7,928,223
Software AG 75,860 6,475,273
Stada Arzneimittel AG 114,260 6,935,927
Vivacon AG 100,600 3,641,193
Wincor Nixdorf AG 53,440 4,979,083
------------
93,264,902
------------
Hong Kong--1.1%
Hengan International Group Co., Ltd. 2,151,400 6,305,699
Wing Hang Bank Ltd. 557,900 6,869,230
------------
13,174,929
------------
Ireland--0.9%
Grafton Group PLC (a) 296,570 4,456,113
IAWS Group PLC 283,000 6,576,762
------------
11,032,875
------------
Italy--5.2%
Asm Brescia Spa 987,900 6,382,787
Azimut Holding Spa 473,900 6,993,996
Banca de Firenze 629,220 4,659,942
Banca Popolare di Milano Scarl (BPM) 380,500 5,889,989
Cementir Spa 414,800 5,260,295
Credito Emiliano Spa 388,900 6,118,707
Fondiaria-Sai Spa 120,440 5,528,747
INDESIT COMPANY Spa 182,200 3,893,541
Mediolanum Spa 443,800 3,597,927
Milano Assicurazioni Spa 696,750 6,016,195
Pirelli & C Real Estate 80,500 6,105,822
Recordati Spa 597,440 4,751,738
------------
65,199,686
------------
Japan--15.5%
Alpine Electronics, Inc. 218,200 3,925,859
Ardepro Co., Ltd. 9,600 3,446,321
Asahi Pretec Corp. 201,900 5,071,917
Chiyoda Integre Co., Ltd. 103,500 2,433,124
Comsys Holdings Corp. 266,000 2,855,724
Dainippon Screen Manufacturing Co., Ltd. 539,900 4,082,584
EXEDY Corp. 209,200 5,965,476
Fuji Machine Mfg. Co., Ltd. 45,400 737,081
Gigas K's Denki Corp. 196,800 5,244,437
Goldcrest Co., Ltd. 85,340 4,693,229
Hisamitsu Pharmaceutical Co., Ltd. 137,400 4,057,982
Hitachi Construction Machinery Co., Ltd. 192,600 5,214,241
Hitachi High-Technologies Corp. 181,100 4,949,011
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Japan (continued)
Hogy Medical Co., Ltd. 79,400 $ 3,712,925
Izumi Co. Ltdronics, Inc. 361,000 6,709,582
Joint Corp. 183,500 6,976,831
Kansai Paint Co., Ltd. 488,000 4,170,551
Keihin Corp. (a) 157,300 3,571,056
Kenedix, Inc. 2,047 10,458,236
Kintetsu World Express, Inc. 130,200 4,618,824
Kyowa Exeo Corp. 476,000 5,219,316
Makita Corp. 119,500 4,431,936
Meiji Dairies Corp. 744,959 5,848,146
Mitsubishi Gas Chemical Co., Inc. 472,400 4,530,357
Mori Seiki Co., Ltd. 221,800 5,280,056
Nichirei Corp. 650,000 3,800,815
Nippon Chemi-Con Corp. 438,000 3,891,929
Nippon Suisan Kaisha Ltd. 564,000 3,690,435
Nippon System Development Co., Ltd. 306,000 4,736,858
Nissin Kogyo Co., Ltd. 301,200 7,387,490
Nitto Boseki Co., Ltd. 1,379,000 5,044,123
NTN Corp. 618,000 5,349,741
Suruga Bank Ltd. 530,000 6,908,937
Taiyo Nippon Sanso Corp. 595,000 5,372,825
Takeuchi MFG. Co., Ltd. 81,400 3,391,955
Toho Pharmaceutical Co., LTD. 256,500 4,636,722
Tosoh Corp. 1,027,000 5,290,580
Ube Industries, Ltd. 1,228,000 3,897,751
Ulvac, Inc. 150,200 4,537,995
Urban Corp. 245,500 3,606,556
Yaskawa Electric Corp. 386,000 4,560,061
------------
194,309,575
------------
Luxembourg--0.3%
Oriflame Cosmetics SA SDR 92,200 3,553,725
------------
Netherlands--4.7%
Aalberts Industries NV 84,320 8,326,960
Endemol NV 167,100 5,220,151
Fugro NV 161,700 8,206,728
Randstad Holding N.V 53,900 4,179,672
SBM Offshore NV 169,260 6,101,458
Sligro Food Group NV 50,900 3,934,121
SNS Reaal 161,200 3,726,821
TomTom NV 109,600 4,466,108
Univar NV 105,100 5,829,631
USG People NV 110,600 4,561,512
Wolters Kluwer NV 165,200 4,955,600
------------
59,508,762
------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Norway--2.2%
Aker Yards AS 242,500 $ 4,190,737
Ementor ASA (a) 799,800 7,009,554
Tandberg ASA (a) 260,600 5,447,127
TGS Nopec Geophysical Co. ASA (a) 470,900 10,889,160
------------
27,536,578
------------
Portugal--0.4%
Banco BPI SA 555,950 4,826,424
------------
Singapore--0.6%
United Test and Assembly Center Ltd. 7,101,000 4,261,349
Wing Tai Holdings, Ltd. 1,783,800 3,740,757
------------
8,002,106
------------
South Korea--3.0%
Daegu Bank 162,800 2,960,000
GS Engineering and Construction Corp. 65,000 5,819,245
Hite Brewery Co., Ltd. 37,400 4,473,684
Honam Petrochemical Corp. 48,800 4,228,814
Hyundai Mipo Dockyard 53,200 9,814,141
Jusung Engineering Co., Ltd. 396,100 4,716,980
Korea Zinc Co., Ltd. 56,900 6,080,223
------------
38,093,087
------------
Spain--3.0%
Abengoa SA 103,800 4,300,466
Banco Pastor SA 216,400 4,985,661
Bolsas y Mercados Espanoles 109,300 5,356,046
Ebro Puleva SA 192,900 4,552,450
Fomento de Construcciones y Contratas SA 64,100 6,587,840
Sol Melia SA 270,900 6,512,653
Union Fenosa SA 95,600 5,154,577
------------
37,449,693
------------
Sweden--1.2%
Alfa Laval AB 102,900 5,337,336
Getinge AB 180,000 4,100,815
NCC AB 194,100 6,243,706
------------
15,681,857
------------
Switzerland--6.3%
Actelion Limited (a) 55,060 12,832,836
Barry Callebaut AG (a) 11,700 8,703,036
Galenica Holding AG 13,800 4,383,115
Georg Fischer AG (a) 10,600 7,675,471
Julius Baer Holding Ltd. 72,800 9,931,902
Kudelski SA 123,300 4,342,335
Rieter Holding AG 13,060 6,506,895
Sika AG 6,200 10,534,847
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Switzerland (continued)
Sulzer AG 3,579 $ 5,027,033
The Swatch Group AG 23,650 6,251,594
Valora Holding AG 11,210 3,205,361
------------
79,394,425
------------
Ukraine--0.7%
Michael Page International PLC 880,200 9,272,340
------------
United Kingdom--18.7%
Admiral Group PLC 165,100 3,731,776
Aegis Group PLC 1,269,600 3,746,336
Amlin PLC 889,300 4,959,637
Ashtead Group PLC 1,128,300 3,351,584
Barratt Developments PLC 255,320 5,550,034
British Airways PLC (a) 813,800 7,780,410
Burren Energy PLC 521,600 8,198,471
Cattles PLC 694,100 5,591,450
Charter PLC (a) 430,310 7,512,739
Chemring Group PLC 179,900 6,571,910
Close Brothers Group PLC 355,460 7,083,513
Cookson Group PLC 527,700 6,451,738
Crest Nicholson 411,800 5,018,526
Croda International PLC 675,000 8,471,747
Daily Mail and General Trust PLC 412,700 6,592,331
Dairy Crest Group PLC 376,000 4,929,882
DS Smith PLC 1,550,800 6,826,017
Enterprise Inn PLC (a) 525,500 6,910,710
Greene King PLC 243,523 5,284,015
Inchcape PLC 699,600 7,851,524
Informa PLC 683,100 8,170,269
International Power PLC 1,325,100 10,335,711
Interserve PLC 458,800 4,393,169
John Wood Group PLC 1,257,600 6,648,743
Kelda Group PLC 441,000 8,137,480
Kier Group PLC 122,310 5,777,004
LogicaCMG PLC 1,171,900 4,103,544
Mcbride PLC 904,500 4,265,949
Morgan Sindall PLC 173,900 4,286,464
N Brown Group PLC (a) 582,033 3,712,585
Next PLC 164,700 7,286,711
Persimmon PLC 173,010 4,785,255
Petrofac Ltd. 888,700 7,696,673
Regus Group PLC 1,715,900 5,004,206
Restaurant Group PLC 747,514 5,367,360
Savills PLC 552,800 7,199,039
SIG PLC 171,130 4,268,683
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
United Kingdom (continued)
Speedy Hire PLC 187,630 $ 4,318,537
Sthree PLC 460,300 3,938,934
The Carphone Warehouse PLC 506,430 2,757,119
--------------
234,867,785
--------------
TOTAL COMMON EQUITIES (Cost $939,013,627) 1,213,179,668
--------------
PREFERRED STOCKS--1.9%
Germany--1.9%
Fresenius AG 126,000 10,029,822
Fuchs Petrolub AG 46,500 4,076,598
Hugo Boss AG 87,000 5,054,578
ProSieben Sat.1 Media AG 127,500 4,500,745
--------------
TOTAL PREFERRED STOCKS (Cost $15,947,860) 23,661,743
--------------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.1%
U.S. Treasury Bill (b) (c) (Cost $653,274) 4.89% 6/14/2007 660,000 653,455
--------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $955,614,761) 1,237,494,866
--------------
AFFILIATED INVESTMENTS--0.9% Shares
------
Dreyfus Institutional Preferred Plus Money Market Fund (d)
(Cost $11,216,571) 11,216,571 11,216,571
--------------
TOTAL INVESTMENTS--99.5% (Cost $966,831,332) 1,248,711,437
--------------
OTHER ASSETS, LESS LIABILITIES--0.5% 6,358,749
--------------
NET ASSETS--100% $1,255,070,186
==============
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Denotes all or part of security segretated as collateral for futures transactions.
(c) Rate noted is yield to maturity.
(d) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2007 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, 2007 to Deliver Appreciation
- -------------------------------------------------------------------------------------------------------------
Austrailian Dollar 3,914,657 4/2/2007 $3,165,118 $3,158,737 $ 6,381
British Pound 1,935,185 4/2/2007 3,806,871 3,797,801 9,070
Singapore Dollar 529,756 4/2/2007 349,418 349,190 228
---------- ---------- ---------
$7,321,407 $7,305,728 $ 15,679
========== ========== =========
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Deliver Amount Value Date March 31, 2007 to Receive (Depreciation)
- -------------------------------------------------------------------------------------------------------------
Japanese Yen 184,061,601 4/2/2007 $1,562,781 $1,560,241 $ (2,540)
Swiss Franc 4,102,896 4/2/2007 3,376,910 3,369,105 (7,805)
---------- ---------- ---------
$4,939,691 $4,929,346 $ 10,345)
========== ========== =========
At March 31, 2007 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- --------------------------------------------------------------------------------------------------
MSCI Pan-Euro (400 Contracts) Long 6/15/2007 $12,313,372 $641,332
Topix Futures (25 Contracts) Long 6/7/2007 3,639,803 35,950
--------
$677,282
========
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------------------
Consumer Discretionary 18.0%
Consumer Staples 6.4
Energy 5.1
Financials 20.2
Health Care 5.7
Industrials 21.3
Information Technology 5.9
Materials 11.9
Telecommunication Services 1.7
Utilities 2.4
Short-term and Other Assets 1.4
-----
100.0%
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 Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)
Unaffiliated issuers, at value (cost $955,614,761) $1,237,494,866
Affiliated issuers, at value (Note 1H) (cost $11,216,571) 11,216,571
Receivable for investments sold 11,461,969
Foreign currency, at value (identified cost, $5,333,052) 5,367,138
Interest and dividends receivable 3,232,096
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 15,679
Prepaid expenses 30,347
--------------
Total assets 1,268,818,666
Liabilities
Payable for investments purchased $ 13,579,016
Accrued accounting, administration and custody fees (Note 2) 114,996
Accrued trustees' fees and expenses (Note 2) 21,776
Accrued professional fees 17,272
Unrealized depreciation on forward currency exchange contracts (Note 5) 10,345
Payable for variation margin on open financial futures contracts (Note 5) 2,537
Other accrued expenses and liabilities 2,538
--------------
Total liabilities 13,748,480
--------------
Net Assets (applicable to investors' beneficial interest) $1,255,070,186
==============
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $579,409) $ 6,065,250
Dividend income from affiliated investments (Note 1H) 387,803
Interest income 60,599
Securitiy lending income (Note 6) 109,640
--------------
Total Investment Income 6,623,292
Expenses
Investment advisory fee (Note 2) $ 5,921,630
Accounting, administration and custody fees (Note 2) 358,203
Trustees' fees and expenses (Note 2) 40,499
Professional fees 15,230
Insurance expense 10,977
Miscellaneous expenses 8,485
--------------
Total expenses 6,355,024
-------------
Net Investment income 268,268
-------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 140,895,315
Financial futures transactions (354,070)
Foreign currency transactions and forward currency exchange transactions (89,314)
--------------
Net realized gain (loss) 140,451,931
Change in unrealized appreciation (depreciation) on:
Investments 59,074,852
Financial futures contracts 677,282
Foreign currency translations and forward currency exchange contracts 23,281
--------------
Change in net unrealized appreciation (depreciation) 59,775,415
-------------
Net realized and unrealized gain (loss) 200,227,346
-------------
Net Increase in Net Assets from Operations $200,495,614
=============
The accompanying notes are an integral part of the financial statements.
21
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, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income (loss) $ 268,268 $ 8,188,084
Net realized gain (loss) 140,451,931 89,220,862
Change in net unrealized appreciation (depreciation) 59,775,415 90,899,614
-------------- --------------
Net increase (decrease) in net assets from operations 200,495,614 188,308,560
-------------- --------------
Capital Transactions
Contributions 169,709,498 481,080,065
Withdrawals (212,458,683) (229,295,440)
-------------- --------------
Net increase (decrease) in net assets from capital transactions (42,749,185) 251,784,625
-------------- --------------
Total Increase (Decrease) in Net Assets 157,746,429 440,093,185
Net Assets
At beginning of period 1,097,323,757 657,230,572
-------------- --------------
At end of period $1,255,070,186 $1,097,323,757
============== ==============
The accompanying notes are an integral part of the financial statements.
22
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 (commencement
March 31 2007 Year Ended September 30, of operations) to
-----------------------------
(Unaudited) 2006 2005 2004 September 30, 2003
---------------- ---- ---- ---- ------------------
Total Return (a) 18.61%(c) 23.75% 40.24% 33.42% 36.44%(b)(c)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 1.07%(d) 1.08% 1.12% 1.20% 1.46%(d)
Net Investment Income (to average daily net assets)* 0.05%(d) 0.85% 1.32% 1.06% 1.29%(d)
Portfolio Turnover 48%(c) 65% 50% 72% 46%(c)
Net Assets, End of Year (000's omitted) $1,255,070 $1,097,324 $657,231 $219,368 $89,545
- ------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken the ratios without waivers and reimbursement would have
been: Ratios (to average daily net assets):
Expenses N/A N/A N/A N/A 1.49%(d)
Net investment income N/A 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. Total return would have been lower in the absence of
expense waivers.
(b) Total return would have been lower in the absence of expense waivers.
(c) Not annualized.
(d) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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 represented in the Citigroup World Extended Market Ex. U.S. (EMI
Ex-U.S.) Index.
At March 31, 2007, there were two funds, The Boston Company International
Core Equity Fund and Dreyfus Premier International Small Cap Fund (the
"Feeder Funds") invested in the Portfolio. The value of the Feeder Funds'
investment in the Portfolio reflects the Feeder Funds' proportionate
interests in the net assets of the Portfolio. At March 31, 2007, The Boston
Company International Core Equity Fund (the "Fund") and the Dreyfus Premier
International Small Cap Fund held approximately 69% and 31% 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 are valued at the last 2sale prices on the exchange or national
securities market on which they are primarily traded. Securities not listed
on an exchange or national securities market, or securities for which there
were no reported transactions, are valued at the last calculated mean price
(average of last bid and last offer). Securities that are fixed income
securities, other than short-term instruments with less than sixty days
remaining to maturity, for which market prices are readily available, are
valued at their current market value on the basis of quotations, which may
be furnished by a pricing service or dealers in such securities. 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. With respect to any portion of the Portfolio's assets that are
invested in one or more open-end regulated investment companies ("RICs"),
the Portfolio's net asset value ("NAV") will be calculated based upon the
NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange. Non-exchange traded derivatives are
normally valued on the basis of quotes obtained from brokers and dealers,
including counterparties or pricing services.
Because foreign markets may be open at different times than the New York
Stock Exchange ("NYSE"), 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 NYSE
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 NYSE.
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 the trade date. Interest income
is determined on the basis of coupon interest earned, adjusted for
accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on 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.
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Portfolio's books and the
U.S. dollar equivalent amounts actually received or paid.
C. Income taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state income taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them.
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 books and 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. Foreign 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 LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
25
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
I. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(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.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Portfolio Trust 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 $358,203 for the six months ended March 31, 2007.
The Portfolio Trust 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 earned $46,873,
for the six months ended March 31, 2007. See Note 6 for further details.
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's and Portfolio Trust's Chief Compliance Officer. No other
director, officer or employee of TBCAM or its affiliates received any
compensation from the Trust or the Portfolio Trust 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, 2007 were as follows:
Purchases Sales
------------- ------------
Non-U.S. Government Securities $557,151,227 $603,053,522
============= ============
26
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $966,831,332
============
Gross unrealized appreciation 290,637,130
Gross unrealized depreciation (8,757,025)
------------
Net unrealized appreciation (depreciation) $281,880,105
============
(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 appreciation or depreciation 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, 2007, the Portfolio held open foreign currency exchange
contracts. See Schedule of Investments for further details.
Futures contracts
The Portfolio may enter into financial futures contracts for the purchase
or sale 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, shown as variation
margin, are made or received by the Portfolio each day, depending on the
daily fluctuations in the value of the underlying security, and are
recorded shown as variation margin for financial statement purposes as
unrealized appreciation or depreciation 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 also 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, 2007, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
27
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities for the six months ended March 31, 2007 and
earned interest on the invested collateral of $129,601 of which $19,961 was
rebated to borrowers or paid in fees. At March 31, 2007, the Portfolio did
not have securities out for loan.
(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. The participating portfolios
and funds also pay an annual renewal fee, computed at a rate of 0.020 of 1%
of the committed amount and allocated ratably to the participating
portfolios/funds. For the six months ended March 31, 2007, the expense
allocated to the Portfolio was $1,862. The facility fee and interest
expense is aggregated with miscellaneous expenses on the Statement of
Operations.
For the six months ended March 31, 2007, the Portfolio had average
borrowings outstanding of $5,769,000 for a total of two days and incurred
$1,843 of interest expense. At March 31, 2007 the Fund had no borrowings
outstanding.
28
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in
Approving Advisory Agreement (Unaudited)
- --------------------------------------------------------------------------------
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 LLC ("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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 and overall responsiveness to
changes in market conditions.
The Board determined that the Adviser had the expertise and resources to
manage the Portfolio effectively.
29
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in
Approving Advisory Agreement (Unaudited)
- --------------------------------------------------------------------------------
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 at the
September 28, 2006 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, 2006 based on the Lipper materials
provided to the Board at the September 28, 2006 meeting. The Board found
that the Fund outperformed its peer group average return for the one-year
period (30.46% vs. 24.07%), three-year period (35.13% vs. 29.75%) and
five-year period (23.42% vs. 18.50%).
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 management fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Portfolio'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 1.00%, in the 3rd quintile
(1st being the best) of its peer group of funds, the median fee of which
was 0.984%. The Portfolio's net management fee was 1.088% (which included
0.091% in administrative services fees under Lipper's calculation
methodology), higher than the peer group median net management fee of
0.970%. Based on the Lipper data, as well as other factors discussed at the
September 28, 2006 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 relative to the nature and quality of the
services provided.
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 actual net expense ratio of 1.160% was lower than
the median net expense ratio of the peer group of 1.294%, 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 the Adviser,
based on profitability information submitted to them by the Adviser,
incurred marginal profitability in managing most of the investment
companies in the Mellon Institutional Funds family of funds. The Trustees
observed that the Adviser had experienced profits in operating the
Portfolio in both 2004 and 2005 and concluded these were not excessive.
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 Boston Company
International Core Equity Portfolio and the Standish Mellon Fixed Income
Portfolio, two of the largest funds in the complex, already had breakpoints
in their fee arrangements that reflected economies resulting from their
size. The Board also noted that at the March 7, 2006 meeting, management
had presented a Breakpoint Discussion Memorandum that had proposed a
framework for future breakpoints. The Board concluded that, at existing
asset levels and considering current asset growth projections, the
implementation of additional fee breakpoints or other fee reductions was
not necessary at this time.
30
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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.
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 a
one-year period.
31
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Principal
Name (Age) Term of Office Occupation(s)
Address, and Position(s) and Length of During Past
Date of Birth Held with Trust Time Served 5 Years
- ----------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus,
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier,
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 (72) Trustee Trustee since Trustee, Mertens
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, President Since 2003 President and Chief
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
7/24/65 and Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
Number of Trustee
Portfolios in Other Remuneration
Name (Age) Fund Complex Directorships (period ended
Address, and Overseen by Held by March 31,
Date of Birth Trustee Trustee 2007)
- --------------------------------------------------------------------------------------------
Samuel C. Fleming (66) 30 None Fund: $250
c/o Decision Resources, Inc. Portfolio: $4,220
61 Meadowbrook Road
Weston, MA 02493
9/30/40
Benjamin M. Friedman (62) 30 None Fund: $250
c/o Harvard University Portfolio: $4,220
Littauer Center 127
Cambridge, MA 02138
8/5/44
John H. Hewitt (72) 30 None Fund: $250
P.O. Box 2333 Portfolio: $4,220
New London, NH 03257
4/11/35
Caleb Loring III (63) 30 None Fund: $250
c/o Essex Street Associates Portfolio: $4,728
P.O. Box 5600
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) 30 None $0
The Boston Company
Asset Management, LLC
One Boston Place
Boston, MA 02108
7/24/65
32
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
33
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[Logo]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6939SA0307
[LOGO]Mellon
---------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Large Cap Core Fund
- --------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,092.40 $4.28
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.84 $4.13
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.82%,
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
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 below.
Percentage of
Top Ten Holdings* Sector Investments
- -------------------------------------------------------------------------------------------------
Altria Group, Inc. Consumer Staples 3.4%
ConocoPhillips Energy 3.0
General Electric Corp. Industrials 2.7
American International Group Financials 2.4
Sempra Energy Utilities 2.2
Microsoft Corp. Information Technology 2.2
JPMorgan Chase & Co. Financials 2.1
Cisco Systems, Inc. Information Technology 1.8
Pfizer, Inc. Health Care 1.8
International Business Machines Information Technology 1.8
---
23.4%
* Excludes short-term securities.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
Consumer Discretionary 8.4%
Consumer Staples 10.6
Energy 11.3
Financials 20.2
Health Care 13.6
Industrials 10.0
Information Technology 17.2
Materials 2.3
Telecommunication Services 1.6
Utilities 3.5
Short-term and Net Other Assets 1.3
-----
100.0%
4
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in in The Boston Company Large Cap Core Portfolio ("Portfolio"), at value $116,234,087
(Note 1A)
Receivable for Fund shares sold 23,268
Prepaid expenses 10,730
------------
Total assets 116,268,085
Liabilities
Payable for Fund shares redeemed $ 68,500
Accrued administrator service fee (Note 2) 36,160
Accrued professional fees 12,265
Accrued transfer agent fee (Note 2) 3,100
Accrued trustees' fees (Note 2) 497
Accrued chief compliance officer fee (Note 2) 376
Accrued shareholder reporting expense (Note 2) 400
Other accrued expenses and liabilities 232
----------
Total liabilities 121,530
------------
Net Assets $116,146,555
Net Assets consist of: ============
Paid-in capital $101,622,849
Accumulated net realized gain 4,623,103
Undistributed net investment income 378,835
Net unrealized appreciation 9,521,768
------------
Total Net Assets $116,146,555
============
Shares of beneficial interest outstanding 2,940,201
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 39.50
============
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $460) $ 986,279
Interest income Allocated from Portfolio 7,697
Expenses allocated from Portfolio (358,563)
----------
Net investment income allocated from Portfolio 635,413
Expenses
Adminstrative service fees (Note 2) $ 71,865
Professional fees 14,235
Registration fees 11,136
Transfer agent fees (Note 2) 5,485
Trustees' fees (Note 2) 997
Insurance expense 672
Miscellaneous expenses 577
--------
Total expenses 104,967
----------
Net investment income 530,446
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investments 5,060,715
Financial futures transactions 71,667
---------
Net realized gain (loss) 5,132,382
Change in unrealized appreciation (depreciation) allocated from Portfolio on: ----------
Investments 3,864,848
----------
Net realized and unrealized gain (loss) 8,997,230
----------
Net Increase in Net Assets from Operations $9,527,676
==========
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, 2007 Year Ended
(Unaudited) September 30, 2006
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 530,446 $ 481,678
Net realized gain (loss) 5,132,382 3,865,493
Change in net unrealized appreciation (depreciation) 3,864,848 866,918
------------ ------------
Net increase (decrease) in net assets from investment operations 9,527,676 5,214,089
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (365,121) (480,413)
From net realized gains on investments (4,041,460) (5,953,616)
------------ ------------
Total distributions to shareholders (4,406,581) (6,434,029)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 29,256,793 51,023,432
Value of shares issued in reinvestment of distributions 3,944,076 5,246,418
Cost of shares redeemed (15,920,312) (7,340,989)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 17,280,557 48,928,861
------------ ------------
Total Increase (Decrease) in Net Assets 22,401,652 47,708,921
Net Assets
At beginning of period 93,744,903 46,035,982
At end of period (including undistributed net ------------ ------------
investment income of $378,835 and $213,510, respectively) $116,146,555 $ 93,744,903
============ ============
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
March 31, 2007 Year Ended September 30,
-------------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
--------- ---- ---- ---- ---- ----
Net Asset Value, Beginning of Period $ 37.58 $ 39.57 $ 35.24 $ 31.43 $ 26.13 $ 34.00
From Investment Operations: ------- ------- -------- ------- ------- -------
Net investment income* (a) 0.18 0.36 0.41 0.23 0.36 0.32
Net realized and unrealized gains (loss) on 3.29(b) 3.22 4.28(b) 3.92(b) 5.30 (5.77)(b)
investments ------- ------- -------- ------- ------- -------
Total from operations 3.47 3.58 4.69 4.15 5.66 (5.45)
Less Distributions to Shareholders: ------- ------- -------- ------- ------- -------
From net investment income (0.13) (0.39) (0.36) (0.34) (0.36) (0.21)
From net realized gains on investments (1.42) (5.18) -- -- -- (2.21)
------- ------- -------- ------- ------- -------
Total distributions to shareholders (1.55) (5.57) (0.36) (0.34) (0.36) (2.42)
------- ------- -------- ------- ------- -------
Net Asset Value, End of Period $ 39.50 $ 37.58 $ 39.57 $ 35.24 $ 31.43 $ 26.13
======= ======= ======== ======= ======= =======
Total Return 9.24%(f) 9.84%(c) 13.34% 13.23%(c) 21.76%(c) (17.70%)(c)
Ratios/Supplemental data
Expenses (to average daily net assets)* (d) 0.82%(e) 0.90% 0.85% 0.83% 0.71% 0.71%
Net Investment Income (to average daily net assets)* 0.94%(e) 0.98% 1.10% 0.67% 1.23% 0.96%
Net Assets, End of Period (000's omitted) $116,147 $93,745 $46,036 $56,067 $64,150 $55,029
- --------------
* 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
without waivers and reimbursements would have been:
Net investment income per share (a) N/A $0.33 N/A $0.23 $0.29 $0.27
Ratios (to average daily net assets):
Expenses (d) N/A 0.99% N/A 0.84% 0.93% 0.83%
Net investment income N/A 0.89% N/A 0.66% 1.01% 0.84%
(a) Calculated based on average shares outstanding.
(b) Amounts includes litigation proceeds received by the Portfolio of $0.01 for
the six months ended March 31, 2007, $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.
(d) Includes the Fund's share of the Portfolio's allocated expenses.
(e) Calculated on an annualized basis.
(f) Not annualized.
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) Organization and 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, 2007 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. 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
The Fund's investment in the Portfolio is recorded on settlement date. The
Portfolio's securities transactions are recorded as of the trade date as
discussed in Note 1B of the Portfolio's Notes to Financial Statements,
which are included elsewhere in this report. 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 are 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 and unrealized gains or
losses on futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions 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/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 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.
F. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined. In
addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to The Boston Company Asset Management, LLC ("TBCAM"), a
wholly-owned subsidiary of Mellon Financial Corporation, for such
services. See Note 2 of the Portfolio's Notes to Financial Statements,
which are included elsewhere in this report.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $5,485 for the six months ended March 31, 2007.
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,
2007, the Fund was charged $978, which is included in miscellaneous
expenses in the statement of operations. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio Trust 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $400, which is included in miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
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, 2007, the Fund was charged $66,830 for fees
payable to Mellon Private Wealth Management.
10
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for
the six months ended March 31, 2007 aggregated $33,403,101 and
$20,409,175, 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, 2007 September 30, 2006
---------------- ------------------
Shares sold 748,800 1,384,404
Shares issued to shareholders
in reinvestment of distributions 100,435 146,598
Shares redeemed (403,670) (199,694)
------- ---------
Net increase (decrease) 445,565 1,331,308
======= =========
At March 31, 2007, two shareholders of record held, in the aggregate,
approximately 72% 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, 2007, the Fund did not
assess any redemption fees.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Code. As such and by complying with
the applicable provisions of the Code regarding the sources of its
income, the timely distributions of its income to its shareholders, and
the diversification of its assets, the Fund will not be subject to U.S.
federal income tax on its investment company taxable income and net
capital gain which are distributed to shareholders.
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENT--98.7%
EQUITIES--98.7%
Consumer Discretionary--8.4%
Coach, Inc. (a) 13,390 $ 670,170
Hilton Hotels Corp. 24,890 895,044
Johnson Controls, Inc. 7,840 741,821
McDonalds Corp. 35,808 1,613,150
Omnicom Group 17,330 1,774,245
Ross Stores, Inc. 17,680 608,192
Target Corp. 19,500 1,155,570
TJX Cos, Inc. 30,740 828,750
Walt Disney Co. 42,840 1,474,981
-------------
9,761,923
-------------
Consumer Staples--10.6%
Altria Group, Inc. 43,900 3,854,859
Cadbury Schweppes PLC--ADR 39,360 2,021,923
Dean Foods Corp. 12,210 570,695
Pepsico, Inc. 28,380 1,803,833
Supervalu, Inc. 32,950 1,287,357
The Kroger Co. 57,270 1,617,878
Wal-Mart Stores, Inc. 24,910 1,169,525
------------
12,326,070
------------
Energy--11.3%
Chesapeake Energy Corp. 34,200 1,056,096
Chevron Corp. 12,232 904,679
ConocoPhillips 50,040 3,420,234
ENSCO International, Inc. 23,330 1,269,152
Exxon Mobil Corp. 15,914 1,200,711
Hess Corp. 13,460 746,626
Marathon Oil Corp. 10,490 1,036,727
Nabors Industries Ltd. (a) 28,460 844,408
National-Oilwell Varco, Inc. (a) 18,010 1,400,998
XTO Energy, Inc. 23,100 1,266,111
------------
13,145,742
------------
Financial--20.2%
Ambac Financial Group, Inc. 12,700 1,097,153
American International Group 40,199 2,702,177
Bank of America Corp. 29,560 1,508,151
Chicago Mercantile Exchange 1,105 588,368
CIT Group, Inc. 20,710 1,095,973
Citigroup, Inc. 37,686 1,934,799
E*TRADE Financial Corp. (a) 31,200 662,064
Franklin Resources, Inc. 6,090 735,855
Hartford Financial Services Group, Inc. 11,480 1,097,258
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------
Financial (continued)
JPMorgan Chase & Co. 50,490 $ 2,442,706
Lehman Brothers Holdings, Inc. 12,720 891,290
Marshall & Ilsley Corp. 14,420 667,790
Merrill Lynch & Co., Inc. 18,740 1,530,496
Metlife, Inc. 16,280 1,028,082
Morgan Stanley 24,160 1,902,842
PNC Financial Services Group, Inc. 10,870 782,314
The Allstate Corp. 11,370 682,882
Wachovia Corp. 37,870 2,084,744
-----------
23,434,944
Health Care--13.6% -----------
Amerisourcebergen Corp. 21,810 1,150,478
Amgen, Inc. (a) 26,400 1,475,232
Baxter International, Inc. 36,570 1,926,142
Becton Dickinson & Co. 8,360 642,800
Cigna Corp. 6,830 974,368
Hospira, Inc. 14,620 597,958
Pfizer, Inc. 83,340 2,105,168
Sanofi-Aventis--ADR 23,760 1,033,798
Schering-Plough Corp. 75,060 1,914,781
Thermo Fisher Scientific, Inc. (a) 36,120 1,688,610
Wellpoint, Inc. (a) 17,330 1,405,463
Zimmer Holdings, Inc. 10,750 918,158
-----------
15,832,956
Industrials--10.0% -----------
Dover Corp. 17,730 865,401
Eaton Corp. 15,620 1,305,207
Emerson Electric Co. 25,630 1,104,397
General Electric Corp. 88,750 3,138,200
Goodrich Corp. 15,600 803,088
L-3 Communications Holdings, Inc. 15,150 1,325,171
Textron, Inc. 18,410 1,653,218
Tyco International Ltd 27,560 869,518
US Airways Group, Inc. (a) 11,052 502,645
-----------
11,566,845
Information Technology--17.2% -----------
Accenture Ltd., Class A 15,350 591,589
Amphenol Corp. 12,580 812,291
Apple Computer, Inc. (a) 16,680 1,549,739
Broadcom Corp. (a) 32,590 1,045,161
Cisco Systems, Inc. (a) 82,760 2,112,863
Cognizant Technology Solutions Corp. (a) 7,960 702,629
Google, Inc. (a) 3,260 1,493,602
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
Information Technology (continued)
Hewlett-Packard Co. 43,120 $ 1,730,837
International Business Machines Corp. 22,180 2,090,687
Microsoft Corp. 91,400 2,547,318
National Semiconductor Corp. 43,430 1,048,400
Oracle Corp. (a) 77,700 1,408,701
Qualcomm, Inc. 35,930 1,532,774
Texas Instruments, Inc. 44,950 1,352,995
------------
20,019,586
Materials--2.3%
Air Products & Chemicals, Inc. 7,540 557,131
Allegheny Technologies, Inc. 11,950 1,274,945
Rohm & Haas Co. 16,930 875,620
------------
2,707,696
------------
Telecommunication Services--1.6%
AT&T, Inc. 47,750 1,882,782
Utilities--3.5% ------------
P G & E Corp. 30,760 1,484,784
Sempra Energy 42,160 2,572,181
------------
4,056,965
------------
TOTAL EQUITIES (Cost $105,213,741) 114,735,509
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $105,213,741) 114,735,509
------------
AFFILIATED INVESTMENTS--1.2%
Dreyfus Institutional Preferred Plus Money Market Fund (b) (cost $1,365,505) 1,365,505 1,365,505
------------
TOTAL INVESTMENTS--99.9% (Cost $106,579,246) 116,101,014
------------
OTHER ASSETS, LESS LIABILITIES--0.1% 133,073
------------
NET ASSETS--100% $116,234,087
============
Notes to Schedule of Investments:
ADR--American Depository Receipts
(a) Non-income producing security
(b) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A):
Unaffiliated issuers, at value (cost $105,213,741) $114,735,509
Affiliated issuers, at value (Note 1A) (cost $1,365,505) (Note 1F) 1,365,505
Interest and dividends receivable 147,409
Receivable for class action settlements due from advisor 41,988
------------
Total assets 116,290,411
Liabilities
Accrued accounting, administration and custody fees (Note 2) $ 16,809
Accrued professional fees 8,735
Accrued trustees' fees and expenses (Note 2) 1,743
Other accrued expenses and liabilities 29,037
---------
Total liabilities 56,324
------------
Net Assets (applicable to investors' beneficial interest) $116,234,087
============
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 Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $460) $ 905,003
Dividend income from affiliated investments (Note 1F) 81,276
Interest income 7,697
----------
Total investment Income 993,976
Expenses
Investment advisory fee (Note 2) $ 283,526
Accounting, administration and custody fees (Note 2) 52,781
Professional fees 9,221
Insurance expense 5,696
Trustees' fees and expenses (Note 2) 4,689
Miscellaneous expenses 2,650
---------
Total expenses 358,563
----------
Net investment income 635,413
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 5,060,715
Financial futures transactions 71,667
----------
Net realized gain (loss) 5,132,382
Change in unrealized appreciation (depreciation) on:
Investments 3,864,848
----------
Net realized and unrealized gain (loss) 8,997,230
----------
Net Increase in Net Assets from Operations $9,632,643
==========
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 Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 635,413 $ 559,811
Net realized gain (loss) 5,132,382 3,865,493
Change in net unrealized appreciation (depreciation) 3,864,848 866,918
------------ ------------
Net increase (decrease) in net assets from operations 9,632,643 5,292,222
------------ ------------
Capital Transactions
Contributions 33,420,882 56,045,051
Withdrawals (20,409,175) (13,796,610)
------------ ------------
Net increase (decrease) in net assets from capital transactions 13,011,707 42,248,441
------------ ------------
Total Increase (Decrease) in Net Assets 22,644,350 47,540,663
Net Assets
At beginning of period 93,589,737 46,049,074
------------ ------------
At end of period $116,234,087 $ 93,589,737
============ ============
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------------
For the
Six Months Ended
March 31, 2007 Year Ended September 30,
-----------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
---- ---- ---- ---- ----
Total Return (a) 9.43%(d) 9.97% 13.49% 13.34% 21.76%(b) (17.69)%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.63%(c) 0.74% 0.70% 0.72% 0.71% 0.70%
Net Investment Income (to average daily 1.12%(c) 1.14% 1.24% 0.77% 1.23% 0.97%
net assets)*
Portfolio Turnover 32%(d) 103% 85% 66% 104% 80%
Net Assets, End of Period (000's omitted) $116,234 $93,590 $46,049 $56,034 $64,170 $55,007
- -------------
* 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 without waivers and reimbursements would have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A N/A 0.77% 0.72%
Net investment income N/A N/A N/A N/A 1.17% 0.95%
(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) Annualized.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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 securities of
companies that appear to be undervalued relative to underlying business
fundamentals.
At March 31, 2007, 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, 2007 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 are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded.
Securities not listed on an exchange or national securities market, or
securities for which there were no reported transactions, are valued at
the last calculated mean price (average of last bid and last offer).
Securities that are fixed income securities, other than short-term
instruments with less than sixty days remaining to maturity, for which
market prices are readily available, are valued at their current market
value on the basis of quotations, which may be furnished by a pricing
service or dealers in such securities. 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. With respect
to any portion of the Portfolio's assets that are invested in one or
more open open-ended regulated investment companies ("RICs"), the
Portfolio's net asset value ("NAV") will be calculated based upon the
NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange.
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 then is valued at amortized cost based upon the value on
such date unless the Trustees determine during such sixty-day period that
amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Interest
income is determined on the basis of coupon interest earned, adjusted
for accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on 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
Each Portfolio is treated as a disregarded entity for U.S. federal
income tax purposes and consequently, each corresponding Feeder Fund
that invests in a Portfolio is treated for U.S. federal income tax
purposes as owning all of the underlying assets of such Portfolio. 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
the Portfolio's 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 investors to satisfy them.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
D. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve
future claims that may be made against the Portfolio that have not yet
occurred. However, based on experience, the Portfolio expects the risks
of loss to be remote.
E. 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.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum
threshold for financial statement recognition of the benefit of positions
taken in filing tax returns (including whether an entity is taxable in a
particular jurisdiction), and requires certain expanded tax disclosures.
Adoption of FIN 48 is required for fiscal years beginning after December
15, 2006 and is to be applied to all open tax years as of the effective
date. At this time, management is evaluating the implications of FIN 48
and its impact, if any, in the financial statements has not yet been
determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(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 0.50% of the Portfolio's average daily net assets
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals
and the approval of BNY's and MFC's shareholders, as well as other
customary conditions to closing. Subject to such approvals and the
satisfaction of the other conditions, MFC and BNY expect the transaction
to be completed in the third quarter of 2007.
The Portfolio Trust 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 $52,781 for the six months ended March 31, 2007.
The Portfolio Trust 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 did
not earn any revenues for the six months ended March 31, 2007. See Note 6
for further details.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Trust reimburses Mellon Asset Management for a portion of the salary
of the Trust's and Portfolio Trust's Chief Compliance Officer. No other
director, officer or employee of TBCAM or its affiliates received any
compensation from the Trust or the Portfolio Trust for serving as an
officer or Trustee of the Trust or Portfolio 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, 2007 were as follows:
Purchases Sales
------------ --------------
Non-U.S. Government Securities $ 50,738,626 $ 35,561,263
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $106,579,246
------------
Gross unrealized appreciation 10,736,182
Gross unrealized depreciation (1,214,414)
------------
Net unrealized appreciation (depreciation) $ 9,521,768
============
(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, known as
variation margin, 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 appreciation or depreciation 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, 2007, the Portfolio did not hold open financial futures
contracts.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which
the Portfolio deems to be creditworthy. The loans are collateralized at
all times with cash or securities with a market value at least equal to
the market value of the securities on loan. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the Portfolio on the next business day. For
the duration of a loan, the Portfolio receives the equivalent of the
interest or dividends paid by the issuer on the securities loaned and
also receives compensation from the investment of the collateral. As
with other extensions of credit, the Portfolio bears the risk of delay
in recovery or even loss of rights in its securities on loan should the
borrower of the securities fail financially or default on its
obligations to the Portfolio. In the event of borrower default, the
Portfolio generally has the right to use the collateral to offset losses
incurred. The Portfolio may incur a loss in the event it was delayed or
prevented from exercising its rights to dispose of the collateral. The
Portfolio also bears the risk in the event that the interest and/or
dividends received on invested collateral is not sufficient to meet the
Portfolio's obligations due on the loans.
The Portfolio did not loan securities for the six months ended March 31,
2007.
(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. The
participating portfolios and funds also pay an annual renewal fee,
computed at a rate of 0.020 of 1% of the committed amount and allocated
ratably to the participating portfolio/fund. For the six months ended
March 31, 2007, the expense allocated to the Portfolio was $629. The
commitment fee and interest expense is aggregated with miscellaneous
expenses on the Statement of Operations.
For the six months ended March 31, 2007, the Portfolio had average
borrowings outstanding of $1,299,000 for a total of thirteen days and
incurred $2,719 of interest expense. At March 31, 2007 the Portfolio had no
borrowings outstanding.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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 LLC ("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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 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
(Unaudited)
- --------------------------------------------------------------------------------
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 at the
September 28, 2006 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, 2006 based on the Lipper materials
provided to the Board at the September 28, 2006 meeting. The Board found
that the Fund outperformed its peer group average return for the one-year
period (6.14% vs. 4.79%), three-year period (10.86% vs. 10.59%) and
five-year period (3.98% vs. 2.44%).
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 management fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Portfolio'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%, in the 1st (best)
quintile of its peer group of funds, the median fee of which was 0.725%.
The Portfolio's net management fee was 0.637% (which included 0.137% in
administrative services fees under Lipper's calculation methodology), lower
than the peer group median net management fee of 0.670%. Based on the
Lipper data, as well as other factors discussed at the September 28, 2006
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 relative to the nature and quality of the
services provided.
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 actual net expense ratio of 0.849% was lower than
the median net expense ratio of the peer group of 0.868%, 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 the Adviser,
based on profitability information submitted to them by the Adviser,
incurred marginal profitability in managing most the investment companies
in the Mellon Institutional Funds family of funds. The Trustees observed
that the Adviser had incurred a loss in operating the Portfolio in 2004 and
had experienced a profit in operating the Portfolio in 2005 and concluded
the profit was not excessive.
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 Boston Company
International Core Equity Portfolio and the Standish Mellon Fixed Income
Portfolio, two of the largest funds in the complex, already had breakpoints
in their fee arrangements that reflected economies resulting from their
size. The Board also noted that at the March 7, 2006 meeting, management
had presented a Breakpoint Discussion Memorandum that had proposed a
framework for future breakpoints. The Board concluded that, at existing
asset levels and considering current asset growth projections, the
implementation of additional fee breakpoints or other fee reductions was
not necessary at this time.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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.
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 a
one-year period.
25
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- --------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $250
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc. Portfolio: $1,031
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $250
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $1,031
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $1,031
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $250
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $1,079
P.O. Box 5600 investment trust office)
Beverly, MA
01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $0
President
The Boston Company and Chief Operating Officer of
Asset Management, LLC Executive The Boston Company
Officer
One Boston Place 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 (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
The Boston Company
Semiannual Report Small/Mid Cap Growth Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- --------------------------------------------------------------------------------------
Actual $1,000.00 $1,117.20 $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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -----------------------------------------------------------------------------
Washington Group International Industrials 1.6%
Stericycle, Inc. Industrials 1.5
Range Resources Corp. Energy 1.5
Perkinelmer, Inc. Healthcare 1.4
NeuStar, Inc. Telecommunication Services 1.4
Petsmart, Inc. Consumer Discretionary 1.3
Integra Lifesciences Healthcare 1.3
Capitalsource, Inc. Financial 1.3
Lions Gate Entertainment Consumer Discretionary 1.3
Tiffany & Co. Consumer Discretionary 1.2
----
13.8%
* Excludes short-term securities and cash collateral investments.
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------
Consumer Discretionary 11.1%
Consumer Staples 6.4
Energy 8.1
Financials 11.0
Health Care 15.8
Industrials 13.7
Information Technology 21.7
Materials 5.9
Telecommunication Services 1.6
Utilities 1.1
Short-term and Other Assets 3.6
-----
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--105.5%
EQUITIES--96.4%
Consumer Discretionary--11.1%
Bright Horizons Family Solutions, Inc. (a) 5,290 $ 199,698
Coldwater Creek Inc. 6,080 123,302
Interface, Inc. 7,510 120,085
ITT Educational Services Inc. 2,690 219,208
Lions Gate Entertainment Corp. (a)(b) 29,108 332,413
Oakley, Inc. 5,840 117,618
Petsmart, Inc. 10,560 348,058
Steiner Leisure Ltd.--ADR (a) 5,180 232,996
Texas Roadhouse, Inc., Class A (a) 20,020 285,285
The Cheesecake Factory (b) 8,550 227,858
Tiffany & Co. 6,780 308,354
---------
2,514,875
---------
Consumer Staples--6.4%
Dean Foods Corp. 3,980 186,025
Hain Celestial Group, Inc. 4,060 122,084
Hansen Natural Corp. (a) 5,520 209,098
Inter Parfums, Inc. 11,850 248,850
Longs Drug Stores Corp. 4,580 236,511
Ruddick Corp. 9,170 275,834
United Natural Foods, Inc. (a) 5,830 178,631
---------
1,457,033
---------
Energy--8.1%
Cameron International Corp. (a) 4,300 269,997
CNX Gas Corp. (b) 9,160 259,503
Dril-Quip, Inc. (a) 3,860 167,061
FMC Technologies, Inc. 3,840 267,878
Penn Virginia Corp. 3,190 234,146
Range Resources Corp. 11,290 377,086
W-H Energy Services, Inc. (a) 5,390 251,929
---------
1,827,600
---------
Financial--11.0%
Arch Capital Group Ltd. ADR (a) 3,770 257,152
Argonaut Group, Inc. (a) 1,990 64,396
CapitalSource, Inc. (b) 13,300 334,229
Capitol Bancorp Ltd. 4,080 150,348
First Midwest Bancorp, Inc. 3,200 117,600
International Securities Exchange, Inc. 3,840 187,392
Lazard Ltd. Class A 5,940 298,069
Montpelier Re Holdings Ltd. 7,230 125,368
Old National Bancorp 9,400 170,892
Piper Jaffray Companies, Inc. (a) 1,960 121,402
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------
Financial (continued)
Portfolio Recovery Associates, Inc. (a)(b) 6,530 $ 291,565
SVB Financial Group 3,730 181,241
UCBH Holdings, Inc. 5,920 110,230
Umpqua Holdings Corp. (b) 3,140 84,058
---------
2,493,942
---------
Health Care--15.8%
Arrow International, Inc. 5,260 169,162
Covance, Inc. (a) 2,050 121,647
Cytyc Corp.(a) 5,350 183,024
Dentsply International, Inc. 5,560 182,090
Exelixis, Inc. 11,590 115,205
Integra LifeSciences Holdings (a) 7,450 339,571
InterMune, Inc. 3,170 78,172
Medarex, Inc. (a)(b) 5,320 68,841
Millipore Corp. (b) 3,390 245,673
PDL BioPharma, Inc. (a) 5,670 123,039
Pediatrix Medical Group, Inc. (a) 4,260 243,076
PerkinElmer, Inc. 15,160 367,175
Psychiatric Solutions, Inc. 5,990 241,457
Respironics, Inc. (a) 7,317 307,241
Thermo Fisher Scientific, Inc. (a)(b) 3,710 173,443
VCA Antech, Inc. (a) 6,690 242,914
Viasys Healthcare, Inc. (a) 6,630 225,354
Wellcare Group, Inc. (a) 1,570 133,843
---------
3,560,927
---------
Industrials--13.7%
Alaska Air Group, Inc. (a) 2,850 108,585
Bucyrus International, Inc., Class A 3,470 178,705
Copart, Inc. (a) 8,020 224,640
Foster Wheeler Ltd. (a) 4,960 289,614
Global Cash Access, Inc. (a) 13,500 225,315
Hub Group, Inc., Class A Shares (a) 7,580 219,744
MSC Industrial Direct Co., Inc. 5,860 273,545
Quanta Services Inc (a) (b) 7,150 180,323
Ritchie Bros. Auctioneers 2,570 150,396
Stericycle, Inc. (a) 4,670 380,605
UAP Holding Corp. 9,170 237,045
UTI Worldwide, Inc. 9,020 221,712
Washington Group International, Inc. (a) 6,180 410,476
---------
3,100,705
---------
Information Technology--21.7%
Activision, Inc. (a) 13,990 264,971
Amdocs, Ltd. ADR (a) 5,030 183,494
AMIS Holdings, Inc. (a) 14,980 164,031
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------
Information Technology (continued)
Arris Group, Inc. (a) 14,650 $ 206,272
BEA Systems, Inc. (a) 8,940 103,615
Brocade Communications Systems, Inc. (a) 19,000 180,880
Ceridian Corp. (a) 4,800 167,232
DealerTrack Holdings, Inc. (a) 4,120 126,566
EFunds Corp. 6,600 175,956
FLIR Systems, Inc. 3,420 121,991
Formfactor, Inc. (a) 2,300 102,925
Foundry Networks, Inc. 14,850 201,515
Harris Corp. 3,660 186,477
Informatica Corp. (a) 13,220 177,545
Intersil Corp., Class A Shares 4,210 111,523
Kronos, Inc. 2,970 158,895
Micrel Inc. (a) 9,650 106,343
Microchip Technology Inc. 5,410 192,217
Microsemi Corp. 9,120 189,787
MoneyGram International, Inc. 3,900 108,264
Net Gear Inc. (a) 6,570 187,442
PMC-Sierra, Inc. (b) 33,100 232,031
Polycom, Inc. (a) 3,400 113,322
Smart Modular Technologies, Inc. (a) 14,940 191,083
Sybase, Inc. (a) 9,350 236,368
Tessera Technologies, Inc. (a) 3,730 148,230
Transaction Systems Archietects, Inc. 3,190 103,324
ValueClick, Inc. (a) 3,550 92,762
Verisign, Inc. (a) 4,570 114,798
Wright Express Corp. (a) 8,110 245,976
---------
4,895,835
---------
Materials--5.9%
Aber Diamond Corp. (b) 6,630 247,034
AptarGroup, Inc. 4,280 286,460
Carpenter Technology Corp. 2,020 243,935
Cleveland-Cliffs, Inc. (b) 1,920 122,899
Kinross Gold Corp. (a) 18,880 260,355
Schnitzer Steel Industries, Inc. 4,410 177,147
---------
1,337,830
---------
Telecommunication Services--1.6%
NeuStar, Inc. (a) 12,540 356,638
---------
Utilities--1.1%
Ormat Technologies, Inc. 5,750 241,269
----------
Total Equities (Cost $20,008,393) 21,786,654
----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT--0.3%
U.S. Government--0.3%
U.S. Treasury Bill (c) (d) (Cost $69,287) 4.89% 6/14/2007 70,000 $ 69,306
-----------
INVESTMENT IN CASH COLLATERAL--8.8% Shares
---------
Registered Investment Company;
BlackRock Cash Strategies L.L.C. (Cost $1,982,465) 1,982,465 1,982,465
-----------
TOTAL UNAFFILIATED INVESTMENTS (Cost $22,060,145) 23,838,425
-----------
AFFILIATED INVESTMENTS--9.6%
Dreyfus Institutional Preferred Plus Money Market Fund
(e) (Cost $2,164,098) 2,164,098 2,164,098
-----------
TOTAL INVESTMENTS--115.1% (Cost $24,224,243) 26,002,523
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS--(15.1%) (3,405,585)
-----------
NET ASSETS--100% $22,596,938
===========
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, 2007
(c) Rate noted is yield to maturity.
(d) Denotes all or part of security segregated as collateral for futures
transactions.
(e) Affiliated institutional money market fund.
At March 31, 2007 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- --------------------------------------------------------------------------------------------------
Russell 2000 Index (4 Contracts) Long 6/14/2007 $1,569,338 $46,648
=======
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on
loan, valued at $1,932,390 (Note 7)):
Unaffiliated investments (cost $22,060,145) $23,838,425
Affiliated investments (Note 1F) (cost $2,164,098) 2,164,098
Receivable for investments sold 282,907
Receivable for class action settlement due from advisor 166,161
Interest and dividends receivable 12,649
Receivable for fund shares sold 17,318
Receivable for variation margin on open futures contracts (Note 6) 7,400
Prepaid expenses 17,503
-----------
Total assets 26,506,461
Liabilities
Collateral for securities on loan (Note 7) $ 1,982,465
Payable for investments purchased 1,894,903
Accrued professional fees 17,855
Accrued accounting, custody, administration and transfer agent fees (Note 2) 12,648
Accrued trustees' fees (Note 2) 982
Accrued chief compliance officer fee (Note 2) 374
Accrued administrator services fee (Note 2) 289
Other accrued expenses and liabilities 7
-----------
Total liabilities 3,909,523
-----------
Net Assets $22,596,938
===========
Net Assets consist of:
Paid-in capital $19,276,669
Accumulated net realized gain 1,517,057
Accumulated net investment loss (21,716)
Net unrealized appreciation 1,824,928
-----------
Total Net Assets $22,596,938
===========
Shares of beneficial interest outstanding 1,446,720
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 15.62
===========
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
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 46,577
Dividend income from affiliated investments (Note 1F) 27,165
Interest income 6,845
Securities lending income (Note 7) 1,933
----------
Total investment income 82,520
Expenses
Investment advisory fee (Note 2) $ 62,539
Accounting, custody, administration and transfer agent fees (Note 2) 35,553
Professional fees 19,184
Registration fees 7,831
Insurance expense 2,493
Trustees' fees and expenses (Note 2) 1,883
Administrative service fee (Note 2) 652
Miscellaneous expenses 4,187
----------
Total expenses 134,322
Deduct:
Waiver of invesment advisory fee (Note 2) (30,086)
----------
Net Expenses 104,236
----------
Net investment loss (21,716)
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 1,470,416
Financial futures transactions 75,789
----------
Net realized gain 1,546,205
Change in unrealized appreciation (depreciation) on:
Investments 741,386
Financial futures contracts 51,557
----------
Net change in unrealized appreciation (depreciation) 792,943
----------
Net realized and unrealized gain (loss) on investments 2,339,148
----------
Net Increase in Net Assets from Operations $2,317,432
==========
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
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (21,716) $ (32,907)
Net realized gain (loss) 1,546,205 3,538,082
Change in net unrealized appreciation (depreciation) 792,943 (1,959,349)
Net increase from payments by affiliates -- 6,357
----------- -----------
Net increase (decrease) in net assets from investment operations 2,317,432 1,552,183
----------- -----------
Distributions to Shareholders (Note 1C)
From net realized gains on investments (1,270,011) --
----------- -----------
Total distributions to shareholders (1,270,011) --
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 1,731,987 99,425
Value of shares issued to shareholders in reinvestment of distibutions 1,270,011 --
Cost of shares redeemed (1,841,035) (972,218)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions 1,160,963 (872,793)
----------- -----------
Total Increase (Decrease) in Net Assets 2,208,384 679,390
Net Assets
At beginning of period 20,388,554 19,709,164
----------- -----------
At end of period [including undistributed
net investment income (loss) of ($21,716) and $0, respectively] $22,596,938 $20,388,554
=========== ===========
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, 2007 -------------------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
----------- ---- ---- ---- ---- ----
Net Asset Value, Beginning of Period $ 14.92 $ 13.84 $ 11.26 $ 9.48 $ 7.10 $ 8.15
-------- -------- -------- -------- -------- --------
FromOperations:
Net investment income (loss) *(a) (0.02) (0.02) (0.04) (0.08) (0.01) (0.02)
Net realized and unrealized gains (loss) on 1.73 1.10 2.62 1.86(b) 2.39(b) (1.03)(b)
investments
Net increase from payments by affiliates - 0.00(c) - - - -
-------- -------- -------- -------- -------- --------
Total from operations 1.71 1.08 2.58 1.78 2.38 (1.05)
-------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income - - - - -(c) -
From net realized gains on investments (1.01) - - - - -
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (1.01) - - - -(c) -
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 15.62 $ 14.92 $ 13.84 $ 11.26 $ 9.48 $ 7.10
======== ======== ======== ======== ======== ========
Total Return (d) 11.72%(g) 7.80%(e) 22.91% 18.78% 33.54% (12.88%)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.00%(f) 1.00% 1.00% 0.98% 0.74% 0.74%
Net Investment Income (Loss)
(to average daily net assets)* (0.21%)(f) (0.16%) (0.32%) (0.69%) (0.17%) (0.24%)
Portfolio Turnover 90%(g) 161% 167% 157% 252%(e) 248%
Net Assets, End of Period (000's omitted) $ 22,597 $ 20,389 $ 19,709 $ 19,222 $ 21,852 $ 18,861
- --------
* 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, without
waivers and reimbursement, would have been:
Net investment income (loss) per share (a) $ (0.04) $ (0.07) $ (0.09) $ (0.12) $ (0.07) $ (0.08)
Ratios (to average daily net assets):
Expenses 1.29%(f) 1.29% 1.38% 1.33% 1.40% 1.46%
Net investment income (loss) (0.50%)(f) (0.45%) (0.70%) (1.04%) (0.83%) (0.96%)
(a) Calculated using the average shares outstanding.
(b) Amounts include litigation proceeds received by the Fund of $0.12 for the
six months ended March 31, 2007, $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.
(c) Calculates to less than $0.01 per share.
(d) Total return would have been lower in the absence of expense waivers.
(e) For the year ended September 30, 2006, 0.03% of the Fund's return consisted
of a payment by the advisor to compensate the Fund for a trading error.
Excluding this payment, total return 7.77%.
(f) Annualized.
(g) Not annualized.
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) Organization and 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 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
and mid cap U.S. companies. The Fund focuses on companies with total market
capitalizations equal to or less than the total market capitalization of
the largest company included in the Russell 2500 Growth Index. The Fund may
also invest in equity index futures based on the Russell 2000 and S&P
Midcap indices, and exchange traded funds based upon the Russell 2500
Growth Index.
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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities
not listed on an exchange or national securities market, or securities for
which there were no reported transactions, are valued at the last
calculated mean price (average of last bid and last offer). Securities that
are fixed income securities, other than short-term instruments with less
than sixty days remaining to maturity, for which market prices are readily
available, are valued at their current market value on the basis of
quotations, which may be furnished by a pricing service or dealers in such
securities. 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. With respect to any portion of the Fund's
assets that are invested in one or more open-end regulated investment
companies ("RICs"), the Fund's net asset value ("NAV") will be calculated
based upon the NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange.
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. 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 the shareholder elects
to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences which may result in reclassifications, are primarily due
to differing treatments for losses deferred due to wash sales and the
timing of recognition of realized and unrealized gains or losses on futures
contracts
Permanent book and tax basis differences relating to shareholder
distributions 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.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold for
financial statement recognition of the benefit of positions taken in filing
tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact in
the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(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 six months ended March
31, 2007. Pursuant to this arrangement, for the six months ended March 31,
2007, TBCAM voluntarily reimbursed $30,086 of the Fund's operating
expenses. This arrangement is voluntary and temporary and may be
discontinued or revised by TBCAM at any time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $3,977 for the six months ended March 31, 2007.
The Trust 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 $31,576 for the six months
ended March 31, 2007.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Trust 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 earned $815 for the six
months ended March 31, 2007. 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,
2007, the Fund was charged $2,105, which is included in miscellaneous
expenses in the statement of operations. 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
Fund 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $317, which is included in miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
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 six months ended March 31, 2007 were as follows:
Purchases Sales
--------- -----
Non-U.S. Government Securities $18,613,594 $18,133,858
=========== ============
(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, 2007 September 30, 2006
---------------- ------------------
Shares sold 114,744 6,818
Shares issued to shareholders
in reinvestment of distributions 84,274 -
Shares redeemed (118,539) (64,826)
----------- -------
Net increase (decrease) 80,479 (58,008)
=========== =======
At March 31, 2007, two shareholders of record held, in the aggregate,
approximately 78% 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, 2007, the Fund did not
access any redemption fees.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $24,224,243
===========
Gross unrealized appreciation $ 2,035,318
Gross unrealized depreciation (257,038)
-----------
Net unrealized appreciation (depreciation) $ 1,778,280
===========
(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 purchase or
sale 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, known as variation margin, 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 appreciation or depreciation 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 also 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, 2007, the Fund held open financial futures 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 during the six months ended March 31, 2007 and
earned interest on the invested collateral of $31,783 of which $29,850 was
rebated to borrowers or paid in fees. At March 31, 2007, the Fund had
securities valued at $1,932,390 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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. Each fund/portfolio also pays an annual renewal fee, computed
at a rate of 0.020 of 1% of the committed amount and allocated ratably to
the participating funds/portfolios. For the six months ended March 31,
2007, the expense allocated to the Fund was $408. The facility fee and
interest expense are included in miscellaneous expenses on the statement of
operations.
For the six months ended March 31, 2007, the Fund had average borrowings
outstanding of $1,200,000 for a total of four days and incurred $767 of
interest expense. At March 31, 2007 the Fund had no borrowings outstanding.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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 ("TBCAM" or 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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio management,
client service personnel and overall organizational structure, insurance
coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and the Adviser's separate account
advisory fee schedules;
(iv) 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, including the
Fund'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 Fund and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 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 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 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 28, 2006 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, 2006 based on the Lipper materials provided to the Board
at the September 28, 2006 meeting. The Board found that the Fund outperformed
its peer group average returns for the one-year period (5.34% vs. 4.35%),
three-year period (16.53% vs. 12.96%) and five-year period (7.12% vs. 5.32%).
18
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser. The
Fund's contractual advisory fee was 0.600%, in the 1st (best) quintile of its
peer group of funds, the median fee of which was 0.775%. The Fund's net
management fee, after giving effect to expense limitations, was 0.220%, below
the peer group median net management fee of 0.663%. Based on the Lipper data, as
well as other factors discussed at the September 28, 2006 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
relative to the nature and quality of the services provided.
The Board also considered the Fund's expense ratio and compared it to that of
its peer group of similar funds. The Board found that the actual net expense
ratio of 1.002% (after giving effect to expense limitations) was slightly higher
than the median net expense ratio of the peer group of 0.984%. However, most of
the 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 the Adviser, based on profitability information
submitted to them by the Adviser, incurred marginal profitability in managing
most of the investment companies in the Mellon Institutional Funds family of
funds. The Trustees observed that the Adviser had incurred losses in operating
the Fund in both 2004 and 2005.
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 Boston Company International
Core Equity Portfolio and the Standish Mellon Fixed Income Portfolio and, two of
the largest funds in the complex, already had breakpoints in their fee
arrangements that reflected economies resulting from their size. The Board also
noted that at the March 7, 2006 meeting, management had presented a Breakpoint
Discussion Memorandum that had proposed a framework for future breakpoints. 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.
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.
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 a one-year period.
19
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None $281
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None $281
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 (72) Trustee Trustee since Trustee, Mertens 30 None $281
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None $290
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $ 0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive Asset Management, LLC;
Boston, MA 02108 Officer formerly Senior Vice
7/24/65 President and Chief
Operating Officer,
("MAM") and Vice
Mellon Asset Management
President and Chief
Financial Officer, MAM
20
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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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THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6928SA0307
[LOGO] Mellon
---------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Small Cap Growth Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- ------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,101.70 $5.71
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.50 $5.49
- -----------
+ Expenses are equal to the Fund's annualized expense ratio of 1.09%,
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 Small Cap Growth Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
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 below.
Percentage of
Top Ten Holdings* Sector Investments
- ---------------------------------------------------------------------------------------
Washington Group International, Inc. Industrials 1.4%
Lions Gate Entertainment Corp. Consumer Discretionary 1.2
Respironics, Inc. Health Care 1.0
Integra LifeSciences Holdings Health Care 1.0
24/7 Real Media, Inc. Information Technology 1.0
MSC Industrial Direct Co., Inc. Industrials 0.9
Natus Medical, Inc. Health Care 0.9
Texas Roadhouse, Inc., Class A Consumer Discretionary 0.9
Inter Parfums, Inc. Consumer Staples 0.9
Portfolio Recovery Associates, Inc. Financials 0.9
------
10.1%
* Excludes short-term securities and cash collateral investments.
Percentage of
Economic Sector Allocation Net Assets
- ---------------------------------------------------------
Consumer Discretionary 12.2%
Consumer Staples 6.8
Energy 6.8
Financials 9.9
Health Care 16.3
Industrials 12.9
Information Technology 22.8
Materials 3.2
Telecommunication Services 1.3
Utilities 1.1
Short-term and Net Other Assets 6.7
-------
100.0%
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap Growth Portfolio ("Portfolio"), at value (Note 1A) $91,294,338
Receivable for Fund shares sold 1,929,974
Prepaid expenses 10,458
Total assets -----------
93,234,770
Liabilities
Payable for Fund shares redeemed $ 3,230
Accrued administrator service fees (Note 2) 13,157
Accrued professional fees 12,612
Accrued transfer agent fees (Note 2) 2,819
Accrued trustees' fees (Note 2) 626
Accrued chief compliance officer fee (Note 2) 396
Other accrued expenses and liabilities 335
Total liabilities --------- 33,175
-----------
Net Assets $93,201,595
Net Assets consist of: ===========
Paid-in capital $95,203,449
Accumulated net realized loss (6,546,619)
Accumulated net investment loss (67,874)
Net unrealized appreciation 4,612,639
-----------
Total Net Assets $93,201,595
===========
Shares of beneficial interest outstanding 1,703,357
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $54.72
===========
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 200,823
Interest and security lending income allocated from Portfolio 25,072
Expenses allocated from Portfolio (280,763)
Net investment loss allocated from Portfolio ---------
(54,868)
Expenses
Administrative service fees (Note 2) $ 21,998
Professional fees 17,820
Registration fees 9,200
Transfer agent fees (Note 2) 5,992
Trustees' fees (Note 2) 1,126
Insurance expense 399
Miscellaneous expenses 4,396
--------
Total expenses 60,931
Deduct:
Reimbursement of fund operating expense (Note 2) (47,925)
--------
Net expenses 13,006
Net investment loss --------
(67,874)
--------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investments 2,811,279
Financial futures transactions (36,302)
---------
Net realized gain (loss) 2,774,977
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investments 2,079,847
Financial futures contracts 37,909
---------
Net change in net unrealized appreciation (depreciation) 2,117,756
---------
Net realized and unrealized gain (loss) on investments 4,892,733
---------
Net Increase in Net Assets from Operations $4,824,859
==========
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- -------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (67,874) $ (112,295)
Net realized gain (loss) 2,774,977 6,830,406
Change in net unrealized appreciation (depreciation) 2,117,756 (4,066,139)
Net increase (depreciation) in net assets from investment operations ----------- ------------
4,824,859 2,651,972
Fund Share Transactions (Note 4) ----------- ------------
Net proceeds from sale of shares 51,427,987 11,509,182
Cost of shares redeemed (5,154,044) (8,381,712)
Net increase (decrease) in net assets from Fund share transactions ----------- ------------
46,273,943 3,127,470
Total Increase (Decrease) in Net Assets ----------- ------------
51,098,802 5,779,442
Net Assets
At beginning of period 42,102,793 36,323,351
At end of period [including undistributed net ----------- ------------
investment income (loss) of $(67,874) and $0, respectively] $ 93,201,595 $ 42,102,793
============ ============
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
March 31, 2007 Year Ended September 30,
---------------------------------------------------------
(Unaudited) 2006 2005 2004(a) 2003(a) 2002(a)
---------- ------ ------ ------ ------ ------
Net Asset Value, Beginning of Period $49.67 $46.30 $37.95 $32.41 $24.78 $29.28
------ ------ ------ ------ ------ ------
From Investment Operations:
Net investment income (loss) * (b) (0.07) (0.14) (0.20) (0.33) (0.11) (0.16)
Net realized and unrealized gains
(loss) on investments 5.12(c) 3.51 8.55 5.87(c) 7.74(c) (4.34)(c)
------ ------ ------ ------ ------ ------
Total from operations 5.05 3.37 8.35 5.54 7.63 (4.50)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Year $54.72 $49.67 $46.30 $37.95 $32.41 $24.78
====== ====== ====== ====== ====== ======
Total Return (d) 10.17%(g) 7.28% 22.00% 17.09% 30.79% (15.37)%
Ratios/Supplemental data:
Expenses (to average daily net assets)* (e) 1.09%(f) 1.10% 1.17% 1.18% 1.00% 1.00%
Net Investment Income (Loss)
(to average daily net assets)* (0.25)%(f) (0.30)% (0.48)% (0.87)% (0.42)% (0.52)%
Net Assets, End of Year (000's omitted) $93,202 $42,103 $36,323 $18,274 $21,168 $18,780
- ----------
* The investment advisor voluntarily agreed not to impose a portion of
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, without waivers and
reimbursement, would have been:
Net investment income (loss) per share $(0.11) $(0.28) $(0.31) $(0.40) $(0.30) $(0.25)
(a)
Ratios (to average daily net assets):
Expenses (e) 1.27%(f) 1.38% 1.41% 1.37% 1.66% 1.29%
Net investment income (loss) (0.43)%(f) (0.58)% (0.72)% (1.06)% (1.08)% (0.81)%
(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 $0.01 for the
six months ended March 31, 2007 and $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.
(e) Includes the Fund's share of the Portfolio's allocated expenses.
(f) Calculated on an annualized basis.
(g) Not annualized.
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) Organization and 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 of 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, 2007 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange
("NYSE") is open. 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
The Fund's investment in the Portfolio is recorded on settlement date.
The Portfolio's securities transactions are recorded as of the trade
date as discussed in Note 1B of the Portfolio's Notes to Financial
Statements, which are included elsewhere in this report. 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 are 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
carryovers and the timing of recognition of 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 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/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 Small 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. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum
threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is
taxable in a particular jurisdiction), and requires certain expanded tax
disclosures. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of
the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact, if any, in the financial
statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of
Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS
157"). FAS 157 establishes an authoritative definition of fair value,
sets out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS 157
is required for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. At this time, management is
evaluating the implications of FAS 157 and its impact, if any, in the
financial statements has not yet been determined.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to The Boston Company Asset Management, LLC ("TBCAM"), a
wholly-owned subsidiary of Mellon Financial Corporation, for such
services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. TBCAM voluntarily agreed to
limit the total annual operating expenses of the Fund and its pro rata
share of the Portfolio expenses (excluding brokerage commissions, taxes
and extraordinary expenses) to 1.10% 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, 2007, TBCAM voluntary
reimbursed $47,925 of the Fund's operating expenses.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") announced that they had entered into
a definitive agreement to merge. The new company will be called The
Bank of New York Mellon Corporation. As part of this transaction,
TBCAM would become an indirect wholly-owned subsidiary of The Bank of
New York Mellon Corporation. The transaction is subject to certain
regulatory approvals and the approval of BNY's and MFC's shareholders,
as well as other customary conditions to closing. Subject to such
approvals and the satisfaction of the other conditions, MFC and BNY
expect the transaction to be completed in the third quarter of 2007.
The Trust 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 $5,992 for the six months ended
March 31, 2007.
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, 2007, the Fund was charged $2,126, which is included
in miscellaneous expenses in the statement of operations. No other
director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio Trust 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 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, 2007, the Fund
was charged $7,803 for fees payable to Mellon Private Wealth
Management.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for
the six months ended March 31, 2007 aggregated $49,533,053 and
$5,169,458, 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, 2007 September 30, 2006
Shares sold 952,540 237,244
Shares redeemed (96,837) (174,108)
------- --------
Net increase (decrease) 855,703 63,136
======= ========
At March 31, 2007, three shareholders of record held, in the aggregate,
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, 2007, the Fund received $330 in redemption fees and is
reflected in the cost of shares redeemed.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Code. As such and by complying with
the applicable provisions of the Code regarding the sources of its
income, the timely distributions of its income to its shareholders, and
the diversification of its assets, the Fund will not be subject to U.S.
federal income tax on its investment company taxable income and net
capital gain which are distributed to shareholders.
See the corresponding master portfolio for tax basis unrealized
appreciation (depreciation) information.
11
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--114.7%
Equities--93.3%
Consumer Discretionary--12.2%
Aeropostale, Inc. (a) 10,100 $ 406,323
Ambassadors Group, Inc. (b) 15,120 502,589
Bright Horizons Family Solutions, Inc. (a) 18,300 690,825
Cache, Inc. (a) 24,720 438,780
California Pizza Kitchen, Inc. (a) 13,580 446,646
Capella Education Co. 9,910 332,381
Citi Trends, Inc. (b) 17,710 756,925
Coldwater Creek, Inc. 23,780 482,258
Fred's, Inc. 44,130 648,711
Interface, Inc. 28,890 461,951
Kenneth Cole Productions, Class A Shares 18,490 474,638
Lions Gate Entertainment Corp. (a)(b) 121,750 1,390,385
Oakley, Inc. 22,270 448,518
Ruth's Chris Steak House, Inc. (a)(b) 21,130 430,207
Steiner Leisure Ltd.--ADR (a) 20,230 909,945
Texas Roadhouse, Inc., Class A (a) 76,380 1,088,415
The Cheesecake Factory (b) 25,710 685,172
Winnebago Industries, Inc. 15,340 515,884
-----------
11,110,553
-----------
Consumer Staples--6.8%
Hain Celestial Group, Inc. 16,110 484,428
Hansen Natural Corp. (a) 22,680 859,118
Inter Parfums, Inc. 51,720 1,086,120
Longs Drug Stores Corp. 17,170 886,659
National Beverage Corp. (b) 42,770 750,186
Physicians Formula Holdings, Inc. (a) 51,290 968,355
Ruddick Corp. 12,160 365,773
United Natural Foods, Inc. (a) 25,030 766,919
-----------
6,167,558
-----------
Energy--6.8%
Arena Resources, Inc. (a)(b) 11,180 560,342
Dril-Quip, Inc. (a) 22,130 957,786
Foundation Coal Holdings, Inc. 13,970 479,730
Global Industries, Ltd. 23,210 424,511
Oil States International, Inc. (a) 18,200 584,038
Parallel Petroleum Corp. (b) 31,560 724,302
Penn Virginia Corp. 12,850 943,190
Superior Well Services, Inc. (a)(b) 23,660 540,631
W-H Energy Services, Inc. (a) 21,140 988,084
-----------
6,202,614
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
Financial--9.9%
Arch Capital Group Ltd.--ADR (a) 8,630 $ 588,652
Argonaut Group, Inc. (a) 7,470 241,729
CapitalSource, Inc.--REIT (b) 28,030 704,394
Capitol Bancorp Ltd. (b) 11,960 440,726
Castlepoint Holdings, Ltd. 5,150 84,203
Financial Institutions, Inc. 6,910 138,684
First Cash Financial Services, Inc. (a) 23,860 531,601
First Mercury Financial Corp. (a) 30,790 632,735
First Midwest Bancorp, Inc. (b) 13,820 507,885
Hallmark Financial Services, Inc. 13,490 162,420
International Securities Exchange, Inc. 10,070 491,416
Montpelier Re Holdings Ltd. 29,670 514,478
Old National Bancorp 24,350 442,683
Piper Jaffray Companies, Inc. (a) 7,940 491,804
Portfolio Recovery Associates, Inc. (a)(b) 23,600 1,053,740
SVB Financial Group 10,080 489,787
Texas Capital Bancshares, Inc. 23,180 475,190
UCBH Holdings, Inc. 22,970 427,701
Umpqua Holdings Corp. (b) 11,700 313,209
Washington Trust Bancorp, Inc. 11,290 302,685
-----------
9,035,722
Health Care--16.3% -----------
Alnylam Pharmaceuticals, Inc. (a)(b) 30,070 541,260
Applera Corp.-Celera Genomics Group (a)(b) 29,870 424,154
Array BioPharma, Inc. (a) 27,710 351,917
Arrow International, Inc. 15,240 490,118
BioMimetic Therapeutics, Inc. 16,230 268,444
Centene Corp. (a)(b) 17,280 362,707
Covance, Inc. (a) 8,400 498,456
Cytyc Corp. (a) 20,100 687,621
Enzon Pharmaceuticals, Inc. (a)(b) 57,890 471,804
Exelixis, Inc. (a) 45,910 456,345
Integra LifeSciences Holdings (a)(b) 26,370 1,201,945
InterMune, Inc. (a)(b) 18,190 448,565
Medarex, Inc. (a)(b) 20,240 261,906
Natus Medical, Inc. (a)(b) 61,320 1,089,656
Pediatrix Medical Group, Inc. (a) 11,390 649,913
PerkinElmer, Inc. 25,490 617,368
Psychiatric Solutions, Inc. 18,270 736,464
Respironics, Inc. (a) 29,380 1,233,666
Rigel Pharmaceuticals, Inc. (a)(b) 39,480 428,753
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Health Care (continued)
Sangamo BioSciences, Inc. (b) 39,460 $ 268,328
Santarus, Inc. (a)(b) 38,720 272,589
Thermo Fisher Scientific, Inc. (a) 14,640 684,420
Thoratec Corp. (a)(b) 27,990 584,991
VCA Antech, Inc. (a) 24,040 872,892
Viasys Healthcare, Inc. (a) 28,080 954,439
-----------
14,858,721
-----------
Industrials--12.9%
Alaska Air Group, Inc. (a) 10,670 406,527
Bucyrus International, Inc., Class A (b) 13,040 671,560
Central Parking Corp. (b) 26,790 594,202
Copart, Inc. (a) 30,550 855,706
eTelecare Global Solutions, Inc. 13,340 202,101
Global Cash Access, Inc. (a) 55,950 933,806
Hub Group, Inc., Class A Shares (a) 29,120 844,189
MSC Industrial Direct Co., Inc. 23,910 1,116,119
Powell Industries, Inc. 9,360 299,520
Quanta Services, Inc (a) 26,900 678,418
Ritchie Bros. Auctioneers 9,940 581,689
Stericycle, Inc. (a) 8,050 656,075
Team, Inc. (a)(b) 15,170 578,736
UAP Holding Corp. 38,560 996,776
UTI Worldwide, Inc. 28,490 700,284
Washington Group International, Inc. (a) 24,520 1,628,618
-----------
11,744,326
-----------
Information Technology--22.8%
24/7 Real Media, Inc. (a)(b) 141,580 1,136,887
AMIS Holdings, Inc. (a) 66,030 723,029
Anadigics, Inc. (b) 34,260 404,953
Arris Group, Inc. (a) 59,050 831,424
BEA Systems, Inc. (a) 32,440 375,980
Brocade Communications Systems, Inc. (a) 76,180 725,234
C-COR, Inc. 48,410 670,963
DealerTrack Holdings, Inc. (a) 16,080 493,978
EFunds Corp. 26,310 701,425
Epicor Software Corp. (a)(b) 51,850 721,234
FLIR Systems, Inc. (b) 14,300 510,081
Formfactor, Inc. (a)(b) 9,170 410,358
Foundry Networks, Inc. 55,980 759,649
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Information Technology (continued)
Informatica Corp. (a) 51,850 $ 696,346
Kronos, Inc. 11,660 623,810
Lawson software, Inc. (b) 53,670 434,190
Marchex, Inc. 33,250 509,390
MasTec, Inc. (a) 80,050 881,351
Micrel, Inc. (a) 36,020 396,940
Microsemi Corp. (b) 35,490 738,547
Net Gear, Inc. (a)(b) 25,390 724,377
PMC-Sierra, Inc. (b) 128,760 902,608
Polycom, Inc. (a) 12,630 420,958
Sirenza Microdevices, Inc. (a) 31,100 268,082
SkillSoft PLC--ADR 66,670 557,361
Smart Modular Technologies, Inc. (a) 59,930 766,505
Standard Microsytems Corp. (a)(b) 9,990 305,095
Tessera Technologies, Inc. (a) 13,900 552,386
The Ultimate Software Group, Inc. (a)(b) 23,310 610,489
TheStreet.com, Inc. 25,310 310,048
Transaction Systems Archietects, Inc. (b) 13,280 430,139
Ultra Clean Holdings, Inc. 36,570 632,661
ValueClick, Inc. (a)(b) 13,930 363,991
Verisign, Inc. (a) 18,150 455,928
Wright Express Corp. (a) 26,060 790,400
-----------
20,836,797
Materials--3.2% -----------
American Vanguard Corp. (b) 34,750 593,877
Cleveland-Cliffs, Inc. (b) 7,240 463,431
Hecla Mining Co. (a)(b) 50,690 459,251
Kinross Gold Corp. (a) 27,860 384,188
Northern Orion Resources, Inc. 61,740 251,282
Schnitzer Steel Industries, Inc. 18,110 727,478
-----------
2,879,507
Telecommunication Services--1.3% -----------
Lightbridge, Inc. 13,800 242,465
NeuStar, Inc. (a) 31,640 899,841
-----------
1,142,306
Utilities--1.1% -----------
Ormat Technologies, Inc. 23,780 997,808
-----------
Total Equities (Cost $80,395,195) 84,975,912
-----------
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Investments--0.4%
U.S. Government-- 0.4%
US Treasury Bill (c)(d) (Cost $356,258) 4.99% 6/14/2007 360,000 $ 356,430
INVESTMENT OF CASH COLLATERAL--21.0% ------------
Shares
--------
BlackRock Cash Strategies L.L.C. (Cost $19,199,959) 19,199,959 19,199,959
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $99,951,412) 104,532,301
------------
AFFILIATED INVESTMENTS--16.2%
Dreyfus Institutional Preferred Plus Money Market Fund (e) (Cost 14,801,114 14,801,114
------------
TOTAL INVESTMENTS--130.9% (Cost $114,752,526) 119,333,415
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(30.9)% (28,039,077)
------------
NET ASSETS--100% $91,294,338
============
Notes to Schedule of Investments:
ADR--American Depository Receipts
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at March 31, 2007.
(c) Denotes all or part of security segregated as collateral for futures
transactions.
(d) Rate noted is yield to maturity.
(e) Affiliated institutional money market fund.
At March 31,2007, the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Future (20 Contracts) Long 6/14/2007 $8,048,175 $31,750
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 Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A)(including securities on loan, valued at $18,384,804 (Note 6)
Unaffiliated issuers, at value (cost $99,951,412) $104,532,301
Affiliated issuers, at value (Note 1F) (cost $14,801,114) 14,801,114
Receivable for investments sold 342,352
Interest and dividends receivable 60,199
Receivable for variation margin on open futures contracts (Note 5) 37,000
Receivable for class action settlement due from advisor 7,929
Prepaid expenses 6,438
-----------
Total assets 119,787,333
Liabilities
Collateral for securities on loan (Note 6) $ 19,199,959
Payable for investments purchased 9,266,079
Accrued accounting, administration and custody fees (Note 2) 16,066
Accrued professional fees 8,722
Accrued trustees' fees and expenses (Note 2) 1,002
Other accrued expenses and liabilities 1,167
------------
Total liabilities 28,492,995
-----------
Net Assets (applicable to investors' beneficial interest) $91,294,338
===========
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 Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 87,614
Dividend income from affiliated investments (Note 1F) 113,209
Interest income 3,196
Securitiy lending income (Note 6) 21,876
---------
Total investment Income 225,895
Expenses
Investment advisory fee (Note 2) $ 213,730
Accounting, administration and custody fees (Note 2) 50,656
Professional fees 9,362
Trustees' fees and expenses (Note 2) 2,164
Insurance expense 3,177
Miscellaneous expenses 1,620
Commitment fees 54
---------
Total Expenses 280,763
---------
Net investment loss (54,868)
---------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 2,811,279
Financial future transactions (36,302)
---------
Net realized gain (loss) 2,774,977
Change in unrealized appreciation (depreciation) on:
Investments 2,079,847
Financial future contracts 37,909
----------
Change in net unrealized appreciation (depreciation) 2,117,756
----------
Net realized and unrealized gain (loss) 4,892,733
----------
Net Increase in Net Assets from Operations $4,837,865
==========
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (54,868) $ (110,285)
Net realized gain (loss) 2,774,977 6,830,406
Change in net unrealized appreciation (depreciation) 2,117,756 (4,066,139)
------------ ------------
Net increase (decrease) in net assets from operations 4,837,865 2,653,982
------------ ------------
Capital Transactions
Contributions 49,533,053 11,475,471
Withdrawals (5,169,458) (8,367,737)
------------ ------------
Net increase (decrease) in net assets from capital transactions 44,363,595 3,107,734
------------ -----------
Total Increase (Decrease) in Net Assets 49,201,460 5,761,716
Net Assets
At beginning of period 42,092,878 36,331,162
------------ -----------
At end of period $91,294,338 $42,092,878
============ ===========
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------------
For the
Six Months Ended
March 31, 2007 Year Ended September 30,
--------------------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
---------- ------ ------ ------ ------ ------
Total Return (a) 10.23% 7.32%(b) 22.05% 17.12%(b) 30.79%(b) (15.37)%(b)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 1.04%(c) 1.10% 1.12% 1.15% 1.00% 1.00%
Net Investment Income (to average daily net (0.20)%(c) (0.29)% (0.42)% (0.83)% (0.42)% (0.51)%
assets)*
Portfolio Turnover 78%(d) 166% 135% 153% 261% 239%
Net Assets, End of Period (000's omitted) $91,294 $42,093 $36,331 $32,769 $29,910 $24,500
- --------
* 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 1.12% N/A 1.18% 1.28% 1.18%
Net investment income N/A (0.31)% N/A (0.86)% (0.70)% (0.69)%
(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 absense of expense waiver.
(c) Calculated on an annualized basis.
(d) Not annualized.
The accompanying notes are an integral part of the financial statements.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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, 2007, 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, 2007 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 are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded.
Securities not listed on an exchange or national securities market, or
securities for which there were no reported transactions, are valued at
the last calculated mean price (average of last bid and last offer).
Securities that are fixed income securities, other than short-term
instruments with less than sixty days remaining to maturity, for which
market prices are readily available, are valued at their current market
value on the basis of quotations, which may be furnished by a pricing
service or dealers in such securities. 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. With respect
to any portion of the Portfolio's assets that are invested in one or
more open-end regulated investment companies ("RICs"), the Portfolio's
net asset value ("NAV") will be calculated based upon the NAVs of such
RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange.
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 then is valued at amortized
cost based upon the value on such date unless the Trustees determine
during such sixty-day period that amortized cost does not represent
fair value.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Interest
income is determined on the basis of coupon interest earned, adjusted
for accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on 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
Each Portfolio is treated as a disregarded entity for U.S. federal
income tax purposes and consequently, each corresponding Feeder Fund
that invests in a Portfolio is treated for U.S. federal income tax
purposes as owning all of the underlying assets of such Portfolio. 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
the Portfolio's 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 investors to satisfy them.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
D. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve
future claims that may be made against the Portfolio that have not yet
occurred. However, based on experience, the Portfolio expects the risks
of loss to be remote.
E. 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.
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.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum
threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is
taxable in a particular jurisdiction), and requires certain expanded tax
disclosures. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of
the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact, if any, in the financial
statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of
Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS
157"). FAS 157 establishes an authoritative definition of fair value,
sets out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of FAS 157
is required for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. At this time, management is
evaluating the implications of FAS 157 and its impact, if any, in the
financial statements has not yet been determined.
(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 Portfolio's average
daily net assets. TBCAM voluntarily agreed to limit the total annual
operating expenses of the Fund and its pro rata share of the Portfolio
expenses (excluding brokerage commission, taxes and extraordinary
expense) to 1.10% 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.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") announced that they had entered into
a definitive agreement to merge. The new company will be called The
Bank of New York Mellon Corporation. As part of this transaction,
TBCAM would become an indirect wholly-owned subsidiary of The Bank of
New York Mellon Corporation. The transaction is subject to certain
regulatory approvals and the approval of BNY's and MFC's shareholders,
as well as other customary conditions to closing. Subject to such
approvals and the satisfaction of the other conditions, MFC and BNY
expect the transaction to be completed in the third quarter of 2007.
The Portfolio Trust 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 $50,656 for the six months
ended March 31, 2007.
The Portfolio Trust 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 earned $9,403 for the six months ended March 31, 2007. See
Note 6 for further details.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Trust reimburses Mellon Asset Management for a portion of the salary
of the Trust's and Portfolio Trust's Chief Compliance Officer. No other
director, officer or employee of TBCAM or its affiliates received any
compensation from the Trust or the Portfolio Trust for serving as an
officer or Trustee of the Trust or Portfolio 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, 2007 were as follows:
Purchases Sales
----------- -----------
Non-U.S. Government Securities $80,431,665 $40,600,585
=========== ===========
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $114,752,526
------------
Gross unrealized appreciation 5,915,487
Gross unrealized depreciation (1,334,598)
------------
Net unrealized appreciation (depreciation) $4,580,889
============
(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, known as
variation margin, 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 appreciation or depreciation 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, 2007, the Portfolio held open financial futures
contracts. See Schedule of Investments for further details.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which
the Portfolio deems to be creditworthy. The loans are collateralized at
all times with cash or securities with a market value at least equal to
the market value of the securities on loan. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the Portfolio on the next business day. For
the duration of a loan, the Portfolio receives the equivalent of the
interest or dividends paid by the issuer on the securities loaned and
also receives compensation from the investment of the collateral. As
with other extensions of credit, the Portfolio bears the risk of delay
in recovery or even loss of rights in its securities on loan should the
borrower of the securities fail financially or default on its
obligations to the Portfolio. In the event of borrower default, the
Portfolio generally has the right to use the collateral to offset losses
incurred. The Portfolio may incur a loss in the event it was delayed or
prevented from exercising its rights to dispose of the collateral. The
Portfolio also bears the risk in the event that the interest and/or
dividends received on invested collateral is not sufficient to meet the
Portfolio's obligations due on the loans.
The Portfolio loaned securities for the six months ended March 31,
2007 and earned interest on the invested collateral of $198,509 of
which, $176,633 was rebated to borrowers or paid in fees. At March 31,
2007, the Portfolio had securities valued at $18,384,804 on loan. See
the 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. The
participating portfolios and funds also pay an annual renewal fee,
computed at a rate of 0.020 of 1% of the committed amount and allocated
ratably to the participating portfolios/funds. For the six months ended
March 31, 2007, the expense allocated to the Portfolio was $54. The
commitment fee and interest expense is aggregated with miscellaneous
expenses on the Statement of Operations.
For the six months ended March 31, 2007, the Portfolio did not borrow
from the line of credit.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory
Agreement (Unaudited)
- --------------------------------------------------------------------------------
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 LLC
("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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 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 Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory
Agreement (Unaudited)
- --------------------------------------------------------------------------------
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 at the September 28, 2006 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, 2006 based on the Lipper materials provided to the Board
at the September 28, 2006 meeting. The Board found that the Fund outperformed
its peer group average return for the one-year period (3.86% vs. 1.11%) and
three-year period (14.81% vs. 12.98%) and had underperformed its peer group
average return for the five-year period (5.31% vs. 5.71%).
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 management fees"
included fees paid by the Portfolio, as calculated by Lipper, for
administrative services provided by Mellon Bank, N.A., the Portfolio'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%, in the 2nd quintile
(1st being the best) of its peer group of funds, the median fee of which
was 0.900%. The Portfolio's net management fee, after giving effect to
expense limitations, was 0.789% (which included 0.227% in administrative
services fees under Lipper's calculation methodology), lower than the peer
group median net management fee of 0.860%. Based on the Lipper data, as
well as other factors discussed at the September 28, 2006 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 relative to the nature and quality of the services provided.
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 actual net expense ratio of 1.163% (after giving effect to
expense limitations) was higher than the median net expense ratio of the peer
group of 1.104%. However, 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 the Adviser, based on profitability
information submitted to them by the Adviser, incurred marginal profitability
in managing most of the investment companies in the Mellon Institutional Funds
family of funds. The Trustees observed that the Adviser had incurred a loss in
operating the Portfolio in 2004 and 2005.
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 Boston Company International
Core Equity Portfolio and the Standish Mellon Fixed Income Portfolio, two of
the largest funds in the complex, already had breakpoints in their fee
arrangements that reflected economies resulting from their size. The Board also
noted that at the March 7, 2006 meeting, management had presented a Breakpoint
Discussion Memorandum that had proposed a framework for future breakpoints. The
Board concluded that, at existing asset levels and considering current asset
growth projections, the implementation of additional fee breakpoints or other
fee reductions was not necessary at this time.
26
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory
Agreement (Unaudited)
- --------------------------------------------------------------------------------
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.
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 a one-year period.
27
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $250
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc. Portfolio: $316
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $250
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $316
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $316
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $250
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $335
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive 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
28
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor,
One Boston Place Officer L.P. 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
29
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
---------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Small Cap Tax-Sensitive Equity Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- --------------------------------------------------------------------------------------
Actual $1,000.00 $1,104.30 $5.19
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- --------------------------------------------------------------------------------------------
Washington Group International, Inc. Industrials 2.0%
Lions Gate Entertainment Corp. Consumer Discretionary 1.6
24/7 Real Media, Inc. Information Technology 1.5
Respironics, Inc. Health Care 1.4
Integra LifeSciences Holdings Health Care 1.4
Natus Medical, Inc. Health Care 1.3
Inter Parfums, Inc. Consumer Staples 1.3
MSC Industrial Direct Co., Inc. Industrials 1.3
Texas Roadhouse, Inc., Class A Consumer Discretionary 1.2
Portfolio Recovery Associates, Inc. Financial 1.2
----
14.2%
* Excludes short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- ---------------------------------------------------------
Consumer Discretionary 12.7%
Consumer Staples 7.0
Energy 7.2
Financial 10.3
Health Care 16.8
Industrials 13.6
Information Technology 23.8
Materials 3.3
Telecommunication Services 1.3
Utilities 1.1
Short-term and Other Assets 2.9
-----
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--122.4%
EQUITIES--97.1%
Consumer Discretionary--12.7%
Aeropostale, Inc. (a) 23,250 $ 935,348
Ambassadors Group, Inc. 32,360 1,075,646
Bright Horizons Family Solutions, Inc. (a) (b) 36,350 1,372,213
Cache, Inc. (a) 57,620 1,022,755
California Pizza Kitchen, Inc. (a) 30,360 998,540
Capella Education Co. 19,440 652,018
Citi Trends, Inc. (b) 35,690 1,525,391
Coldwater Creek Inc. 51,660 1,047,665
Fred's, Inc. 96,520 1,418,844
Interface, Inc. 63,460 1,014,725
Kenneth Cole Productions, Class A 38,900 998,563
Lions Gate Entertainment Corp. (a) (b) 259,820 2,967,144
Oakley, Inc. 49,540 997,736
Ruth's Chris Steak House, Inc. (a) (b) 47,360 964,250
Steiner Leisure Ltd., ADR (a) 43,740 1,967,425
Texas Roadhouse, Inc., Class A (a) 158,750 2,262,188
The Cheesecake Factory (b) 53,850 1,435,103
Winnebago Industries, Inc. 32,540 1,094,320
------------
23,749,874
------------
Consumer Staples--7.0%
Hain Celestial Group, Inc. (b) 34,190 1,028,093
Hansen Natural Corp. (a) 46,270 1,752,708
Inter Parfums, Inc. 111,160 2,334,360
Longs Drug Stores Corp. 38,620 1,994,337
National Beverage Corp. (b) 90,270 1,583,336
Physicians Formula Holdings, Inc. (a) 110,310 2,082,653
Ruddick Corp. 25,150 756,512
United Natural Foods, Inc. (a) 52,560 1,610,438
------------
13,142,437
------------
Energy--7.2%
Arena Resources, Inc. (a) (b) 24,950 1,250,494
Dril-Quip, Inc. (a) 46,540 2,014,251
Foundation Coal Holdings, Inc. 29,100 999,294
Global Industries, Ltd 52,640 962,786
Oil States International, Inc. (a) (b) 40,230 1,290,981
Parallel Petroleum Corp. (b) 67,460 1,548,207
Penn Virginia Corp. 28,070 2,060,338
Superior Well Services, Inc. (a) 51,890 1,185,687
W-H Energy Services, Inc. (a) 46,240 2,161,258
------------
13,473,296
------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Financial--10.3%
Arch Capital Group Ltd. ADR (a) 18,270 $ 1,246,197
Argonaut Group, Inc. (a) 16,670 539,441
Capital Source, Inc., ADR (b) 63,230 1,588,970
Capitol Bancorp Ltd. (b) 24,800 913,880
Castlepoint Holdings, Ltd 11,180 182,793
Financial Institutions, Inc. 14,680 294,628
First Cash Financial Services, Inc. (a) 55,770 1,242,556
First Mercury Financial Corp. (a) 65,840 1,353,012
First Midwest Bancorp, Inc. (b) 30,280 1,112,790
Hallmark Financial Services, Inc. 27,600 332,304
International Securities Exchange, Inc. 21,860 1,066,768
Montpelier Re Holdings Ltd. (b) 60,280 1,045,255
Old National Bancorp 52,340 951,541
Piper Jaffray Companies, Inc. (a) 16,510 1,022,629
Portfolio Recovery Associates, Inc. (a) (b) 49,730 2,220,445
SVB Financial Group 20,540 998,039
Texas Capital Bancshares, Inc. 47,830 980,515
UCBH Holdings, Inc. (b) 49,430 920,387
Umpqua Holdings Corp. (b) 26,060 697,626
Washington Trust Bancorp, Inc. (b) 22,500 603,225
------------
19,313,001
------------
Health Care--16.8%
Alnylam Pharmaceuticals Inc. (a) (b) 63,310 1,139,580
Applera Corp.-Celera Genomics Group (a) (b) 64,920 921,864
Array BioPharma, Inc. (a) 56,890 722,503
Arrow International, Inc. 30,540 982,166
BioMimetic Therapeutics, Inc. 35,110 580,719
Centene Corp. (a) (b) 37,920 795,941
Covance, Inc. 17,210 1,021,241
Cytyc Corp. (a) 45,040 1,540,818
Enzon Pharmaceuticals, Inc. (a) (b) 124,110 1,011,497
Exelixis, Inc. (b) 97,160 965,770
Integra LifeSciences Holdings (a) (b) 56,090 2,556,582
InterMune, Inc. (a) (b) 41,380 1,020,431
Medarex, Inc. (a) (b) 43,390 561,467
Natus Medical, Inc. (a) (b) 132,540 2,355,236
Pediatrix Medical Group, Inc. (a) 23,210 1,324,363
PerkinElmer, Inc. 54,320 1,315,630
Psychiatric Solutions, Inc. 37,660 1,518,075
Respironics, Inc. (a) 62,698 2,632,689
Rigel Pharmaceuticals, Inc. (a) (b) 83,420 905,941
Sangamo BioSciences, Inc. (b) 78,080 530,944
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
Santarus, Inc. (a) (b) 84,350 $ 593,824
Thermo Fisher Scientific, Inc. (a) 32,650 1,526,388
Thoratec Corp. (a) (b) 61,060 1,276,154
VCA Antech, Inc. (a) 50,530 1,834,744
Viasys Healthcare, Inc. (a) (b) 57,280 1,946,947
------------
31,581,514
------------
Industrials--13.6%
Alaska Air Group, Inc. (a) 23,870 909,447
Bucyrus International, Inc., Class A (b) 29,290 1,508,435
Central Parking Corp. (b) 58,180 1,290,432
Copart, Inc. (a) 68,040 1,905,800
eTelecare Global Solutions Inc. 28,050 424,958
Global Cash Access, Inc. (a) 121,640 2,030,172
Hub Group, Inc., Class A Shares (a) 63,600 1,843,764
MSC Industrial Direct Co., Inc. 49,880 2,328,398
Powell Industries, Inc. (b) 20,360 651,513
Quanta Services, Inc. (a) (b) 60,350 1,522,027
Ritchie Bros. Auctioneers 21,870 1,279,832
Stericycle, Inc. (a) 16,990 1,384,685
Team, Inc. (a) (b) 34,079 1,300,114
UAP Holding Corp. (b) 82,820 2,140,897
UTI Worldwide, Inc. 58,450 1,436,701
Washington Group International, Inc. (a) 53,890 3,579,374
------------
25,536,549
------------
Information Technology--23.8%
24/7 Real Media, Inc. (a) (b) 330,880 2,656,966
AMIS Holdings, Inc. (a) 141,960 1,554,462
Anadigics, Inc. (b) 71,150 840,993
Arris Group, Inc. (a) 121,450 1,710,016
BEA Systems, Inc. (a) 76,540 887,099
Brocade Communications Systems, Inc. (a) 162,150 1,543,668
C-COR, Inc. 104,260 1,445,044
DealerTrack Holdings, Inc. (a) 34,420 1,057,382
EFunds Corp. 54,950 1,464,967
Epicor Software Corp. (a) (b) 109,770 1,526,901
FLIR Systems, Inc. 28,690 1,023,372
Formfactor, Inc. (a) (b) 20,450 915,138
Foundry Networks, Inc. 117,660 1,596,646
Informatica Corp. (a) (b) 109,550 1,471,257
Kronos, Inc. 24,730 1,323,055
Lawson software, Inc. 116,360 941,352
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Information Technology (continued)
Marchex, Inc. 72,180 $ 1,105,798
MasTec, Inc. 170,170 1,873,572
Micrel, Inc. (a) 80,900 891,518
Microsemi Corp. (b) 76,250 1,586,763
NetGear, Inc. (a) 55,540 1,584,556
PMC-Sierra, Inc. (b) 271,960 1,906,440
Polycom, Inc. (a) 29,290 976,236
Sirenza Microdevices, Inc. (a) 68,480 590,298
SkillSoft PLC ADR 139,490 1,166,136
Smart Modular Technologies, Inc. (a) 125,740 1,608,215
Standard Microsytems Corp. (a) 22,440 685,318
Tessera Technologies, Inc. (a) 31,230 1,241,080
The Ultimate Software Group, Inc. (a) (b) 48,820 1,278,596
TheStreet.com, Inc. 53,710 657,948
Transaction Systems Archietects, Inc. 26,520 858,983
Ultra Clean Holdings, Inc. 73,300 1,268,090
ValueClick, Inc. (a) (b) 29,680 775,538
Verisign, Inc. (a) 38,480 966,618
Wright Express Corp. (a) 57,260 1,736,696
------------
44,716,717
------------
Materials--3.3%
American Vanguard Corp. (b) 71,990 1,230,309
Cleveland-Cliffs, Inc. (b) 15,930 1,019,679
Hecla Mining Co. (a) (b) 116,800 1,058,208
Kinross Gold Corp. (a) 65,590 904,486
Northern Orion Resources, Inc. (b) 131,810 536,467
Schnitzer Steel Industries, Inc. 36,440 1,463,795
------------
6,212,944
------------
Telecommunication Services--1.3%
Lightbridge, Inc. (b) 29,100 511,287
NeuStar, Inc. (a) 65,060 1,850,306
------------
2,361,593
------------
Utilities--1.1%
Ormat Technologies, Inc. 48,070 2,017,017
------------
Total Equities (Cost $158,808,020) 182,104,942
------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT--0.4%
U.S. Government--0.4%
U.S. Treasury Bill (c) (d) (Cost $663,173) 4.89% 6/14/2007 670,000 $ 663,357
-------------
INVESTMENT OF CASH COLLATERAL--24.9% Shares
----------
BlackRock Cash Strategies L.L.C. (c) (Cost $46,773,777) 46,773,777 46,773,777
TOTAL UNAFFILIATED INVESTMENTS (Cost $206,244,970) 229,542,076
AFFILIATED INVESTMENTS--10.9%
Dreyfus Institutional Preferred Plus Money Market Fund (e)
(Cost $ 20,592,998) 20,592,998 20,592,998
-------------
TOTAL INVESTMENTS--133.3% (Cost $226,837,968) 250,135,074
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(33.3%) (62,487,275)
-------------
NET ASSETS--100% $ 187,647,799
=============
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, 2007.
(c) Rate noted is yield to maturity.
(d) Denotes all or part of security segregated as collateral for futures
transactions.
(e) Affiliated institutional money market fund.
At March 31, 2007 the Fund held the following futures contracts:
Underlying Unrealized
Contract Position Expiration Date Face Amount at Value Appreciation
- -------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (39 Contracts) Long 06/14/2007 $ 15,413,488 $342,374
========
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $44,762,192 (Note 7)):
Unaffiliated investments (cost $206,244,970) $ 229,542,076
Affiliated investments (Note 1F) (cost $20,592,998) 20,592,998
Receivable for investments sold 743,308
Interest and dividends receivable 126,808
Receivable for variation margin on open future contracts (Note 6) 72,150
Receivable for Fund shares sold 207,970
Receivable for class action settlements due from advisor 52,420
Prepaid expenses 26,222
-------------
Total assets 251,363,952
Liabilities
Collateral for securities on loan (Note 7) $ 46,773,777
Payable for investments purchased 16,773,229
Payable for Fund shares redeemed 100,765
Accrued accounting, custody, adminiastration and transfer agent fees (Note 2) 27,660
Accrued professional fees 17,712
Accrued administrator services fee (Note 2) 14,585
Accrued trustees' fees and expenses (Note 2) 5,188
Accrued shareholders reporting expense (Note 2) 2,000
Accrued chief compliance officer fee (Note 2) 375
Other accrued expenses and liabilities 862
-------------
Total liabilities 63,716,153
-------------
Net Assets $ 187,647,799
=============
Net Assets consist of:
Paid-in capital $ 153,677,760
Accumulated net realized gain 10,570,785
Accumulated net investment loss (240,226)
Net unrealized appreciation 23,639,480
-------------
Total Net Assets $ 187,647,799
=============
Shares of beneficial interest outstanding 4,756,645
=============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 39.45
=============
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
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 264,868
Dividend income from affiliated investments (Note 1F) 267,579
Securities lending income (Note 7) 79,957
Interest income 9,445
-----------
Total investment income 621,849
Expenses
Investment advisory fee (Note 2) $ 693,410
Accounting, custody, administration and transfer agent fees (Note 2) 79,157
Administrative service fee (Note 2) 29,560
Professional fees 20,324
Registration fees 10,025
Trustees' fees and expenses (Note 2) 9,547
Insurance expense 5,485
Chief compliance officer expense (Note 2) 2,105
Miscellaneous expenses 12,462
-------------
Net Expenses 862,075
-----------
Net investment loss (240,226)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 10,857,401
Financial futures transactions 895,074
-------------
Net realized gain 11,752,475
Change in unrealized appreciation (depreciation) on:
Investments 5,018,884
Financial futures contracts 408,873
-------------
Change in net unrealized appreciation (depreciation) 5,427,757
-----------
Net realized and unrealized gain (loss) 17,180,232
-----------
Net Increase in Net Assets from Operations $16,940,006
===========
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, 2007 Year Ended
(Unaudited) September 30, 2006
----------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (240,226) $ (291,040)
Net realized gain (loss) 11,752,475 28,507,556
Change in net unrealized appreciation (depreciation) 5,427,757 (15,412,552)
------------- -------------
Net increase (decrease) in net assets from investment operations 16,940,006 12,803,964
------------- -------------
Distributions to Shareholders (Note 1C)
From net realized gains on investments (27,215,421) (11,653,235)
------------- -------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 26,046,804 25,431,734
Value of shares issued to shareholders in reinvestment of distributions 25,616,045 9,807,382
Cost of shares redeemed (14,291,709) (35,872,639)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions 37,371,140 (633,523)
------------- -------------
Total Increase (Decrease) in Net Assets 27,095,725 517,206
Net Assets
At beginning of period 160,552,074 160,034,868
------------- -------------
At end of year [including net investment (loss) of $(240,226)] $ 187,647,799 $ 160,552,074
============= =============
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
March 31, Year Ended September 30,
2007 ----------------------------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
--------- --------- --------- ---------- --------- ---------
Net Asset Value, Beginning of Period $ 42.27 $ 42.35 $ 34.71 $ 29.58 $ 22.53 $ 26.23
--------- --------- --------- ---------- --------- ---------
From Operations:
Net investment income (loss) * (a) (0.06) (0.08) (0.10) (0.24) (0.11) (0.13)
Net realized and unrealized gains
(loss) on investments 4.36 3.08 7.74 5.37(b) 7.16(b) (3.57)(b)
--------- --------- --------- ---------- --------- ---------
Total from operations 4.30 3.00 7.64 5.13 7.05 (3.70)
--------- --------- --------- ---------- --------- ---------
Less Distributions to Shareholders:
From net realized gains on
investments (7.12) (3.08) -- -- -- --
--------- --------- --------- ---------- --------- ---------
Total distributions to shareholders (7.12) (3.08) -- -- -- --
--------- --------- --------- ---------- --------- ---------
Net Asset Value, End of Period $ 39.45 $ 42.27 $ 42.35 $ 34.71 $ 29.58 $ 22.53
========= ========= ========= ============= ========= =========
Total Return 10.43%(e) 7.49% 22.01% 17.34% 31.29%(c) (14.11%)(c)
Ratios/Supplemental data:
Expenses (to average daily net
assets)* 0.99%(d) 0.99% 0.99% 1.03% 1.00% 1.00%
Net Investment Income (Loss) to
average daily net assets)* (0.28%)(d) (0.18%) (0.26%) (0.71%) (0.43%) (0.47%)
Portfolio Turnover 80%(e) 169% 137% 150% 252% 241%
Net Assets, End of Period
(000's omitted) $ 187,648 $ 160,552 $ 160,035 $ 120,372 $ 106,718 $ 82,469
- --------------
* 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 excluding waivers and reimbursements would have been:
Net investment income (loss) per share (a) N/A N/A N/A N/A $ (0.13) $ (0.15)
Ratios (to average daily net assets):
Expenses (c) N/A N/A N/A N/A 1.07% 1.08%
Net investment income (loss) N/A N/A N/A N/A (0.50%) (0.55%)
(a) Calculated based on average shares outstanding.
(b) Amounts includes litigation proceeds received by the Fund of $0.01 for the
six months ended March 31, 2007, $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.
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Organization and 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 Fund may also invest
in equity index futures contracts based primarily upon the Russell 2000
Index.
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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities
not listed on an exchange or national securities market, or securities for
which there were no reported transactions, are valued at the last
calculated mean price (average of last bid and last offer). Securities that
are fixed income securities, other than short-term instruments with less
than sixty days remaining to maturity, for which market prices are readily
available, are valued at their current market value on the basis of
quotations, which may be furnished by a pricing service or dealers in such
securities. 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. With respect to any portion of the Fund's
assets that are invested in one or more open-end regulated investment
companies ("RICs"), the Fund's net asset value ("NAV") will be calculated
based upon the NAVs of such RICs.
Non-exchange traded derivatives are normally valued on the basis of quotes
obtained from brokers and dealers, including counterparties or pricing
services.
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. 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 the shareholder elects
to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences which may result in reclassifications, are primarily due
to differing treatments for losses deferred due to wash sales and the
timing of recognition of realized and unrealized gains or losses on futures
contracts.
Permanent book and tax basis differences relating to shareholder
distributions 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 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 LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold for
financial statement recognition of the benefit of positions taken in filing
tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact in
the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(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 Fund's average daily net assets.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $6,844 for the six months ended March 31, 2007.
The Trust 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 $72,313 for the six months
ended March 31, 2007.
The Trust 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 earned $33,907 for the
six months ended March 31, 2007. 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,
2007, the Fund was charged $2,105. 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 Fund 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.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $2,000, which is included in miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
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, 2007, the Fund was charged $29,590 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, 2007 were as follows:
Purchases Sales
--------- -----
Non-U.S. Government Securities $149,861,242 $132,317,244
============ ============
(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, 2007 September 30, 2006
-------------- ------------------
Shares sold 657,359 604,209
Shares issued to shareholders
in reinvestment of distributions 659,528 244,757
Shares redeemed (358,779) (829,484)
-------- --------
Net increase (decrease) 958,108 19,482
======== ========
At March 31, 2007, one shareholder of record held, in the aggregate,
approximately 66% 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, 2007, the Fund did not
assess any redemption fees.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $ 226,837,968
-------------
Gross unrealized appreciation 25,579,717
Gross unrealized depreciation (2,282,611)
-------------
Net unrealized appreciation (depreciation) $ 23,297,106
=============
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity 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 purchase or
sale 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, known as variation margin, 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 appreciation or depreciation 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 also 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, 2007, the Fund held open financial futures 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 during the six months ended March 31, 2007 and
earned interest on the invested collateral of $787,601 of which $707,644
was rebated to borrowers or paid in fees. At March 31, 2007, the Fund had
securities valued at $44,762,192 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. Each fund/portfolio also pays an annual renewal fee, computed
at a rate of 0.020 of 1% of the committed amount and allocated ratably to
the participating funds/portfolios. For the six months ended March 31,
2007, the expense allocated to the Fund was $191. The facility fee and
interest expense are included in miscellaneous expenses on the statement of
operations.
For the six months ended March 31, 2007, the Fund did not have any
borrowings outstanding.
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 (Unaudited)
- --------------------------------------------------------------------------------
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 ("TBCAM" or 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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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, including the Fund'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 Fund and potential
economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 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 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 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 (Unaudited)
- --------------------------------------------------------------------------------
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 28, 2006 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, 2006 based on the Lipper materials
provided to the Board at the September 28, 2006 meeting. The Board found
that the Fund outperformed its peer group average returns for the one-year
period (4.12% vs. 1.09%), three-year period (15.25% vs. 13.21%) and
five-year period (6.00% vs. 5.95%).
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser.
The Fund's contractual advisory fee was 0.800%, in the 2nd quintile (1st
being the best) of its peer group of funds, the median fee of which was
0.900%. The Fund's net management fee, after giving effect to expense
limitations, was 0.799%, below the peer group median net management fee of
0.860%. Based on the Lipper data, as well as other factors discussed at the
September 28, 2006 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 relative to the nature and quality of the
services provided.
The Board also considered the Fund's expense ratio and compared it to that
of its peer group of similar funds. The Board found that the actual net
expense ratio of 0.990% was lower than the median net expense ratio of the
peer group of 1.104%, 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 the Adviser, based on profitability
information submitted to them by the Adviser, incurred marginal
profitability in managing most of the investment companies in the Mellon
Institutional Funds family of funds. The Trustees observed that the Adviser
had experienced profits in operating the Fund in both 2004 and 2005 and
concluded these were not excessive.
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 Boston Company
International Core Equity Portfolio and the Standish Mellon Fixed Income
Portfolio and, two of the largest funds in the complex, already had
breakpoints in their fee arrangements that reflected economies resulting
from their size. The Board also noted that at the March 7, 2006 meeting,
management had presented a Breakpoint Discussion Memorandum that had
proposed a framework for future breakpoints. 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.
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 (Unaudited)
- --------------------------------------------------------------------------------
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.
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 a
one-year period.
20
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) Position(s) Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Held with and Length of During Past Overseen by Held by March 31,
Date of Birth Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $1,499
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $1,499
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $1,499
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $1,572
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 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;
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
21
Principal Officers who are Not Trustees
Name (Age) 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 (46) Vice President Since 2003 Senior Vice President and Head of Operations, Mellon
Mellon Asset Management and Secretary Asset Management ("MAM"); formerly First Vice
One Boston Place President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor,
One Boston Place Officer L.P. 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
22
THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6938SA0307
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
- --------------------------------------------------------------------------------
March 31, 2007 (Unaudited) Small Cap Value Fund
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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- -------------------------------------------------------------------------------------
Actual $1,000.00 $1,122.10 $4.76
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 Small Cap Value Fund
Portfolio Information as of March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
The Boston Company Small Cap Value Fund invests all of its investable assets in
an interest of The Boston Company Small Cap Value Portfolio (See Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented below.
Percentage of
Top Ten Holdings* Sector Investments
- --------------------------------------------------------------------
Ralcorp Holdings, Inc. Consumer Staples 1.6%
Longs Drug Stores Corp. Consumer Staples 1.4
Shaw Group, Inc. Industrials 1.1
BJ'S Wholesale Club, Inc. Consumer Staples 1.1
Clean Harbors, Inc. Industrials 1.0
Regis Corp. Consumer Discretionary 1.0
Metal Management, Inc. Materials 0.9
School Specialty, Inc. Industrials 0.9
CARBO Ceramics, Inc. Energy 0.9
FEI Co. Information Technology 0.9
----
10.8%
* Excludes short-term securities and cash collateral investments.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------
Consumer Discretionary 16.1%
Consumer Staples 7.2
Energy 4.9
Financials 20.6
Health Care 8.1
Industrials 15.3
Information Technology 16.8
Materials 4.5
Telecommunications Services 0.7
Utilities 1.7
Short-term and other Assets 4.1
-----
100.0%
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Assets and Liabilities
March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap Value
Portfolio ("Portfolio"), at value (Note 1A) $781,099,891
Receivable for Fund shares sold 3,581,498
Receivable from advisor (Note 2) 27,495
Receivable for class action settlement due
from advisor 14,482
Prepaid expenses 29,437
------------
Total assets 784,752,803
------------
Liabilities
Payable for Fund shares redeemed $ 187,919
Accrued administrator services fee (Note 2) 84,139
Accrued professional fees 17,772
Accrued transfer agent fees (Note 2) 10,023
Accrued registration fee 2,245
Accrued trustees' fees (Note 2) 498
Accrued chief compliance officer fee (Note 2) 420
Accrued shareholder reporting fees (Note 2) 200
---------
Total liabilities 303,216
------------
Net Assets $784,449,587
============
Net Assets consist of:
Paid-in capital $685,725,684
Accumulated net realized gain 27,248,424
Undistributed net investment income 2,097,873
Net unrealized appreciation 69,377,606
------------
Total Net Assets $784,449,587
============
Shares of beneficial interest outstanding 30,709,880
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 25.54
============
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 5,267,976
Interest and securities lending income allocated from
Portfolio 84,254
Expenses allocated from Portfolio (2,758,526)
-----------
Net investment income allocated from Portfolio 2,593,704
Expenses
Administrative service fees (Note 2) $ 99,657
Registration fees 46,161
Professional fees 20,529
Transfer agent fees (Note 2) 18,109
Insurance expense 872
Trustees' fees (Note 2) 497
Miscellaneous expenses 26,591
-----------
Total expenses 212,416
-----------
Net investment income 2,381,288
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investments and financial futures transactions 32,923,197
Change in unrealized appreciation (depreciation) allocated
from Portfolio on:
Investments and financial futures transactions 36,023,787
-----------
Net realized and unrealized gain (loss) 68,946,984
-----------
Net Increase in Net Assets from Operations $71,328,272
===========
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, 2007 Year Ended
(Unaudited) September 30, 2006
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 2,381,288 $ 1,320,137
Net realized gain (loss) 32,923,197 18,994,109
Change in net unrealized appreciation (depreciation) 36,023,787 14,188,217
------------ ------------
Net increase (decrease) in net assets from investment operations 71,328,272 34,502,463
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (1,104,131) (446,329)
From net realized gains on investments (25,544,571) (13,455,548)
------------ ------------
Total distributions to shareholders (26,648,702) (13,901,877)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds 252,646,150 374,463,760
Value of shares issued in reinvestment of distributions 20,131,986 10,108,779
Cost of shares redeemed (72,568,529) (55,259,897)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 200,209,607 329,312,642
------------ ------------
Total Increase (Decrease) in Net Assets 244,889,177 349,913,228
Net Assets
At beginning of period 539,560,410 189,647,182
------------ ------------
At end of period (including undistributed net
investment income of $2,097,873 and $820,716, respectively) $784,449,587 $539,560,410
============ ============
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, 2007 -----------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
----------- ---- ---- ---- ---- -----
Net Asset Value, Beginning of Period $ 23.70 $ 22.55 $ 21.91 $ 18.49 $ 14.30 $ 13.86
-------- -------- -------- -------- -------- --------
From Investment Operations:
Net investment income*(a) 0.09 0.09 0.02 (0.05) (0.01) 0.05
Net realized and unrealized gains (loss) on investments 2.78(b) 2.58 4.29 5.27 4.24 0.75
-------- -------- -------- -------- -------- --------
Total from operations 2.87 2.67 4.31 5.22 4.23 0.80
-------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.04) (0.03) - - (0.02) (0.04)
From net realized gains on investments (0.99) (1.49) (3.67) (1.80) (0.02) (0.32)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (1.03) (1.52) (3.67) (1.80) (0.04) (0.36)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 25.54 $ 23.70 $ 22.55 $ 21.91 $ 18.49 $ 14.30
======== ======== ======== ======== ======== ========
Total Return 12.21%(g) 12.42% 21.34% 29.92% 29.64%(c) 5.43%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)*(d) 0.90%(f) 0.94% 1.05% 1.18% 1.15% 1.00%
Net Investment Income (Loss)
(to average daily net assets)* 0.72%(f) 0.40% 0.08% (0.24)% (0.05)% 0.32%
Portfolio Turnover N/A N/A N/A N/A 51%(e) 164%(e)
Net Assets, End of Period (000's omitted) $784,450 $539,560 $189,647 $ 61,182 $ 45,305 $ 35,934
* The investment advisor voluntarily agreed not to impose a portion of its
investment advisory fee and/or reimbursed the (loss) 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 without waivers and
reimbursements would have been:
Net investment income per share(a) N/A N/A N/A N/A $ (0.03) $ 0.01
Ratios (to average daily net assets):
Expenses(d) N/A N/A N/A N/A 1.28% 1.24%
Net investment income (loss) N/A N/A N/A N/A (0.18)% 0.08%
(a) Calculated based on average shares outstanding.
(b) Amount includes litigation proceeds received by the fund of less than $0.01
for the six months ended March 31, 2007.
(c) Total return would have been lower in the absence of expense waivers.
(d) Includes the Fund's share of the Portfolio's allocated expenses.
(e) 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.
(f) Annualized.
(g) Not annualized.
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) Organization and 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. As of March 31, 2007, the Fund owned 91% 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. 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
The Fund's investment in the Portfolio is recorded on settlement date. The
Portfolio's securities transactions are recorded as of the trade date as
discussed in Note 1B of the Portfolio's Notes to Financial Statements,
which are included elsewhere in this report. 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 are 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 and unrealized gains or
losses on futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions 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/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 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.
F. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM"), a wholly-owned subsidiary
of Mellon Financial Corporation, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide personnel and facilities to perform transfer agency and certain
shareholder services for the Fund. For these services, the Fund pays
Dreyfus Transfer, Inc. a fixed fee plus per account and transaction based
fees, as well as out-of-pocket expenses. Pursuant to this agreement, the
Fund was charged $18,109 for the six months ended March 31, 2007.
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,
2007, the Fund was charged $2,121, which is included in miscellaneous
expenses in the statement of operations. No other director, officer or
employee of TBCAM or its affiliates receives any compensation from the
Trust or the Portfolio Trust 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $200, which is included in miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
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, 2007, the Fund was charged $50,143 for fees
payable to Mellon Private Wealth Management.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2007 aggregated $271,003,432 and $99,359,247,
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, 2007 September 30, 2006
-------------- ------------------
Shares sold 10,044,518 16,310,078
Shares issued to shareholders
in reinvestment of distributions 806,247 464,397
Shares redeemed (2,908,946) (2,415,192)
---------- ----------
Net increase (decrease) 7,941,819 14,359,283
========== ==========
At March 31, 2007, one shareholder of record held, in the aggregate,
approximately 20% 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, 2007, the Fund received
$15,795 in redemption fees and is reflected in the cost of shares redeemed.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--115.7%
EQUITIES--95.9%
Consumer Discretionary--16.1%
Aeropostale, Inc. (a)(b) 136,920 $ 5,508,292
Big 5 Sporting Goods Corp. (b) 308,124 7,986,574
CEC Entertainment, Inc. (a)(b) 87,960 3,653,858
Charming Shoppes, Inc. (a)(b) 432,290 5,598,156
Courier Corp. 91,310 3,567,482
Cox Radio, Inc., Class A Shares (a)(b) 376,720 5,142,228
Drew Industries, Inc. (b) 128,190 3,676,489
Entercom Communications Corp. (b) 193,770 5,460,439
Entravision Communications Corp. 286,100 2,672,174
Ethan Allen Interiors, Inc. 97,600 3,449,174
Finish Line (b) 309,130 3,895,038
Furniture Brands International, Inc. (b) 313,140 4,941,349
Gentex Corp. (b) 373,750 6,073,438
Hot Topic, Inc. (a)(b) 259,980 2,885,778
Jos A Bank Clothiers, Inc. (a)(b) 201,520 7,123,732
Kenneth Cole Productions, Class A Shares (b) 213,030 5,468,480
Keystone Automotive Industries, Inc. (a) 136,920 4,614,204
Lin TV Corp. (a)(b) 148,460 2,360,514
Media General, Inc., Class A 105,040 4,008,326
Meredith Corp. 72,200 4,143,558
Morton's Restaurant Group, Inc. (a) 225,245 4,007,109
New York & Company , Inc. (a) 470,997 7,437,043
Red Lion Hotels Corp. (a) 112,270 1,396,639
Regis Corp. (b) 248,560 10,034,367
Ryland Group, Inc. (b) 140,360 5,921,788
Scholastic Corp. 68,800 2,139,680
Tenneco, Inc. (a) 256,973 6,542,533
The Timberland Co. (b) 191,480 4,984,224
Zale Corp. (a)(b) 122,140 3,222,053
-------------
137,914,719
-------------
Consumer Staples--7.2%
BJ'S Wholesale Club, Inc. (a)(b) 320,730 10,850,296
Casey's General Stores, Inc. (b) 342,650 8,569,677
J & J Snack Food Corp. 25,713 1,015,406
Lance, Inc. (b) 186,090 3,766,462
Longs Drug Stores Corp. 273,180 14,107,015
Ralcorp Holdings, Inc. (b) 249,060 16,014,558
Sanderson Farms, Inc. (b) 206,700 7,660,302
-------------
61,983,716
-------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------
Energy--4.9%
CARBO Ceramics, Inc. (b) 200,750 $ 9,344,913
Dril-Quip, Inc. (a) 105,713 4,575,259
Oil States International, Inc. (a)(b) 187,390 6,013,345
Penn Virginia Corp. 48,400 3,552,560
Superior Well Services, Inc. (a)(b) 146,510 3,347,754
Tetra Technologies (a) 165,410 4,087,281
Unit Corp. (a) 107,360 5,431,342
Universal Compression Holdings, Inc. (a)(b) 90,230 6,106,766
------------
42,459,220
------------
Financial--20.6%
Alabama National Bancorp/Del (b) 62,040 4,393,052
American Financial Realty Trust REIT (b) 702,740 7,083,619
Anthracite Capital, Inc. REIT 416,210 4,994,520
Anworth Mortgage Asset Corp. 193,940 1,894,794
Aspen Insurance Holdings Ltd. 244,190 6,400,220
Assured Guaranty Ltd. 289,880 7,919,522
BankAtlantic Bancorp, Inc. 554,110 6,073,046
CBRE Realty Finance, Inc. REIT 322,500 4,266,675
Citizens Banking Corp. (b) 174,940 3,876,670
Cowen Group, Inc. (a) 108,963 1,813,144
Crystal River Capital, Inc. REIT (b) 130,900 3,513,356
Education Realty Trust, Inc. REIT (b) 370,156 5,470,906
Financial Federal Corp. (b) 290,250 7,639,380
First Indiana Corp. (b) 102,830 2,246,836
First Potomac Realty Trust REIT (b) 145,290 4,150,935
Firstmerit Corp. (b) 233,610 4,931,507
Flushing Financial Corp. (b) 161,940 2,628,286
Horace Mann Educators Corp. 196,130 4,030,472
Innkeepers USA Trust REIT 302,180 4,919,490
Knight Capital Group, Inc. (b) 328,340 5,200,906
Lasalle Hotel Properties REIT 118,390 5,488,560
Lexington Realty Trust REIT (b) 225,430 4,763,336
Mission West Properties REIT 247,600 3,580,296
Old National Bancorp 94,900 1,725,282
Pacific Capital Bancorp (b) 121,370 3,898,404
Piper Jaffray Companies, Inc. (a) 138,950 8,606,563
Provident Bankshares Corp. 94,380 3,101,327
Provident Financial Services, Inc. 134,480 2,346,676
Redwood Trust, Inc. REIT (b) 125,650 6,556,417
Security Capital Assurance Ltd. 153,810 4,342,056
South Financial Group, Inc. 231,160 5,714,275
Sterling Bancshares, Inc. 320,560 3,583,861
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------
Financial (continued)
Sterling Financial Corp. (b) 113,130 $ 3,528,525
Stewart Information Services Corp. (b) 99,907 4,175,114
Strategic Hotels and Resorts, Inc. REIT 189,830 4,341,412
Texas Capital Bancshares, Inc. (a) 207,260 4,248,830
Triad Guaranty, Inc. (a) (b) 154,230 6,386,664
Washington Federal, Inc. 262,900 6,167,634
------------
176,002,568
------------
Health Care--8.1%
Air Methods Corp. (a) (b) 155,280 3,729,826
Chemed Corp. 94,310 4,617,418
Computer Programs & Systems, Inc. (b) 119,740 3,211,427
K-V Pharmaceutical Co., Class A (a)(b) 145,914 3,608,453
Lifepoint Hospitals, Inc. (a) 147,820 5,649,680
Magellan Health Services, Inc. (a)(b) 152,250 6,394,500
Medical Action Industries, Inc. (a)(b) 160,855 3,844,435
Option Care, Inc. (b) 622,450 8,278,585
Pediatrix Medical Group, Inc. (a) 147,310 8,405,509
Phase Forward, Inc. (a) (b) 334,590 4,393,167
Providence Service Corp. (a)(b) 256,300 6,079,436
RehabCare Group, Inc. (a)(b) 341,480 5,419,288
Res-Care, Inc. (a) 329,444 5,765,270
------------
69,396,994
------------
Industrials--15.3%
American Ecology Corp. (b) 85,670 3,566,721
Bowne & Co., Inc. (b) 398,060 6,261,484
Casella Waste Systems, Inc. (a) 393,960 3,845,050
Central Parking Corp. (b) 259,703 5,760,213
Clean Harbors, Inc. (a)(b) 238,540 10,786,779
Comfort Systems USA, Inc. 127,880 1,529,445
Corrections Corp. of America (a)(b) 76,510 4,040,493
Curtiss-Wright Corp. 115,290 4,443,277
Electro Rent Corp. 98,860 1,423,584
Esterline Technologies Corp. (a)(b) 195,991 8,049,350
Flanders Corp. 333,540 2,418,165
II-VI, Inc. (a) 150,400 5,091,040
Infrasource Services, Inc. (a)(b) 242,460 7,397,455
Insituform Technologies, Inc. (a)(b) 172,421 3,584,633
Laidlaw International, Inc. 124,500 4,307,700
LECG Corp. (a)(b) 421,280 6,100,134
McGrath Rentcorp 188,070 5,956,177
Moog, Inc., Class A 54,740 2,279,921
School Specialty, Inc. (a)(b) 262,610 9,482,847
Shaw Group, Inc. (a)(b) 353,320 11,048,316
The Brink's Co. 64,250 4,076,663
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------
Industrials (continued)
Toro Co. (b) 165,030 $ 8,456,137
United Stationers, Inc. 93,260 5,588,139
Waste Connections, Inc. (a)(b) 204,529 6,123,598
------------
131,617,321
------------
Information Technology--16.8%
Actel Corp. (a) 316,820 5,233,866
Avid Technology, Inc. (a)(b) 140,010 4,883,549
Brocade Communications Systems, Inc. (a) 453,800 4,320,176
Cirrus Logic, Inc. (a) 537,240 4,115,258
Comtech Telecommunications Corp. (a)(b) 196,120 7,595,728
CSG Systems International , Inc. (a)(b) 304,480 7,618,090
DSP Group, Inc. (a) 95,508 1,814,652
Electronics for Imaging, Inc. (a)(b) 304,950 7,151,078
Emulex Corp. (a) 375,450 6,866,981
Epicor Software Corp. (a)(b) 369,540 5,140,301
EPIQ Systems, Inc. (a)(b) 192,480 3,922,742
FEI Co. (a)(b) 256,210 9,238,933
Foundry Networks, Inc. (a)(b) 500,630 6,793,549
Lionbridge Technologies, Inc. (a) 528,450 2,689,811
Mercury Computer Systems, Inc 113,729 1,577,421
Micrel, Inc. (a)(b) 298,430 3,288,699
Microsemi Corp. (b) 236,430 4,920,108
MKS Instruments, Inc. (a)(b) 176,677 4,508,797
MTS Systems Corp. 125,770 4,884,907
Net Gear, Inc. (a)(b) 240,310 6,856,044
NIC, Inc. 613,110 3,286,270
Perot Systems Corp., Class A (a) 476,710 8,518,808
Powerwave Technologies, Inc. (a) 650,612 3,701,982
Rudolph Technologies, Inc. (a)(b) 253,670 4,424,005
Semtech Corp. 310,800 4,189,584
SI International, Inc. (a) 125,260 3,596,215
Sybase, Inc. (a) 256,110 6,474,461
Symmetricom, Inc. (a) 63,406 526,270
Tekelec (a)(b) 403,050 6,009,476
------------
144,147,761
------------
Materials--4.5%
AMCOL International Corp. (b) 133,510 3,958,572
Compass Minerals International, Inc. (b) 141,100 4,712,740
Glatfelter (b) 267,770 3,992,451
Metal Management, Inc. 208,360 9,626,232
Neenah Paper, Inc. 140,790 5,594,995
RTI International Metals Inc. (a)(b) 75,390 6,861,244
Wausau Paper Corp. (b) 258,420 3,710,911
------------
38,457,145
------------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunication Services--0.7%
Cincinnati Bell, Inc. (a)(b) 1,232,620 $ 5,793,314
-------------
Utilities--1.7%
El Paso Electric Co. (a)(b) 231,290 6,094,492
PNM Resources, Inc. 257,430 8,314,989
-------------
14,409,481
-------------
Total Equities (Cost $746,983,917) 822,182,239
-------------
SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.2%
U.S. Treasury Bill (c)(d)(Cost $1,484,719) 4.89% 6/14/2007 1,500,000 1,485,126
-------------
INVESTMENT OF CASH COLLATERAL--19.6% Shares
------
BlackRock Cash Strategies L.L.C. (Cost $168,009,702) 168,009,702 168,009,702
-------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $916,478,338) 991,677,067
-------------
AFFILIATED INVESTMENTS--4.1%
Dreyfus Institutional Preferred Plus Money Market Fund (e)(Cost $35,757,552) 35,757,552 35,757,552
-------------
TOTAL INVESTMENTS--119.8% (Cost $952,235,890) 1,027,434,619
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(19.8)% (169,566,111)
-------------
NET ASSETS--100% $ 857,868,508
=============
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 March 31, 2007.
(c) Rate noted is yield to maturity.
(d) Denotes all or part of security pledged as collateral for outstanding
futures contracts.
(e) Affiliated institutional money market fund.
At March 31, 2007, the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- ----------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (69 Contracts) Long 6/14/2007 $26,887,050 $ 988,705
=========
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A) (including securities on loan,
valued at $162,111,298 (Note 6))
Unaffiliated issuers, at value (cost $916,478,338) $ 991,677,067
Affiliated issuers, at value (Note 1F) (cost $35,757,552) 35,757,552
Cash 2,969
Receivable for investments sold 4,995,195
Interest and dividends receivable 1,133,579
Receivable for variation margin on open future contracts (Note 5) 127,650
Prepaid expenses 15,163
--------------
Total assets $1,033,709,175
Liabilities
Collateral for securities on loan (Note 6) $168,009,702
Payable for investments purchased 7,775,514
Accrued accounting, administration and custody fees (Note 2) 30,826
Accrued professional fees 15,363
Accrued trustees' fees and expenses (Note 2) 6,900
Other accrued expenses and liabilities 2,362
------------
Total liabilities 175,840,667
--------------
Net Assets (applicable to investors' beneficial interest) $ 857,868,508
==============
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 4,916,564
Dividend income from affiliated Investments (Note 1F) 945,095
Securitiy lending income (Note 6) 71,016
Interest income 22,704
------------
Total investment Income 5,955,379
Expenses
Investment advisory fee (Note 2) $ 2,938,404
Accounting, administration and custody fees (Note 2) 92,264
Trustees' fees and expenses (Note 2) 16,954
Professional fees 15,527
Insurance expense 6,907
Miscellaneous expenses 3,966
-----------
Total expenses 3,074,022
------------
Net investment income 2,881,357
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 36,390,764
Financial future transactions 238,039
-----------
Net realized gain (loss) 36,628,803
Change in unrealized appreciation (depreciation) on:
Investments 39,696,895
Financial futures contracts 867,318
-----------
Change in net unrealized appreciation (depreciation) 40,564,213
------------
Net realized and unrealized gain (loss) 77,193,016
------------
Net Increase in Net Assets from Operations $ 80,074,373
============
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, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets
From Operations
Net investment income $ 2,881,357 $ 1,809,038
Net realized gain (loss) 36,628,803 21,441,536
Change in net unrealized appreciation (depreciation) 40,564,213 15,802,007
------------ ------------
Net increase (decrease) in net assets from operations 80,074,373 39,052,581
------------ ------------
Capital Transactions
Contributions 281,009,005 427,309,889
Withdrawals 110,927,886) (78,684,651)
------------ ------------
Net increase (decrease) in net assets from capital transactions 170,081,119 348,625,238
------------ ------------
Total Increase (Decrease) in Net Assets 250,155,492 387,677,819
Net Assets
At beginning of period 607,713,016 220,035,197
------------ ------------
At end of period $857,868,508 $607,713,016
============ ============
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 2007 -------------------------------- of operations) to
(Unaudited) 2006 2005 2004 September 30, 2003
----------- ---- ---- ---- ------------------
Total Return (a) 12.27%(c) 12.50% 21.45% 30.07% 29.85%(b)(c)
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.84%(d) 0.86% 0.94% 1.03% 1.10%(d)
Net Investment Income (to average
daily net assets)* 0.78%(d) 0.48% 0.19% (0.10%) (0.07%)(d)
Portfolio Turnover
27%(c) 60% 70% 123% 102%(c)
Net Assets, End of Year (000's omitted) $857,869 $607,713 $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, and the ratios excluding waivers and reimbursement
would have been:
Ratios (to average daily net assets):
Expenses N/A N/A N/A N/A 1.10%(d)
Net investment income N/A N/A N/A N/A (0.07%)(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) Calculated 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) Organization and 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, 2007, there were two funds, The Boston Company Small Cap Value
Fund and Dreyfus Premier Small Cap Equity Fund invested in the Portfolio
(the "Feeder Funds"). The value of the Feeder Funds' investment in the
Portfolio reflects the Feeder Funds' proportionate interests in the net
assets of the Portfolio. At March 31, 2007, The Boston Company Small Cap
Value Fund (the "Fund") and the Dreyfus Premier Small Cap Equity Fund held
91% and 9% 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 are valued at the last sale prices on the exchange or national
securities market on which they are primarily traded. Securities not listed
on an exchange or national securities market, or securities for which there
were no reported transactions, are valued at the last calculated mean price
(average of last bid and last offer). Securities that are fixed income
securities, other than short-term instruments with less than sixty days
remaining to maturity, for which market prices are readily available, are
valued at their current market value on the basis of quotations, which may
be furnished by a pricing service or dealers in such securities. 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. With respect to any portion of the Portfolio's assets that are
invested in one or more open open-ended regulated investment companies
("RICs"), the Portfolio's net asset value ("NAV") will be calculated based
upon the NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange.
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 then is valued at amortized cost based upon the value on
such date unless the Trustees determine during such sixty-day period that
amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of coupon interest earned, adjusted for
accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on 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 the Portfolio's
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 investors to satisfy them.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
D. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
However, based on experience, the Portfolio expects the risks of loss to be
remote.
E. 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.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of Mellon
Financial Corporation, or its affiliates.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Portfolio, a minimum threshold
for financial statement recognition of the benefit of positions taken in
filing tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(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.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Portfolio Trust 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 $92,264 for the six months ended March 31, 2007.
The Portfolio Trust 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 earned $29,891
for the six months ended March 31, 2007. See Note 6 for further details.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Trust reimburses Mellon Asset Management for a portion of the salary of
the Trust's and Portfolio Trust's Chief Compliance Officer. No other
director, officer or employee of TBCAM or its affiliates received any
compensation from the Trust or the Portfolio Trust for serving as an
officer or Trustee of the Trust or Portfolio 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, 2007 were as follows:
Purchases Sales
------------ -------------
Non-U.S. Government Securities $333,503,880 $186,983,348
============ =============
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $952,235,890
============
Gross unrealized appreciation 93,631,210
Gross unrealized depreciation (18,432,481)
------------
Net unrealized appreciation (depreciation) $ 75,198,729
============
(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, known as variation
margin, 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 appreciation or
depreciation 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, 2007, the Portfolio held open financial futures contracts. See
Schedule of Investments for further details.
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Fund's obligations due on the loans.
The Portfolio loaned securities for the six months ended March 31, 2007 and
earned interest on the invested collateral of $3,092,005 of which,
$3,020,989 was rebated to borrowers or paid in fees. At March 31, 2007, the
Portfolio had securities valued at $162,111,298 on loan. See the 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. The participating portfolios
and funds also pay an annual renewal fee, computed at a rate of 0.020 of 1%
of the committed amount and allocated ratably to the participating
portfolio/fund. For the six months ended March 31, 2007, the expense
allocated to the Portfolio was $1,939. The commitment fee and interest
expense is aggregated with miscellaneous expenses on the Statement of
Operations.
For the six months ended March 31, 2007, the Portfolio did not borrow from
the line of credit.
24
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory
Agreement (Unaudited)
- --------------------------------------------------------------------------------
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 LLC
("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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio management,
client service personnel and overall organizational structure, insurance
coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and the Adviser's separate account
advisory fee schedules;
(iv) 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
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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 at the September 28, 2006 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, 2006 based on the Lipper materials provided to the Board
at the September 28, 2006 meeting. The Board found that the Fund outperformed
its peer group average return for the one-year period (6.83% vs. 5.00%),
three-year period (20.23% vs. 18.01%) and five-year period (15.10% vs. 12.98%).
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 management fees" included fees
paid by the Portfolio, as calculated by Lipper, for administrative services
provided by Mellon Bank, N.A., the Portfolio'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%, in the 4th quintile (1st
being the best) of its peer group of funds, the median fee of which was 0.779%.
The Portfolio's net management fee was 0.897% (which included 0.102% in
administrative services fees under Lipper's calculation methodology), higher
than the peer group median net management fee of 0.773%. Based on the Lipper
data, as well as other factors discussed at the September 28, 2006 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 relative to the nature and quality of the services provided.
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 actual net expense ratio of 1.045% was slightly higher than
the median net expense ratio of the peer group of 1.028%. However, 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 the Adviser, based on profitability information
submitted to them by the Adviser, incurred marginal profitability in managing
most of the investment companies in the Mellon Institutional Funds family of
funds. The Trustees observed that the Adviser had experienced profits in
operating the Portfolio in both 2004 and 2005 and concluded these were not
excessive.
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 Boston Company International
Core Equity Portfolio and the Standish Mellon Fixed Income Portfolio, two of the
largest funds in the complex, already had breakpoints in their fee arrangements
that reflected economies resulting from their size. The Board also noted that at
the March 7, 2006 meeting, management had presented a Breakpoint Discussion
Memorandum that had proposed a framework for future breakpoints. The Board
concluded that, at existing asset levels and considering current asset growth
projections, the implementation of additional fee breakpoints or other fee
reductions was not necessary at this time.
26
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
(Unaudited)
- --------------------------------------------------------------------------------
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.
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 a one-year period.
27
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of
Principal Portfolios in
Name (Age) 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 (66) Trustee Trustee since Chairman Emeritus, 30
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30
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 (72) Trustee Trustee since Trustee, Mertens 30
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, President Since 2003 President and Chief 30
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
7/24/65 and Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
Other Trustee
Name (Age) Directorships Remuneration
Address, and Held by (period ended
Date of Birth Trustee March 31, 2007)
- ----------------------------------------------------------------
Samuel C. Fleming (66) None Fund: $250
c/o Decision Resources, Inc. Portfolio: $2,239
61 Meadowbrook Road
Weston, MA 02493
9/30/40
Benjamin M. Friedman (62) None Fund: $250
c/o Harvard University Portfolio: $2,239
Littauer Center 127
Cambridge, MA 02138
8/5/44
John H. Hewitt (72) None Fund: $250
P.O. Box 2333 Portfolio: $2,239
New London, NH 03257
4/11/35
Caleb Loring III (63) None Fund: $250
c/o Essex Street Associates Portfolio: $2,538
P.O. Box 5600
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) None $0
The Boston Company
Asset Management, LLC
One Boston Place
Boston, MA 02108
7/24/65
28
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
29
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[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6944SA0307
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
World ex-U.S. Value Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,105.90 $4.73
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- --------------------------------------------------------------------------------------------------------
Sanofi-Synthelabo SA France Health Care 2.0%
Novartis AG Switzerland Health Care 1.9
BP PLC United Kingdom Energy 1.9
Unilever PLC United Kingdom Consumer Staples 1.9
HSBC Holdings PLC United Kingdom Financials 1.9
GlaxoSmithKline PLC United Kingdom Health Care 1.9
Total SA France Energy 1.8
Sumitomo Mitsui Financial Japan Financials 1.6
Royal Bank of Scotland Group PLC United Kingdom Financials 1.5
Siemens AG Germany Industrials 1.3
----
17.7%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- -------------------------------------------------------------
Americas ex U.S. 7.1%
Asia ex Japan 17.2
Europe ex U.K. 33.5
Japan 20.5
Middle East/Africa 1.6
U.K. 20.1
-----
100.0%
* Excludes short-term securities.
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--97.3%
EQUITIES--97.3%
Australia--3.2%
Amcor Ltd. 68,716 $ 419,506
Insurance Australia Group Ltd. 28,658 135,793
National Australia Bank Ltd. 12,707 415,105
Suncorp-Metway Ltd. 17,214 289,520
TABCORP Holdings, Ltd. 28,832 384,441
Telstra Corp. Ltd. 58,670 221,073
-----------
1,865,438
-----------
Belgium--0.8%
Fortis 10,170 464,269
-----------
Brazil--1.2%
Petroleo Brasileiro SA--ADR 3,410 339,329
Tele Norte Leste Participacoes SA--ADR 26,470 366,345
-----------
705,674
-----------
Canada--4.9%
Bank of Montreal 7,416 449,265
Celestica, Inc 18,170 111,614
EnCana Corp. 8,910 451,113
Loblaw Companies Ltd. 13,870 553,142
Petro--Canada 12,350 484,284
Quebecor World, Inc. (a) 31,130 396,475
RONA, Inc. (a) 9,760 199,817
Torstar Corp. 9,970 170,255
-----------
2,815,965
-----------
China--0.2%
China Telecom Corp., Ltd. 251,000 123,362
-----------
Finland--1.4%
M-real Oyj 6,320 49,127
Nokia Oyj 20,760 477,737
Nokia Oyj--ADR 2,300 52,716
UPM-Kymmene Oyj 9,660 246,039
-----------
825,619
-----------
France--8.5%
BNP Paribas 4,830 504,400
Credit Agricole S.A 12,612 491,694
France Telecom SA 24,408 644,489
Legardere SCA 5,160 397,237
PSA Peugeot Citroen 3,480 245,223
Sanofi-Synthelabo SA 12,710 1,105,103
Thomson 17,590 338,537
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
France (continued)
Total SA 14,060 $ 984,934
Valeo SA 2,607 152,891
-----------
4,864,508
-----------
Germany--7.5%
Adidas AG 8,300 453,729
Allianz SE 1,590 326,419
Bayerische Motoren Werke AG 1,000 58,993
Deutsche Bank AG 1,019 137,241
Deutsche Post AG 23,070 698,207
Deutsche Telekom AG 28,980 479,176
E On AG 3,400 462,187
Hannover Rueckversicheru 5,200 231,620
Heidelberger Druckmaschinen 2,480 113,611
Henkel KGaA 1,070 158,158
Medion AG 1,970 26,443
Muenchener Rueckversicherungs-Gesellschaft AG 2,580 436,279
Siemens AG 6,880 735,298
-----------
4,317,361
-----------
Greece--0.7%
Public Power Corp. 17,230 421,587
-----------
Hong Kong--3.0%
BOC Hong Kong Holdings Ltd. 99,500 241,201
Citic 1616 Holdings Ltd. 1,480 494
Citic Pacific Ltd. 21,600 79,897
CNOOC Ltd. 318,000 278,801
CNOOC Ltd.--ADR 700 61,341
Denway Motors Ltd. 736,000 321,225
Hong Kong Electric Holdings, Ltd. 7,000 35,927
Huadian Power International Co. 498,000 178,469
Hutchinson Whampoa Ltd. 34,800 334,722
Johnson Electric Holdings, Ltd. 95,500 63,438
Weiqiao Textile Co., Ltd. 82,000 118,596
-----------
1,714,111
-----------
Hungary--0.3%
Magyar Telekom 37,340 188,531
-----------
Indonesia--0.4%
PT Gudang Garam Tbk 175,180 203,608
-----------
Ireland--0.3%
Bank of Ireland 7,590 163,412
-----------
Israel--0.7%
Teva Pharmaceutical ADR 10,750 402,373
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
Italy--3.6%
Compagnia Assicuratrice Unipol Spa 96,740 $ 374,051
Eni Spa 12,150 395,303
Mediaset Spa 47,420 515,857
Saras Spa 50,870 298,605
UniCredito Italiano Spa 52,370 498,361
-----------
2,082,177
-----------
Japan--20.1%
Aeon Co., Ltd. 34,600 690,062
Aiful Corp. 2,870 88,904
Astellas Pharma, Inc 6,400 275,923
Canon, Inc 2,405 129,173
Credit Saison Co. Ltd. 4,800 158,058
Dentsu, Inc 182 509,717
Fuji Film Holdings Corp. 8,900 364,067
Funao Electric Co., Ltd. 1,700 162,310
Hinos Motors Ltd. 69,500 370,415
JS Group Corp. 10,600 229,848
Kao Corp. 7,700 225,452
Kuraray Co., Ltd. 18,500 199,868
Lawson Inc 6,200 238,360
Matsumotokiyoshi Co Ltd. 9,857 225,867
Mitsubishi Corp. 16,000 371,383
Mitsubishi UFJ Financial Group, Inc 63 711,109
Mitsui Trust Holdings Inc 19,500 192,302
Nippon Express Co., Ltd. 103,300 647,872
Nippon Paper Group, Inc 82 291,590
Nissan Motor Co. 50,600 542,373
NOK Corp. 18,700 318,200
Nomura Holdings Inc 14,200 295,858
Ricoh Co Ltd. 20,900 470,928
Rohm Co., Ltd. 7,600 689,502
Sankyo Co., Ltd. 1,000 43,962
Sekisui Chemical Co., Ltd. 54,600 435,113
Sekisui House Ltd. 32,500 505,856
SFCG Co., Ltd. 827 147,531
Shinsei Bank Ltd. 48,700 233,519
Sumitomo Mitsui Financial 97 880,845
Takefuji Corp. 3,180 127,653
Teijin Ltd. 49,600 279,929
The 77 Bank Ltd. 38,000 248,001
THK Co., Ltd. 7,600 178,987
-----------
11,480,537
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
Malaysia--1.2%
Malayan Banking Berhad 95,700 $ 354,444
Sime Darby Berhad 141,300 331,172
-----------
685,616
-----------
Mexico--0.8%
Coca-Cola Femsa, S.A. de C.V.--ADR 5,160 186,379
Telefonos de Mexico SA de CV--ADR 7,960 265,864
-----------
452,243
-----------
Netherlands--1.6%
ABN Amro Holding NV 5,898 253,809
Aegon NV 20,802 414,525
Philips Electronics NV 7,230 276,076
-----------
944,410
-----------
New Zealand--0.3%
Vedior NV 8,730 193,786
-----------
Russia--0.5%
Lukoil--ADR 3,620 313,130
-----------
Singapore--1.5%
DBS Group Holdings, Ltd. 38,810 547,701
United Overseas Bank Ltd. 21,550 298,437
-----------
846,138
-----------
South Africa--0.9%
Nampak Ltd. (a) 55,150 169,124
Nedbank Group, Ltd. 17,932 349,108
-----------
518,232
-----------
South Korea--3.9%
Hyundai Motor Co. 4,250 298,698
Kookmin Bank 680 61,023
Kookmin Bank--ADR 3,750 338,063
Korea Electric Power Corp. 2,410 96,221
KT Corp. 1,990 89,291
KT Corp.--ADR 7,410 165,910
LG Electronics, Inc 5,315 362,810
Lotte Shopping Co. Ltd. 716 251,989
Samsung Electronics Co., Ltd. 592 354,382
SK Telecom Co., Ltd.--ADR 9,770 228,813
-----------
2,247,200
-----------
Spain--1.2%
Banco Santander Central 19,833 353,892
Repsol YPF SA 10,780 363,400
-----------
717,292
-----------
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
Sweden--0.5%
Svenska Cellulosa AB (SCA), Class B 1,380 $ 73,952
Telefonaktiebolaget LM Ericsson 43,900 161,658
Telefonaktiebolaget LM Ericsson ADR 980 36,348
-----------
271,958
-----------
Switzerland--5.5%
CIBA Specialty Chemicals AG 8,928 588,074
Clariant AG (a) 11,450 196,439
Nestle SA 1,371 533,881
Novartis AG 18,950 1,086,822
Swiss Re 3,013 275,194
UBS AG 8,120 482,403
-----------
3,162,813
-----------
Taiwan--2.3%
Chunghwa Telecom Co., Ltd.--ADR 9,200 183,264
Compal Electronics, Inc 367,062 310,646
First Financial Holding Co. Ltd. 285,275 200,042
SinoPac Financial Holdings Co., Ltd. 648,000 297,706
United Microelectronics Corp. (a) 513,622 296,514
United Microelectronics Corp.--ADR 9,680 30,782
-----------
1,318,954
-----------
Thailand--0.7%
Kasikornbank Public Company Ltd. 203,700 423,191
-----------
United Kingdom--19.6%
BHP Billition 17,950 400,076
BP PLC 99,768 1,083,375
British Energy Group PLC 24,142 231,405
Centrica PLC 34,100 259,270
Debenhams PLC 90,950 312,210
Friends Provident PLC 88,550 335,326
GlaxoSmithKline PLC 38,521 1,058,626
HBOS PLC 17,693 364,415
HSBC Holdings PLC 60,689 1,061,951
Old Mutual PLC 127,470 411,495
Reed Elsevier PLC 38,910 465,003
Rentokil Initial PLC 175,660 563,260
Rexam PLC 20,810 225,156
Rio Tinto PLC 500 28,544
Royal Bank of Scotland Group PLC 21,072 822,424
Royal Dutch Shell PLC 5,552 184,689
Royal Dutch Shell PLC 18,439 613,216
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------
United Kingdom (continued)
SabMiller PLC 21,720 $ 476,413
Smiths Group PLC 14,830 299,904
Trinity Mirror PLC 28,420 297,430
Unilever PLC 35,671 1,074,333
Vodafone Group PLC 246,310 656,554
-----------
11,225,075
-----------
TOTAL EQUITIES (Cost $50,610,801) 55,958,570
-----------
AFFILIATED INVESTMENTS--0.0% Shares
------
Dreyfus Institutional Preferred Plus Money Market Fund (b) (Cost $17,920) 17,920 $ 17,920
-----------
TOTAL INVESTMENTS--97.3% (Cost $50,628,721) 55,976,490
-----------
OTHER ASSETS, LESS LIABILITIES--2.7% 1,540,432
-----------
NET ASSETS--100.0% $57,516,922
===========
Notes to Schedule of Investments:
ADR--American Depository Receipts
(a) Non-income producing security.
(b) Affiliated institutional money market fund.
The fund held the following forward foreign currency exchange contracts at
March 31, 2007.
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Deliver Amount Value Date March 31, 2007 to Receive (Loss)
- ---------------------------------------------------------------------------------------------------------------
Australian Dollar 22,654 4/2/2007 $18,317 $18,307 $ (10)
======
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------
Consumer Discretionary 13.9%
Consumer Staples 7.9
Energy 10.2
Financials 27.6
Health Care 6.8
Industrials 9.8
Information Technology 5.6
Materials 6.3
Telecommunication Services 6.3
Utilities 2.9
Short-term and Other Assets 2.7
-----
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A):
Unaffiliated investments (cost $50,610,801) $55,958,570
Affiliated investments (Note 1H) (cost $17,920) 17,920
Cash 1,514
Foreign currency, at value (cost $916,057) 920,480
Receivable for investments sold 700,434
Interest and dividends receivable 238,940
Prepaid expenses 13,302
-----------
Total assets 57,851,160
Liabilities
Payable for investments purchased $ 270,934
Accrued accounting, custody, administration and transfer agent fees (Note 2) 29,898
Accrued professional fees 20,299
Accrued trustees' fees (Note 2) 2,140
Accrued shareholder reporting fee (Note 2) 1,075
Accrued chief compliance officer fee (Note 2) 375
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 10
Other accrued expenses and liabilities 9,507
----------
Total liabilities 334,238
Net Assets $57,516,922
===========
Net Assets consist of:
Paid-in capital $48,825,623
Accumulated net realized gain 3,147,470
Undistributed net investment income 188,331
Net unrealized appreciation 5,355,498
Total Net Assets $57,516,922
===========
Shares of beneficial interest outstanding 2,307,263
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 24.93
===========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net foreign witholding taxes $47,671) $ 497,868
Dividend income from affiliated investments (Note 1H) 19,887
Interest income 7,799
-----------
Total investment income 525,554
Expenses
Investment advisory fee (Note 2) $ 215,015
Accounting, custody, administration and transfer agent fees (Note 2) 87,890
Professional fees 30,064
Registration fees 10,493
Trustees' fees and expenses (Note 2) 3,936
Insurance expense 2,547
Miscellaneous expenses 8,549
----------
Total expenses 358,494
Deduct:
Waiver of invesment advisory fee (Note 2) (100,477)
----------
Net expenses 258,017
-----------
Net investment income 267,537
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 3,864,339
Foreign currency transactions and forward currency exchange transactions 21,786
----------
Net realized gain (loss) 3,886,125
Change in unrealized appreciation (depreciation) on:
Investments 1,590,331
Foreign currency translations and forward currency exchange transactions 16,051
----------
Change in net unrealized appreciation (depreciation) 1,606,382
-----------
Net realized and unrealized gain (loss) 5,492,507
-----------
Net Increase in Net Assets from Operations $5,760,044
===========
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
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 267,537 $ 965,813
Net realized gain (loss) 3,886,125 5,430,129
Change in net unrealized appreciation (depreciation) 1,606,382 2,005,454
------------ ------------
Net increase (decrease) in net assets from investment operations 5,760,044 8,401,396
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (499,622) (965,092)
From net realized gains on investments (5,878,439) (756,714)
------------ ------------
Total distributions to shareholders (6,378,061) (1,721,806)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 1,069,086 20,344,259
Value of shares issued to shareholders in reinvestment of distributions 6,235,792 1,697,914
Cost of shares redeemed (4,271,907) (4,590,750)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 3,032,971 17,451,423
------------ ------------
Total Increase (Decrease) in Net Assets 2,414,954 24,131,013
Net Assets
At beginning of period 55,101,968 30,970,955
------------ ------------
At end of period (including undistributed net investment
income of $188,331 and $420,416, respectively) $ 57,516,922 $ 55,101,968
============ ============
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
Period Ended For the (commencement of
March 31, 2007 Year Ended operations) to
(Unaudited) September 30, 2006 September 30, 2005
-------------- ------------------ ------------------
Net Asset Value, Beginning of Period $ 25.25 $ 22.29 $ 20.00
------- ------- -------
From Operations:
Net investment income* (a) 0.12 0.46 0.32
Net realized and unrealized gains (loss) on investments 2.48 3.30 2.02
Net increase from payments by affiliated -- -- --(c)
------- ------- -------
Total from operations 2.60 3.76 2.34
------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.23) (0.45) (0.05)
From net realized gain on investments (2.69) (0.35) --
------- ------- -------
Total distributions to shareholders (2.92) (0.80) (0.05)
------- ------- -------
Net Asset Value, End of Year $ 24.93 $ 25.25 $ 22.29
======= ======= =======
Total Return (d) 10.59%(f) 17.24% 11.72%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.90%(e) 0.90% 0.90%(e)
Net Investment Income (to average daily net assets)* 0.93%(e) 1.93% 1.76%(e)
Portfolio Turnover 31%(f) 61% 34%(f)
Net Assets, End of Period (000's omitted) $57,517 $55,102 $30,971
- ----------
* 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 excluding waivers and
reimbursement would have been:
Net investment income per share (a) $ 0.07 $ 0.36 $ 0.12
Ratios (to average daily net assets):
Expenses 1.25%(e) 1.32% 2.02%(e)
Net investment income 0.58%(e) 1.51% 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) Organization and 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") 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
located in foreign countries represented in the Morgan Stanley Capital
International All Country World Index ex-United States Free Index. The Fund
may invest up to 35% of 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Securities are valued at the last sale prices on the exchange or
national securities market on which they are primarily traded. Securities
not listed on an exchange or national securities market, or securities for
which there were no reported transactions, are valued at the last
calculated mean price (average of last bid and last offer). Securities that
are fixed income securities, other than short-term instruments with less
than sixty days remaining to maturity, for which market prices are readily
available, are valued at their current market value on the basis of
quotations, which may be furnished by a pricing service or dealers in such
securities. 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. With respect to any portion of the Fund's
assets that are invested in one or more open-end regulated investment
companies ("RICs"), the Fund's net asset value ("NAV") will be calculated
based upon the NAVs of such RICs.
Non-exchange traded derivatives are normally valued on the basis of quotes
obtained from brokers and dealers, including counterparties or pricing
services.
Because foreign markets may be open at different times than the NYSE, 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 NYSE 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 NYSE. 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. 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.
15
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
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 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.
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. Foreign 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.
16
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
I. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold for
financial statement recognition of the benefit of positions taken in filing
tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact,
if any, in the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(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, 2007. Pursuant to this arrangement, for the six months ended March 31,
2007, waived $100,477 of its investment advisory fee. This arrangement is
voluntary and temporary and may be discontinued or revised by TBCAM at any
time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, TBCAM would
become an indirect wholly-owned subsidiary of The Bank of New York Mellon
Corporation. The transaction is subject to certain regulatory approvals and
the approval of BNY's and MFC's shareholders, as well as other customary
conditions to closing. Subject to such approvals and the satisfaction of
the other conditions, MFC and BNY expect the transaction to be completed in
the third quarter of 2007.
The Trust 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 $4,263, for the six months ended March 31, 2007.
The Trust 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 $83,627 for the six months
ended March 31, 2007.
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,
2007, the Fund was charged $2,105, which is included in miscellaneous
expenses in the statement of operations. 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
Fund 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 Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide printing and fulfillment services for the Fund. Pursuant to this
agreement, the Fund was charged $1,075, which is included in miscellaneous
expenses in the statement of operations, for the six months ended March 31,
2007.
17
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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, 2007, the Fund was not charged an administrative
service fee.
(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, 2007 were as follows:
Purchases Sales
------------ ------------
Non-U.S. Government Securities $ 17,581,067 $ 20,467,497
============ ============
(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, 2007 September 30, 2006
---------------- ------------------
Shares sold 39,855 909,550
Shares issued to shareholders
in reinvestment of distributions 256,406 74,197
Shares redeemed (171,224) (191,000)
--------- ---------
Net increase (decrease) 125,037 792,747
========= =========
At March 31, 2007, four shareholders of record, in the aggregate, held
approximately 87% 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, 2007, the Fund did not
assess any redemption fees.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $50,628,721
-----------
Gross unrealized appreciation 6,398,808
Gross unrealized depreciation ( 1,051,039)
-----------
Net unrealized appreciation (depreciation) $ 5,347,769
===========
18
Mellon Institutional Funds Investment Trust
The Boston Company World ex-U.S. Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following 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 appreciation or depreciation are recorded for financial
statement purposes as unrealized until the contract settlement date or upon
the closing of the contract. Forward currency exchange contracts are used
by the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
At March 31, 2007, the Fund held foreign currency exchange contracts. See
Schedule of Investments for further details.
(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/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. Each fund/portfolio also pays an annual renewal fee, computed
at a rate of 0.020 of 1% of the committed amount and allocated ratably to
the participating funds/portfolios. For the six months ended March 31,
2007, the expense allocated to the Fund was $1,394. The facility fee and
interest expense are included in miscellaneous expenses on the statement of
operations.
For the six months ended March 31, 2007, the Fund had average borrowings
outstanding of $1,153,800 for a total of five days and incurred $926 of
interest expense. At March 31, 2007 the Fund had no borrowings outstanding
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
(Unaudited)
- --------------------------------------------------------------------------------
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 ("TBCAM" or 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 28, 2006 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 17, 2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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, including the Fund'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 Fund and potential
economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 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 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 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 28, 2006 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-year period ended
July 31, 2006 based on the Lipper materials provided to the Board at the
September 28, 2006 meeting. The Board found that the Fund underperformed
its peer group average returns for the one-year period (20.04% vs. 23.52%).
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
(Unaudited)
- --------------------------------------------------------------------------------
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser.
The Fund's contractual advisory fee was 0.750%, in the 2nd quintile (1st
being the best) of its peer group of funds, the median fee of which was
0.750%. The Fund's net management fee, after giving effect to expense
limitations, was 0.00%, while the peer group median net management fee was
0.786%. Based on the Lipper data, as well as other factors discussed at the
September 28, 2006 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 relative to the nature and quality of the
services provided.
The Board also considered the Fund's expense ratio and compared it to that
of its peer group of similar funds. The Board found that the actual net
expense ratio of 0.904% (after giving effect to expense limitations) was
lower than the median net expense ratio of the peer group of 0.978%,
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 the Adviser, based on profitability
information submitted to them by the Adviser, incurred marginal
profitability in managing most of the investment companies in the Mellon
Institutional Funds family of funds. The Trustees observed that the Adviser
had incurred losses in operating the Fund in both 2004 and 2005.
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 Boston Company
International Core Equity Portfolio and the Standish Mellon Fixed Income
Portfolio and, two of the largest funds in the complex, already had
breakpoints in their fee arrangements that reflected economies resulting
from their size. The Board also noted that at the March 7, 2006 meeting,
management had presented a Breakpoint Discussion Memorandum that had
proposed a framework for future breakpoints. 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.
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.
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 a
one-year period.
21
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $586
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $586
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $586
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $611
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, President Since 2003 President and Chief 30 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
7/24/65 and Chief Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
22
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
23
[LOGO]Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408 800.221.4795
www.melloninstitutionalfunds.com
6612SA0307
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report Standish Mellon
Intermediate Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
March 31, 2007 (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://www.melloninstitutionalfunds.com.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30 visit http://www.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, 2006 to March 31, 2007).
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, 2006
October 1, 2006 March 31, 2007 to March 31, 2007
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,016.60 $2.26
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Rate Maturity Investments
- ---------------------------------------------------------------------------------------------------------
Tennessee Energy Acquisition Corp. 5.250% 9/1/2017 2.1%
New York Dormitory Authority Revenue 5.250 11/15/2023 1.7
Golden State Tobacco Securitization Corp. 4.500 6/1/2027 1.5
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 1.5
Wisconsin State Certificate Participation 5.000 3/1/2010 1.5
Puerto Rico Commonwealth Fuel Sales Tax Revenue 5.000 7/1/2018 1.5
Oklahoma DFA Revenue Hillcrest Healthcare System 5.625 8/15/2019 1.4
New York Dormitory Authority State
University Educational Facilities MBIA IBC 5.250 5/15/2015 1.4
Tobacco Settlement Funding Corp. NJ 6.750 6/1/2039 1.4
Tobacco Settlement Authority Iowa 5.600 6/1/2035 1.4
-----
15.4%
* Excluding short-term investments.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
General Obligations 12.7%
Government Backed 11.0
Housing Revenue 3.2
Industrial Development 7.9
Insured Bond 38.4
Lease Revenue 5.2
Revenue Bonds 13.1
Special Revenues 4.2
Short-term and Net Other Assets 4.3
------
100.0%
Summary of Combined Ratings+
- --------------------------------------------------------------------------------
Percentage of
Quality Breakdown Investments
- --------------------------------------------------------------------------------
AAA 59.8%
AA 21.6
A 7.3
BBB 11.3
-----
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
BONDS--95.7%
General Obligations--12.7%
ABAG CA Odd Fellows Homes 5.700% 8/15/2014 1,000,000 $ 1,017,280
California State NCL 5.750 11/1/2011 300,000 326,316
California State 5.000 10/1/2011 70,000 73,119
California State 5.000 6/1/2014 1,435,000 1,540,114
California State 5.000 8/1/2016 750,000 811,500
Magnolia Texas Independent School District Refunding PSF-GTD 5.000 8/15/2018 1,000,000 1,085,880
Commonwealth of Massachusetts NCL 6.000 11/1/2010 1,350,000 1,453,977
Commonwealth of Massachusetts 5.000 7/1/2012 2,000,000 2,121,760
New York NY NCL 5.000 8/1/2011 770,000 808,369
New York NY NCL 5.000 8/1/2011 1,700,000 1,784,711
New York NY NCL 5.000 6/1/2011 1,000,000 1,048,060
New York NY NCL 5.000 8/1/2013 1,500,000 1,598,550
New York NY 5.250 9/1/2014 1,000,000 1,088,790
Puerto Rico Commonwealth Fuel Sales Tax Revenue 5.000 7/1/2018 2,325,000 2,358,945
Puerto Rico Public Building Authority Revenue 5.000 7/1/2028 1,000,000 1,044,400
San Antonio Texas Apartment Systems Revenue AMT FSA 5.000 7/1/2013 1,000,000 1,056,390
Spring Branch Texas Independent School District PSF GTD 5.625 2/1/2014 1,000,000 1,109,390
-----------
20,327,551
-----------
Government Backed--11.0%
Alpine UT School District 5.000 3/15/2011 25,000 25,500
Dallas Texas Independent School District 5.500 2/15/2017 1,500,000 1,620,495
District of Columbia Prerefunded MBIA NCL 5.750 6/1/2010 10,000 10,621
Goose Creek TX Independent School District 7.000 8/15/2009 110,000 118,318
Goose Creek TX Independent School District 7.000 8/15/2009 260,000 279,172
Goose Creek TX Independent School District PSF 7.000 8/15/2009 230,000 247,393
Mass DFA Williston School (e) 6.000 10/1/2013 185,000 192,642
Massachusetts State FSA 5.000 12/1/2023 1,000,000 1,083,880
Met Govt Nashville & Davidson TN Industrial
Development Board Revenue Prerefunded 7.500 11/15/2010 1,000,000 1,109,500
Milwaukee Wisconsin Met Sewer District 5.250 10/1/2019 1,000,000 1,088,120
New Jersey State Transportation FSA 5.750 12/15/2014 770,000 874,297
Northern TOB Securitization Corp. Alaska 6.500 6/1/2031 1,000,000 1,082,990
Northern TOB Securitization Corp. Alaska 4.750 6/1/2015 560,000 565,544
Oklahoma DFA Revenue Hillcrest Healthcare System 5.625 8/15/2019 2,185,000 2,300,827
Palm Beach County FL Solid Waste AMBAC 6.000 10/1/2009 60,000 63,403
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue 5.750 7/1/2041 1,500,000 1,651,200
Texas Municipal Power Agency MBIA (a) 0.000 9/1/2016 10,000 6,864
Tobacco Settlement Authority Iowa 5.600 6/1/2035 2,000,000 2,162,280
Tobacco Settlement Funding Corp. NJ 5.000 6/1/2010 500,000 520,090
Tobacco Settlement Funding Corp. NJ 4.375 6/1/2019 425,000 426,454
Tobacco Settlement Funding Corp. NJ 6.750 6/1/2039 1,855,000 2,163,913
-----------
17,593,503
-----------
Housing Revenue--3.2%
Colorado HFA Single Family Project AMT 6.800 2/1/2031 1,335,000 1,430,412
Colorado HFA Single Family Project AMT 6.600 8/1/2032 1,080,000 1,153,710
Florida Housing Finance Corp. FSA 5.750 1/1/2017 30,000 30,102
Illinois Financial Authority Student Housing Revenue NCL 5.000 6/1/2012 1,160,000 1,201,853
Ohio HFA Mortgage Revenue AMT GNMA 5.350 9/1/2018 180,000 183,593
Rhode Island Housing & Mortgage Finance Corp. 4.950 10/1/2016 150,000 150,420
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Housing Revenue (continued)
Tennessee Housing Development Agency
Homeownership Project AMT NCL 5.750% 7/1/2007 840,000 $ 842,537
Utah HFA AMT SFM 5.400 7/1/2020 175,000 177,968
-----------
5,170,595
Industrial Development--7.9% -----------
Connecticut Gaming Authority Mohegan Tribe 5.375 1/1/2011 900,000 918,423
Gloucester NJ Resource Recovery 6.850 12/1/2029 500,000 532,965
Golden State Tobacco Securitization Corp. 5.000 6/1/2021 1,100,000 1,103,454
Golden State Tobacco Securitization Corp.
(4.60% beginning 6/1/2010) (c) 0.000 6/1/2023 750,000 654,720
Golden State Tobacco Securitization Corp. 4.500 6/1/2027 2,500,000 2,438,425
Hendersonville TN Kroger 5.950 12/15/2008 120,000 121,336
Mass DFA Waste Management Resource Recovery AMT 6.900 12/1/2029 500,000 532,290
Northern TOB Securitization Corp. Alaska 4.625 6/1/2023 1,000,000 991,500
San Manuel Entertainment Series 2004-C 4.500 12/1/2016 1,000,000 1,010,340
Tobacco Settlement Authority Southern California 4.750 6/1/2025 1,000,000 1,004,720
Tobacco Settlement Authority Washington 6.500 6/1/2026 955,000 1,046,336
Tobacco Settlement Funding Corp. NJ 4.500 6/1/2023 1,250,000 1,227,225
Tobacco Settlement Funding Corp. NY 5.250 6/1/2013 1,000,000 1,017,480
-----------
12,599,214
-----------
Insured Bond--38.4%
Atlanta GA Apartment Revenue AMT 5.250 1/1/2012 900,000 953,676
Broward County FL School Board AMBAC 5.000 7/1/2013 1,000,000 1,062,070
Broward County Florida School Board Certificates of Participation FGIC 5.000 7/1/2013 1,000,000 1,062,070
California State 6.000 4/1/2016 1,000,000 1,163,750
Carroll Texas Independent School District 5.000 2/15/2016 1,155,000 1,250,288
Charleston SC COP MBIA 6.000 12/1/2008 1,000,000 1,037,590
Chicago Illinois O'Hare International Airport Revenue AMT 5.500 1/1/2012 1,000,000 1,051,750
Chicago Illinois Transportation Authority AMBAC 5.250 6/1/2013 1,000,000 1,082,320
Chicago International Airport Revenue FGIC 5.250 1/1/2014 1,000,000 1,083,610
Citizens Property Insurance Corp. FL MBIA 5.000 3/1/2014 1,000,000 1,071,020
Clark County Nevada AMBAC 5.000 11/1/2013 1,000,000 1,071,610
Cleveland Ohio Waterworks Revenue MBIA 5.500 1/1/2013 1,500,000 1,585,905
Colorado State Department of Corrections Penitentiary II Project B AMBAC 5.000 3/1/2015 1,000,000 1,080,560
Cook County IL High School FGIC NCL 7.875 12/1/2014 750,000 955,388
Cook County IL School District FSA NCL 6.750 5/1/2010 1,750,000 1,906,380
Denver Colorado City and County Airport Revenue AMT FGIC 5.250 11/15/2013 1,000,000 1,064,840
District of Columbia MBIA NCL 5.750 6/1/2010 15,000 15,908
Douglas County CO School District MBIA 7.000 12/15/2012 625,000 727,938
Fairfax County VA EDA Residential Recovery AMT 6.100 2/1/2011 1,000,000 1,075,570
Farmington New Mexico Pollution Control Revenue FGIC (b) 3.550 4/1/2029 2,000,000 1,986,540
Golden State Tobacco Securitization Corp. (c) 5.000 6/1/2020 500,000 516,770
Harris County Texas Health Facility Development Corp. MBIA 6.000 6/1/2013 1,000,000 1,113,350
Harris County Texas Toll Revenue FGIC NCL 6.000 8/1/2012 1,000,000 1,110,180
Hawaii Harbor AMT FSA 5.000 1/1/2014 1,000,000 1,061,560
Hillsborough County Fl Assessment Revenue FGIC 5.000 3/1/2013 1,000,000 1,058,050
Hillsborough County Florida Utility Revenue 5.500 8/1/2012 1,000,000 1,087,230
Honolulu Hawaii City & County Board Water Supply AMT MBIA 5.000 7/1/2014 1,000,000 1,061,630
Indianapolis Airport Authority AMT AMBAC 5.000 1/1/2017 1,000,000 1,066,210
Intermountain Power Agency UT NCL 6.500 7/1/2010 1,000,000 1,085,360
Louisville & Jefferson County KY Regional Airport Authority Revenue FSA AMT 5.500 7/1/2011 1,355,000 1,441,639
Lubbock County Texas FSA 4.500 2/15/2021 1,000,000 1,017,500
Mass State School Building Authority Dedicated Sales Tax Revenue FSA 5.000 8/15/2013 1,000,000 1,070,730
Mesa Arizona Utility System Revenue FGIC 5.000 7/1/2018 1,000,000 1,099,280
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Insured Bond (continued)
Mesa Arizona Utility System Revenue NCL 6.000% 7/1/2020 1,250,000 $ 1,509,288
Metropolitan Washington DC Apartment Authority System AMT MBIA 5.000 10/1/2012 1,000,000 1,055,930
Miami Dade County Florida Aviation Revenue AMT 5.250 10/1/2014 1,000,000 1,070,840
Michigan City School District 5.000 5/1/2014 1,000,000 1,074,450
Midlothian Texas Development Authority 5.000 11/15/2013 530,000 558,620
Nassau County NY FGIC 6.000 7/1/2010 25,000 26,771
New Jersey Health Care Facilities Financing Authority Revenue AMBAC 4.800 8/1/2021 460,000 462,208
New Jersey State Transportation FSA 5.750 12/15/2014 230,000 259,511
New York Dormitory Authority Presbyterian Hospital AMBAC 4.400 8/1/2013 25,000 25,054
New York Dormitory Authority State University Educational Facilities MBIA 6.000 5/15/2015 1,000,000 1,079,930
New York Dormitory Authority State University Educational Facilities MBIA 5.250 5/15/2015 2,000,000 2,188,820
IBC
North Carolina Medical Care Community HCF Revenue AMBAC 5.000 10/1/2012 750,000 797,288
North Slope Boro Alaska MBIA 5.000 6/30/2016 1,000,000 1,086,210
Palm Beach County Florida School Board, Certificate of Participation AMBAC 5.000 8/1/2013 1,000,000 1,064,540
Pasco County FL Solid Waste AMBAC AMT NCL 6.000 4/1/2010 1,000,000 1,061,660
Pennsylvania Economic DFA Resource
Recovery Revenue; Colver Project AMT AMBAC 5.000 12/1/2012 1,000,000 1,049,100
Platte River Power Authority Colorado Power Revenue FSA 5.000 6/1/2013 2,000,000 2,144,200
Port Authority NY & NJ 5.000 10/1/2013 1,000,000 1,063,730
Port Seattle Washington Revenue AMBAC 5.000 10/1/2014 2,000,000 2,129,700
Puerto Rico Electric Power Authority Revenue XLCA 5.500 7/1/2016 500,000 563,200
St Louis Airport Revenue FSA 5.000 7/1/2013 1,000,000 1,067,780
Stafford TX Economic Development FGIC 6.000 9/1/2015 525,000 603,776
Sweetwater County Wyoming Improvement Project Powers Board Lease Revenue 5.000 12/15/2009 1,120,000 1,158,450
Wisconsin State Certificate Participation 5.000 3/1/2010 2,295,000 2,377,758
------------
61,557,086
------------
Lease Revenue--5.2%
Greenville County South Carolina School District 5.000 12/1/2011 1,000,000 1,051,610
New Jersey B PPTYS Lease Revenue King County Washington Project 5.000 12/1/2014 1,000,000 1,076,970
New Jersey Economic Development Authority
Revenue School Facilities Construction NCL 5.000 9/1/2012 1,000,000 1,061,150
New York Dormitory Authority Revenue (b) 5.250 11/15/2023 2,500,000 2,666,925
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico (b) 5.750 8/1/2027 2,250,000 2,410,875
------------
8,267,530
------------
Revenue Bonds--13.1%
California Statewide Communities DFA--Kaiser Permanente 2.300 4/1/2033 1,250,000 1,248,800
Energy Northwest Washington Electricity Revenue 5.000 7/1/2011 1,000,000 1,048,540
Energy Northwest Washington Electricity Revenue 5.500 7/1/2015 1,000,000 1,113,280
Franklin County Ohio Revenue Refunding Trinity Health Credit NCL 5.000 6/1/2014 1,340,000 1,432,956
Illinois DFA Depaul University NCL 5.500 10/1/2011 1,000,000 1,067,460
Illinois HEFA Condell Medical Center 6.000 5/15/2010 345,000 352,207
Indiana Health Facility Financing Authority Revenue 5.000 11/1/2011 500,000 524,965
Lubbock TX Health Facilities Development St. Joseph Healthcare System 5.000 7/1/2008 2,000,000 2,031,400
Main Street National Gas, Inc. Georgia Gas Project Revenue 5.000 3/15/2018 1,000,000 1,068,700
Mass HEFA Lahey Clinic Medical Center FGIC 5.000 8/15/2014 1,000,000 1,071,760
Mass HEFA Partners NCL 5.000 7/1/2012 1,250,000 1,324,263
Metropolitan Transportation Authority NY Revenue 5.250 11/15/2014 1,000,000 1,092,970
Michigan State Hospital Finance Authority 5.250 11/15/2010 1,000,000 1,044,710
New Hampshire HEFA Monadnock Hospital 5.250 10/1/2007 100,000 100,446
New Mexico State Hospital Equipment Loan
Revenue Presbyterian Healthcare Services 5.750 8/1/2012 1,000,000 1,089,720
New York NY City Industrial Development Agency Special Facility Revenue 5.500 1/1/2014 1,000,000 1,083,500
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Revenue Bonds (continued)
Puerto Rico Commonwealth Highway and Transportation Authority Revenue 5.000% 7/1/2016 1,000,000 $ 1,068,590
Tennessee Energy Acquisition Corp. 5.250 9/1/2017 3,000,000 3,271,200
-------------
21,035,467
Special Revenues--4.2% -------------
Florida Hurricane Catastrophe Funding Financial Corp. 5.250 7/1/2012 2,000,000 2,141,440
Jicarilla NM Apache Nation Revenue 5.000 9/1/2013 500,000 524,254
Puerto Rico Commonwealth Government Development Bank 5.000 12/1/2015 1,000,000 1,070,250
Puerto Rico Commonwealth Government Development Bank AMT 5.250 1/1/2015 600,000 638,783
Puerto Rico Commonwealth Highway & Transportation Authority Revenue 5.000 7/1/2007 650,000 651,741
Scottsdale Arizona Excise Tax Revenue 5.000 7/1/2015 1,550,000 1,685,035
Wisconsin State Transportation 5.500 7/1/2010 15,000 15,820
-------------
6,727,323
-------------
TOTAL BONDS (Cost $152,099,784) 153,278,269
-------------
SHORT-TERM INVESTMENTS--3.5%
Short-Term Bonds--3.4%
Kansas Street Department Transportation Highway Revenue (d) 3.800 9/1/2020 1,085,000 1,085,000
Massachusetts State Development Finance Agency (a) 3.810 10/1/2042 3,600,000 3,600,000
University NC Hospital--Chapel Hill Revenue (d) 3.800 2/15/2031 800,000 800,000
-------------
Total Short-Term Bonds (Cost $5,485,000) 5,485,000
-------------
Investment Companies--0.1% Shares
--------
Wells Fargo National Tax-Free Money Market Fund (Cost $93,827) 93,827 93,827
-------------
Total Short-Term Investments (Cost $5,578,827) 5,578,827
-------------
TOTAL INVESTMENTS--99.2% (Cost $157,678,611) 158,857,096
-------------
OTHER ASSETS, LESS LIABILITIES--0.8% 1,475,105
-------------
NET ASSETS--100% $160,332,201
=============
Notes to Schedule of Investments:
AMBAC--American Municipal Bond Assurance Corp.
AMT--Alternative Minimum
Tax COP--Certificate of Participation
DFA--Development Finance Authority
FGIC--Financial Guaranty Insurance Co.
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
HCF--Health Care Facilities
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
PSF--Public School Fund
SFM--Single Family Mortgage
TOB--Tobacco
VA--Veterans Administration
XLCA--XL Capital Assurance
(a) Zero coupon security
(b) Variable Rate Security; rate indicated is as of March 31, 2007.
(c) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(d) Variable rate securities that reset monthly or more frequently and have put
features that can be exercised within 7 days.
(e) Illiquid security.
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, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (cost $157,678,611) $158,857,096
Receivable for Fund shares sold 2,812,238
Interest receivable 1,934,800
Prepaid expenses 41,724
-------------
Total assets 163,645,858
Liabilities
Payable for securities purchased $ 2,988,387
Payable for Fund shares redeemed 227,874
Distributions Payable 53,777
Accrued accounting, custody, administration and transfer agent fees (Note 2) 21,927
Accrued professional fees 10,990
Accrued trustees' fees and expenses (Note 2) 4,942
Accrued administrative services expense (Note 2) 3,134
Accrued shareholders reporting fees (Note 2) 1.144
Accrued chief compliance officer fee (Note 2) 376
Other accrued expenses and liabilities 1,106
------------
Total liabilities 3,313,657
------------
Net Assets $160,332,201
============
Net Assets consist of:
Paid-in capital $159,426,158
Accumulated net realized loss (290,561)
Undistributed net investment income 18,119
Net unrealized appreciation 1,178,485
------------
Total Net Assets $160,332,201
============
Shares of beneficial interest outstanding 7,402,703
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $21.66
============
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $2,648,015
Dividend income 74,346
----------
Total investment income 2,722,361
Expenses
Investment advisory fee (Note 2) $ 267,956
Accounting, custody, administration and transfer agent fees (Note 2) 60,505
Registration fees 22,273
Professional fees 15,092
Trustees' fees and expenses (Note 2) 8,646
Administrative service fee (Note 2) 7,023
Insurance expense 5,211
Chief compliance officer expense (Note 2) 2,101
Miscellaneous expenses 11,553
----------
Total expenses 400,360
Deduct:
Waiver of invesment advisory fee (Note 2) (98,905)
----------
Net expenses 301,455
----------
Net investment income 2,420,906
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 95,172
Change in unrealized appreciation (depreciation) on:
Investments (260,092)
-----------
Net realized and unrealized gain (loss) on investments (164,920)
-----------
Net Increase in Net Assets from Operations $2,255,986
===========
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, 2007 Year Ended
(Unaudited) September 30, 2006
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 2,420,906 $ 4,198,620
Net realized gain (loss) 95,172 (258,860)
Change in net unrealized appreciation (depreciation) (260,092) 304,871
------------ ------------
Net increase (decrease) in net assets from investment operations 2,255,986 4,244,631
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (2,420,906) (4,198,620)
------------ ------------
Total distributions to shareholders (2,420,906) (4,198,620)
Fund Share Transactions (Note 4) ------------ ------------
Net proceeds from sale of shares 45,521,463 50,311,439
Value of shares isued to shareholders in reinvestment of distributions 2,094,170 3,487,897
Cost of shares redeemed (15,045,881) (35,231,940)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 32,569,752 18,567,396
------------ ------------
Total Increase (Decrease) in Net Assets 32,404,832 18,613,407
Net Assets
At beginning of period 127,927,369 109,313,962
At end of period (including undistributed ------------ ------------
net investment income of $18,119 and $18,119) $160,332,201 $127,927,369
============ ============
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, 2007 --------------------------------------------------------
(Unaudited) 2006 2005 2004 2003 2002
----------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $21.69 $21.71 $22.05 $22.78 $22.78 $22.04
From Investment Operations: ------- ------- ------- ------- ------- -------
Net investment income* (a) 0.39 0.78 0.77 0.69 0.81 0.90
Net realized and unrealized
gains (loss) on investments (0.03) (0.02) (0.29) (0.08) 0.07 0.74
Total from operations 0.36 0.76 0.48 0.61 0.88 1.64
Less Distributions to Shareholders: ------- ------- ------- ------- ------- -------
From net investment income (0.39) (0.78) (0.77) (0.71) (0.81) (0.90)
From net realized gains on investments -- -- (0.05) (0.63) (0.07) --
------- ------- ------- ------- ------- -------
Total distributions to shareholders (0.39) (0.78) (0.82) (1.34) (0.88) (0.90)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $21.66 $21.69 $21.71 $22.05 $22.78 $22.78
======= ======= ======= ======= ======= =======
Total Return (b) 1.66%(d) 3.58% 2.18% 2.76% 3.88% 7.65%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.45%(c) 0.45% 0.45% 0.50% 0.65% 0.65%
Net Investment Income (to average daily 3.60%(c) 3.61% 3.50% 3.16% 3.58% 4.09%
net assets)*
Portfolio Turnover 7.00%(d) 29% 35% 72% 42% 17%
Net Assets, End of Period (000's omitted) $160,332 $127,927 $109,314 $111,887 $70,505 $82,162
- ------------
* 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 without waiver and reimbursement would have been:
Net investment income per share (a) $0.37 $0.74 $0.73 $0.65 $0.80 $0.90
Ratios (to average daily net assets):
Expenses * 0.60%(c) 0.63% 0.62% 0.68% 0.68% 0.66%
Net investment income * 3.46%(c) 3.43% 3.33% 2.97% 3.55% 4.08%
(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) Organization and 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 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
shareholders' 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
Fund shares are valued as of the close of regular trading (normally 4:00
p.m., Eastern Time) on each day that the New York Stock Exchange ("NYSE")
is open. Tax-exempt bonds and notes are priced at market 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. With
respect to any portion of the Fund's assets that are invested in one or
more open-end regulated investment companies ("RICs"), the Fund's net asset
value ("NAV") will be calculated based upon the NAVs of such RICs.
Exchange traded options and futures are valued at the settlement price
determined by the relevant exchange. Non-exchange traded derivatives are
normally valued on the basis of quotes obtained from brokers and dealers,
including counterparties, or pricing services.
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 then is valued at amortized cost based upon the value on
such date unless the Trustees determine during such sixty-day period that
amortized cost does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of coupon interest earned, adjusted for
accretion of discount or amortization of premium using the
yield-to-maturity method on long-term debt securities and short-term
securities with greater than sixty days to maturity. Dividend income is
recorded on 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 on shares of the Fund are declared daily from net investment
income and distributed monthly. Distributions from capital gains, if any,
are distributed annually by the Fund. Distributions from net investment
income and capital gains, if any, are automatically reinvested in
additional shares of the applicable Fund unless the shareholder elects to
receive them in cash. Distributions are recorded on the ex-dividend date.
Income and capital gains distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in reclassifications, are primarily due to differing
treatments for losses deferred due to wash sales, post-October losses,
capital loss carryovers and amortization and/or accretion of premiums and
discounts on certain securities.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (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.
G. New Accounting Requirements
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109" (the
"Interpretation"). The Interpretation establishes for all entities,
including pass-through entities such as the Fund, a minimum threshold for
financial statement recognition of the benefit of positions taken in filing
tax returns (including whether an entity is taxable in a particular
jurisdiction), and requires certain expanded tax disclosures. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and
is to be applied to all open tax years as of the effective date. At this
time, management is evaluating the implications of FIN 48 and its impact in
the financial statements has not yet been determined.
In addition, on September 20, 2006, FASB released Statement of Financial
Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157
establishes an authoritative definition of fair value, sets out a framework
for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of FAS 157 is required for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years. At this time, management is evaluating the implications of
FAS 157 and its impact, if any, in the financial statements has not yet
been determined.
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to Standish Mellon for overall investment
advisory and administrative services, and general office facilities, is
paid monthly at the annual rate of 0.40% of the Fund's average daily net
assets. Standish Mellon voluntarily agreed to limit the Fund's total annual
operating expenses (excluding brokerage commissions, taxes and other
extraordinary expenses) to 0.45% of the Fund's average daily net assets for
the six months ended March 31, 2007. Pursuant to this arrangement, for the
six months ended March 31, 2007, Standish Mellon voluntarily waived $98,905
of its advisory fee. This arrangement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
On December 4, 2006, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") announced that they had entered into a
definitive agreement to merge. The new company will be called The Bank of
New York Mellon Corporation. As part of this transaction, Standish Mellon
would become an indirect wholly-owned subsidiary of The Bank of New York
Mellon Corporation. The transaction is subject to certain regulatory
approvals and the approval of BNY's and MFC's shareholders, as well as
other customary conditions to closing. Subject to such approvals and the
satisfaction of the other conditions, MFC and BNY expect the transaction to
be completed in the third quarter of 2007.
The Trust 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 $5,619 for the six months ended March 31, 2007.
The Trust 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, 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 $54,886 for the
six months ended March 31, 2007.
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,
2007, the Fund was charged $2,101. 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
Fund 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.
14
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements (Unaudited)
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The Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of Standish
Mellon, to provide printing and fulfillment services for the Fund. Pursuant
to this agreement, the Fund was charged $1,144, which is included as
miscellaneous expenses in the statement of operations for the six months
ended March 31, 2007.
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 six months ended
March 31, 2007 were as follows:
Purchases Sales
----------- ----------
Investments (non-U.S. Government Securities) $36,780,540 $8,620,629
=========== ==========
(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, 2007 September 30, 2006
---------------- ------------------
Shares sold 2,102,257 2,339,293
Shares issued to shareholders
in reinvestment of distributions 96,602 161,970
Shares redeemed (693,712) (1,638,284)
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Net increase (decrease) 1,505,147 862,979
========= ==========
At March 31, 2007, two shareholders of record held, in the aggregate,
approximately 82% 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 7 days from the day of their purchase. The redemption fee is paid
directly to the Fund, and is designed to offset brokerage commissions,
market impact, and other costs associated with short-term trading in the
Fund. The fee does not apply to shares that were acquired through
reinvestment of distributions. For the six months ended March 31, 2007, the
Fund received $56 in redemption fees and is reflected in the cost of shares
redeemed.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timely distributions of its income to its shareholders, and the
diversification of its assets, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain
which are distributed to shareholders.
15
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements (Unaudited)
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The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2007, as computed on a federal
income tax basis, were as follows:
Cost for federal income tax purposes $157,678,611
------------
Gross unrealized appreciation 1,696,431
Gross unrealized depreciation (517,946)
------------
Net unrealized appreciation (depreciation) $1,178,485
============
(6) 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. Each fund/portfolio also pays an annual renewal fee, computed
at a rate of 0.020 of 1% of the committed amount and allocated ratably to
the participating funds/portfolios. For the six months ended March 31,
2007, the expense allocated to the Fund was $541. The facility fee and
interest expense are included in miscellaneous expenses on the statement of
operations.
For the six months ended March 31, 2007, the Fund had average borrowings
outstanding of $533,000 for a total of twelve days and incurred $1,038 of
interest expense. At March 31, 2007 the Fund had no borrowings outstanding.
16
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Factors Considered by Board of Trustees in
Approving Advisory Agreement (Unaudited)
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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. 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 ("Standish Mellon" or 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 28, 2006 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 17,
2006.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: The Adviser's balance sheet 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;
(ii) Management Teams and Operations: The Adviser's Form ADV, as well as
information concerning the Adviser's executive management, portfolio
management, client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and the Adviser's
separate account advisory fee schedules;
(iv) 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, including the Fund'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 Fund and potential
economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") in the form of revenues received by Mellon affiliates in
consideration of custodial, administrative, transfer agency and securities
lending services provided by such affiliates to the Funds.
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 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 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 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 28, 2006 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 (Unaudited)
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The Board considered the Fund's performance for the one-, three- and
five-year periods ended July 31, 2006 based on the Lipper materials
provided to the Board at the September 28, 2006 meeting. The Board found
that the Fund slightly underperformed its peer group average returns for
the one-year period (2.09% vs. 2.12%), three-year period (3.31% vs. 3.49%)
and five-year period (3.90% vs. 3.95%). The Board noted the Fund's improved
recent performance, which was reported in the September 28, 2006 Board
meeting Fund Reports.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Fund to the Adviser.
The Fund's contractual advisory fee was 0.400%, in 2nd quintile (1st being
the best) of its peer group of funds, the median fee of which was 0.453%.
The Fund's net management fee, after giving effect to expense limitations,
was 0.231%, well below the peer group median net management fee of 0.394%.
Based on the Lipper data, as well as other factors discussed at the
September 28, 2006 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 relative to the nature and quality of the
services provided.
The Board also considered the Fund's expense ratio and compared it to that
of its peer group of similar funds. The Board found that the actual net
expense ratio of 0.450% (after giving effect to expense limitations) was
lower than the median net expense ratio of the peer group of 0.565%,
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, 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 the Adviser, based on the profitability
information submitted to them by the Adviser, incurred losses in managing
all but one of the investment companies in the Mellon Institutional Funds
family of funds. The Trustees observed that the Adviser had incurred losses
in operating the Fund in both 2004 and 2005.
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 and The Boston Company International Core Equity
Portfolio, two of the largest funds in the complex, already had breakpoints
in their fee arrangements that reflected economies resulting from their
size. The Board also noted that at the March 7, 2006 meeting, management
had presented a Breakpoint Discussion Memorandum that had proposed a
framework for future breakpoints. 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.
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.
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 a
one-year period.
18
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; 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, 2007. The Trust's Statement of Additional
Information includes additional information about the Trust's trustees and is
available, without charge, upon request by writing Mellon Institutional Funds at
P.O. Box 8585, Boston, MA 02266-8585 or calling toll free 1-800-221-4795.
Independent Trustees
Number of Trustee
Principal Portfolios in Other Remuneration
Name (Age) 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 2007)
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Samuel C. Fleming (66) Trustee Trustee since Chairman Emeritus, 30 None Fund: $1,446
c/o Decision Resources, Inc. 11/3/1986 Decision Resources, Inc.
61 Meadowbrook Road ("DRI") (biotechnology
Weston, MA 02493 research and consulting
9/30/40 firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (62) Trustee Trustee since William Joseph Maier, 30 None Fund: $1,446
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 (72) Trustee Trustee since Trustee, Mertens 30 None Fund: $1,446
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (63) Trustee Trustee since Trustee, Essex Street 30 None Fund: $1,502
c/o Essex Street Associates 11/3/1986 Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees
Patrick J. Sheppard (41) Trustee, Since 2003 President and Chief 30 None $0
The Boston Company President Operating Officer of
Asset Management, LLC and Chief The Boston Company
One Boston Place Executive Asset Management, LLC;
Boston, MA 02108 Officer formerly Senior Vice
7/24/65 President and Chief
Operating Officer,
Mellon Asset Management
("MAM") and Vice
President and Chief
Financial Officer, MAM
19
Principal Officers who are Not Trustees
Name (Age) 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 (46) 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 (41) 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 (55) Assistant Vice Since 1996 First 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 Company, LLC
8/19/51
Mary T. Lomasney (50) Chief Since 2005 First Vice President, Mellon Asset Management and
Mellon Asset Management Compliance Chief Compliance Officer, Mellon Funds Distributor, L.P.
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
20
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6933SA0307
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 8, 2007
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 8, 2007
By (Signature and Title): /s/ STEVEN M. ANDERSON
----------------------
Steven M. Anderson, Vice President and Treasurer
Date: June 8, 2007