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)
One Boston Place, 024-0242
Boston, Massachusetts 02108
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(Address of principal executive offices) (Zip code)
Denise B. Kneeland
Assistant Vice President and Secretary
One Boston Place, 024-0242
Boston, MA 02108
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(Name and address of agent for service)
with a copy to:
Christopher P. Harvey, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Registrant's telephone number, including area code: (617) 248-6000
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Date of fiscal year end: September 30
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Date of reporting period: September 30, 2007
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Item 1. Reports to Stockholders.
MELLON INSTITUTIONAL FUNDS
Annual Report Mellon Equity
Large Cap Growth Fund
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Year ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Management Discussion and Analysis
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For the year ended September 30, 2007, The Mellon Large Cap Growth Fund had a
total return of 17.5% compared to its benchmark, the Russell 1000 Growth index
which returned 19.4%. The twelve-month period ended September 30, 2007 concluded
one of the more challenging periods in recent memory as both credit and equity
markets witnessed volatility increasing, risk appetites abating, and liquidity
disappearing. An overheating China and an economic slowdown worried investors in
February, but companies managed to continue to grow earnings, calming investors'
fears through the second quarter. Continued deterioration in the housing market
and signs of mounting credit losses at Wall Street banks ignited a flight to
quality in July. Both occurrences witnessed global investors fleeing risky
assets for the safety of liquid short-term investment vehicles. Investors bid up
the price of cash causing liquidity around the world to cost more. With
liquidity evaporating, many leveraged investors were forced to liquidate
regardless of valuation conviction. Given the turmoil in the credit markets,
where even the most creditworthy counterparties were hesitant to lend even
overnight, the U.S. Federal Reserve first reduced its emergency discount window
rate, and then reduced its Federal Funds rate. Both rate reductions of 50 basis
points helped calm the marketplace as September ended. Although some fears have
receded, concerns over economic growth, reacceleration of inflation, and
monetary policy remain well entrenched.
Energy and material related names led the Fund's benchmark, the Russell 1000
Growth Index, as investors sought value in hard assets. Financials and consumer
cyclicals sectors were the worst performing sectors reflecting investors'
concerns over further deterioration of the housing sector and the strength of
consumer confidence.
During the reporting period, the Fund underperformed its benchmark in an up
market. Selection within the technology, consumer cyclicals, and
telecommunication sectors contributed positively to performance. Companies
differentiating themselves through cash generation continued to have positive
performance. This was particularly the case within technology and the
telecommunications sectors. Within consumer cyclicals, strong operating
efficiencies were rewarded throughout the period. Health care, information and
industrial sectors detracted from performance as oil services, drug, and
internet related companies lagged their respective benchmark groups.
Our approach involves the identification of those common stock attributes that
are rewarded in a given market environment. We seek to capture market themes
among equities by emphasizing the optimal combination of fundamentally based
characteristics to identify good stocks. In addition, we use a disciplined
construction process that provides a portfolio that is broadly diversified
across economic sectors.
Ronald P. Gala, CFA Jocelin A. Reed
Portfolio Manager Portfolio Manager
Mellon Equity Associates, LLP Mellon Equity Associates, LLP
2
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Comparison of Change in Value of $100,000 Investment in
Mellon Equity Large Cap Growth Fund and the Russell
1000 Growth Index (Unaudited)
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Mellon Equity
PERIOD Large Cap Growth Fund Russell 1000 Growth Index*
12/21/05 100,000 100,000
12/31/05 98,650 100,000
3/31/06 101,700 103,094
6/30/06 97,755 99,072
9/30/06 101,813 102,971
12/31/06 108,264 109,074
3/31/07 108,615 110,370
6/30/07 116,340 117,937
9/30/07 119,615 122,900
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 12/21/2005
- --------------------------------------------------------------------------------
Fund 17.49% 10.59%
* Source: Lipper Inc.
Average annual total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- -------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,101.30 $5.00
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.31 $4.81
- ---------
+ Expenses are equal to the Fund's annualized expense ratio of 0.95%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Portfolio Information as of September 30, 2007 (Unaudited)
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Percentage of
Top Ten Holdings* Sector Investments
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Microsoft Corp. Technology 3.7%
Cisco Systems, Inc. Technology 3.2
Apple Computer, Inc. Technology 2.5
International Business Machines Corp. Technology 2.3
Pepsico, Inc. Consumer Staples 2.3
Google, Inc., Class A Information 1.9
Altria Group, Inc. Consumer Staples 1.8
Exxon Mobil Corp. Oil and Gas Producer 1.8
Amgen, Inc. Health Care 1.7
Hewlett-Packard Co. Technology 1.7
----
22.9%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- ---------------------------------------------------------
Consumer Cyclicals 9.8%
Consumer Hard Goods 0.5
Consumer Staples 7.7
Financials 7.4
Health Care 16.5
Industrials 8.6
Information 8.1
Materials 3.6
Oil And Gas Producer 8.3
Technology 24.5
Telecommunications 0.8
Utilities 0.9
Short-term and net Other Assets 3.3
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Schedule of Investments--September 30, 2007
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Value ($)
Security Shares (Note 1A)
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UNAFFILIATED INVESTMENTS--98.1%
EQUITIES--96.7%
Consumer Cyclicals--9.8%
Best Buy Co., Inc. 400 18,408
Coach, Inc. 500 (a) 23,635
Costco Wholesale Corp. 550 33,753
Dick's Sporting Goods, Inc. 200 (a) 13,430
McDonald's Corp. 900 49,023
NIKE, Inc., Class B 600 35,196
Nordstrom, Inc. 500 23,445
Phillips-Van Heusen Corp. 200 10,496
Sotheby's Holdings, Inc., Class A 300 14,337
Target Corp. 450 28,606
Tiffany & Co. 200 10,470
Walgreen Co. 600 28,344
Wynn Resorts Ltd. 100 15,756
304,899
Consumer Hard Goods--.5%
Harley-Davidson, Inc. 350 16,174
Consumer Staples--7.7%
Altria Group, Inc. 800 55,624
Anheuser Busch Co., Inc. 400 19,996
Coca-Cola Co. 650 37,355
Kimberly-Clark Corp. 250 17,565
Pactiv Corp. 500 (a) 14,330
Pepsico, Inc. 950 69,597
Procter & Gamble Co. 350 24,619
239,086
Financials--7.4%
Allstate Corp. 250 14,298
American Express Co. 800 47,496
First Marblehead Corp. 300 (b) 11,379
Franklin Resources, Inc. 200 25,500
Goldman Sachs Group, Inc. 200 43,348
IntercontinentalExchange, Inc. 100 (a) 15,190
JPMorgan Chase & Co. 300 13,822
Merrill Lynch & Co., Inc. 350 24,948
ProLogis--REIT 200 13,270
State Street Corp. 300 20,448
229,699
Health Care--16.5%
Aetna, Inc. 400 21,708
Amerisourcebergen Corp. 400 18,132
Amgen, Inc. 900 (a) 50,913
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--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
Becton Dickinson & Co. 500 41,025
Cigna Corp. 250 13,322
Davita, Inc. 200 (a) 12,636
Forest Laboratories, Inc. 500 (a) 18,761
Genentech, Inc. 300 (a) 23,406
Gilead Sciences, Inc. 300 (a) 12,261
Humana, Inc. 200 (a) 13,976
Intuitive Surgical, Inc. 100 (a) 23,000
Johnson & Johnson 650 42,705
Laboratory Corp. of America Holdings 100 (a) 7,823
McKesson Corp. 300 17,637
Medtronic, Inc. 650 36,666
Merck & Co., Inc. 800 41,352
Pfizer, Inc. 600 14,658
UnitedHealth Group, Inc. 800 38,744
Wyeth 900 40,095
Zimmer Holdings, Inc. 300 (a) 24,297
513,117
Industrials--8.6%
Boeing Co. 450 47,245
Burlington Northern Santa Fe Corp. 200 16,234
Cummins, Inc. 100 12,789
Dover Corp. 300 15,285
Emerson Electric Co. 600 31,932
Fluor Corp. 100 14,398
Foster Wheeler Ltd. 100 (a) 13,128
Lennox International, Inc. 400 13,520
Manpower, Inc. 250 16,087
Parker Hannifin Corp. 150 16,774
Raytheon Co. 550 35,101
Waste Management, Inc. 600 22,644
Woodward Governor Co. 200 12,480
267,617
Information--8.1%
Accenture Ltd., Class A 850 34,213
Akamai Technologies, Inc. 600 (a,b) 17,238
Cognizant Technology Solutions Corp., Class A 350 (a) 27,919
Equifax, Inc. 350 13,342
Google, Inc., Class A 100 (a) 56,727
McGraw-Hill Companies, Inc. 500 25,455
News Corp., Class A 1,000 21,990
Walt Disney Co. 1,250 42,987
Watson Wyatt Worldwide, Inc., Class A 300 13,482
253,353
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Materials--3.6%
Celanese Corp., Class A 400 15,592
El Du Pont de Nemours & Co. 600 29,736
Monsanto Co. 550 47,157
Nucor Corp. 350 20,815
113,300
Oil And Gas Producer--8.3%
ConocoPhillips 400 35,108
ENSCO International, Inc. 300 (b) 16,830
Exxon Mobil Corp. 600 55,536
GlobalSantaFe Corp. 300 22,806
Marathon Oil Corp. 400 22,808
Noble Corp. 400 9,620
Schlumberger Ltd. 400 42,000
Tesoro Corp. 300 13,806
Unit Corp. 200 (a) 9,680
Valero Energy Corp. 300 20,154
258,348
Technology--24.5%
Apple Computer, Inc. 500 (a) 76,770
Applied Materials, Inc. 1,700 35,190
Autodesk, Inc. 350 (a) 17,490
Broadcom Corp., Class A 350 (a) 12,754
Cisco Systems, Inc. 2,900 (a) 96,019
Danaher Corp. 250 20,678
Dolby Laboratories, Inc., Class A 400 (a) 13,928
EMC Corp. 1,300 (a) 27,040
F5 Networks, Inc. 400 (a) 14,876
Harris Corp. 250 14,448
Hewlett-Packard Co. 1,000 49,790
Intel Corp. 1,250 32,325
International Business Machines Corp. 600 70,680
Linear Technology Corp. 450 15,746
Microsoft Corp. 3,750 110,475
National Semiconductor Corp. 400 10,848
Nokia OYJ--ADR 700 26,551
Nvidia Corp. 300 (a) 10,872
Oracle Corp. 1,700 (a) 36,805
Qualcomm, Inc. 600 25,356
Texas Instruments, Inc. 1,150 42,079
760,720
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------
Telecommunications--.8%
NII Holdings, Inc. 150 (a) 12,323
SBA Communications Corp., Class A 400 (a) 14,112
26,435
Utilities--.9%
Constellation Energy Group, Inc. 200 17,158
Sempra Energy 200 11,624
28,782
TOTAL EQUITIES (Cost $2,615,399) 3,011,530
INVESTMENT OF CASH COLLATERAL --1.4%
BlackRock Cash Strategies L.L.C (Cost $43,900) 43,900 43,900
TOTAL UNAFFILIATED INVESTMENTS (Cost $2,659,299) 3,055,430
AFFILIATED INVESTMENTS--4.9%
Dreyfus Institutional Preferred Plus Money Market 152,778 (c) 152,778
Fund (Cost $152,778) ---------
TOTAL INVESTMENTS--103.0% (Cost $2,812,077) 3,208,208
LIABILITIES IN EXCESS OF OTHER ASSETS--(3.0%) (94,806)
---------
NET ASSETS--100.0% 3,113,402
=========
Notes to Schedule of Investments:
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at September 30, 2007.
(c) Affiliated institutional money market fund.
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 Assets and Liabilities
September 30, 2007
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Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $130,819 (Note 6)):
Unaffiliated investments (cost $2,659,299) $3,055,430
Affiliated investments (Note 1F) (cost $152,778) 152,778
Receivable for investments sold 39,050
Interest and dividends receivable 2,921
Prepaid expenses 2,965
----------
Total assets 3,253,144
Liabilities
Collateral for securities on loan (Note 6) $ 43,900
Payable for investments purchased 44,330
Accrued professional fees 35,287
Accrued accounting, custody, administration and transfer agent fees (Note 2) 12,828
Accrued shareholder reporting fees (Note 2) 1,222
Accrued trustees' fees (Note 2) 1,015
Accrued chief compliance officer fee (Note 2) 367
Other accrued expenses and liabilities 793
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Total liabilities 139,742
----------
Net Assets $3,113,402
==========
Net Assets consist of:
Paid-in capital $2,363,385
Accumulated net realized gain 346,050
Undistributed net investment income 7,836
Net unrealized appreciation 396,131
----------
Total Net Assets $3,113,402
==========
Shares of beneficial interest outstanding 131,149
==========
Net Asset Value, offering and redemption price per share $ 23.74
==========
(Net Assets/Shares outstanding)
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Statement of Operations
For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes $125) $ 63,762
Dividend income from affiliated investments (Note 1 F) 5,475
Securities lending income (Note 6) 271
----------
Total investment income 69,508
Expenses
Investment advisory fee (Note 2) $ 31,362
Accounting, custody, administration and transfer agent fees (Note 2) 50,654
Professional fees 36,208
Registration fees 21,185
Trustees' fees and expenses (Note 2) 2,999
Insurance expense 1,045
Miscellaneous expenses 18,279
---------
Total expenses 161,732
Deduct:
Waiver of investment advisory fee (Note 2) (31,362)
Reimbursement of Fund operating expenses (Note 2) (84,532)
---------
Total expense deduction (115,894)
---------
Net Expenses 45,838
----------
Net investment income 23,670
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 406,171
Change in unrealized appreciation (depreciation) on:
Investments 299,538
----------
Net realized and unrealized gain (loss) on investments 705,709
----------
Net Increase in Net Assets from Operations $ 729,379
==========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
December 21, 2005
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
-------------------- --------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 23,670 $ 9,098
Net realized gain (loss) 406,171 (60,121)
Change in net unrealized appreciation (depreciation) 299,538 96,593
----------- -----------
Net increase (decrease) in net assets from investment operations 729,379 45,570
----------- -----------
Distributions to Shareholders (Note 1C)
From net investment income (20,067) (5,000)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 3,129,260 2,500,000
Dividend reinvestment 20,067 5,000
Cost of shares redeemed (3,290,807) --
----------- -----------
Net increase (decrease) in net assets from Fund share transactions (141,480) 2,505,000
----------- -----------
Total Increase (Decrease) in Net Assets 567,832 2,545,570
Net Assets
At beginning of year 2,545,570 --
----------- -----------
At end of year (including undistributed net investment income
of $7,836 and $4,098, respectively) $ 3,113,402 $ 2,545,570
=========== ===========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
December 21, 2005
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
-------------------- --------------------
Net Asset Value, Beginning of Year $ 20.32 $20.00
------- ------
From Operations:
Net investment income* (a) 0.11 0.07
Net realized and unrealized gains (loss) on investments 3.44 0.29
------- ------
Total from operations 3.55 0.36
------- ------
Less Distributions to Shareholders:
From net investment income (0.13) (0.04)
------- ------
Total distributions to shareholders (0.13) (0.04)
------- ------
Net Asset Value, End of Year $ 23.74 $20.32
======= ======
Total Return (b) 17.49% 1.81%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.95% 0.95%(d)
Net Investment Income (to average daily net assets)* 0.49% 0.47%(d)
Portfolio Turnover 109% 23%(c)
Net Assets, End of Year (000's omitted) $ 3,113 $2,546
- --------
* 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) $ (0.42) $(0.87)
Ratios (to average daily net assets):
Expenses 3.35% 7.06%(d)
Net investment income (loss) (1.91%) (5.64%)(d)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Not annualized. Returns for periods of less than one year have not been
annualized.
(d) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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, or if such quotations do not accurately reflect
fair value, 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. 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 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.
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 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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
14
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among 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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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 year
ended September 30, 2007. Pursuant to this agreement, for the year ended
September 30, 2007, Mellon Equity voluntarily waived a portion of its
investment advisory fee in the amount of $31,362 and reimbursed $84,532 of
the Fund's operating expenses. This arrangement is voluntary and temporary
and may be discontinued or revised by Mellon Equity at any time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$6,119, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of BNY Mellon 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 $44,535 for the year ended September 30,
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 $112 for the year
ended September 30, 2007. See Note 6 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged $72
for the year ended September 30, 2007, which is included in miscellaneous
expenses on the statement of operations. See Note 7 for further details.
15
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,250, which amount 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 Fund may pay 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
year ended September 30, 2007, the Fund was not charged an administrative
service fee by an affiliate of BNY Mellon.
The Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of BNY Mellon and an affiliate of Mellon Equity, to provide
printing and fulfillment services for the Fund. Pursuant to this agreement,
the Fund was charged $1,171, which amount is included in miscellaneous
expenses in the statement of operations, for the year ended September 30,
2007.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of Mellon Equity, replaced
Mellon Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
============= =============
Non-U.S. Government Securities $ 5,084,361 $ 5,332,002
============= =============
(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
Year Ended operations) to
September 30, 2007 September 30, 2006
-------------------- --------------------
Shares sold 149,038 125,000
Shares issued to shareholders in
reinvestment of distributions 888 262
Shares redeemed (144,039) (--)
-------- -------
Net increase (decrease) 5,887 125,262
======== =======
At September 30, 2007, one shareholder of record (MBC Investments Corp., a
wholly-owned subsidiary of BNY Mellon and an affiliate of Mellon Equity)
held in the aggregate 96% 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 year ended September 30, 2007, the Fund did not
assess any redemption fees.
16
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
In July 2006, FASB 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 on
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $2,819,264
==========
Gross unrealized appreciation $ 442,041
Gross unrealized depreciation (53,097)
----------
Net unrealized appreciation (depreciation) $ 388,944
==========
Undistributed ordinary income $ 175,598
Undistributed capital gains 185,475
----------
Total distributable earnings $ 361,073
==========
The tax character of distributions paid during the fiscal years ended
September 30, 2007 and September 30, 2006 was as follows:
2007 2006
--------- -------
Ordinary income $ 20,067 $ 5,000
========= =======
(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 year ended September 30, 2007 and
earned interest on the invested collateral of $3,252 of which $2,981 was
rebated to borrowers or paid in fees. At September 30, 2007, the Fund had
securities valued at $130,819 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held, of
which $43,900 was collateralized with cash and $90,600 was collateralized
with liquid securities.
(7) Line of Credit:
On behalf of the Fund, and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the aggregate,
up to $35 million under a committed line of credit and up to $15 million
under an uncommitted line of credit.
For the year ended September 30, 2007, the Fund had average borrowings
outstanding of $42,750 for a total of eight days and incurred $55 of
interest expense. At September 30, 2007, the Fund did not have a loan
balance outstanding.
17
Mellon Institutional Funds Investment Trust
Mellon Equity Large Cap Growth Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and
Shareholders of Mellon Equity Large Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of Mellon
Equity Large Cap Growth Fund (the "Fund") at September 30, 2007, the
results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for the year then ended and for the
period from December 21, 2005 (commencement of operations) through
September 30, 2006, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
18
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $512
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $512
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 25 None Fund: $512
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $515
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 *
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of
the Trust.
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) * President, Chief President and CEO Senior Vice President and Head of operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
20
THIS PAGE INTENTIONALLY LEFT BLANK
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
MELLON INSTITUTIONAL FUNDS
Annual Report Mellon Equity
Micro Cap Fund
- -------------------------------------------------------------------------------
Year ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year
ended September 30, 2007.
The financial markets experienced a major bout of volatility in the
summer stemming from two principal sources: troubles in the credit
markets related to the difficulties experienced by mortgage securities
backed by sub-prime loans, and the high degree of leverage employed by
many hedge funds, whose impact on the markets has swollen
significantly over the past decade. From its peak of over 1550 in
mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period,
resulting in an 11.8% return over that period. Part of the rebound was
due to the September 18 decision by the U.S. Federal Reserve Board to
cut the Federal Funds rate by 50 basis points to 4.75%. This ended a
string of nine consecutive meetings in which the Fed left rates
unchanged. The reduction was 25 basis points greater than anticipated,
driven by the Fed's concerns over the housing recession and tighter
credit availability.
Credit markets responded to the sub-prime troubles with a broad-based
flight to quality as investors fled to short-term Treasury securities.
One result was a significant steepening of the yield curve, as the
yield on the 2-year Treasury note fell 86 basis points to 3.98%, while
the 30-year Treasury bond yield dropped just 25 basis points to 4.84%.
In a dramatic re-pricing of risk, spreads widened in the corporate
bond sector compared to Treasury issues, which has the effect of
making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some
issuers of commercial paper - typically viewed as the safest segment
of the corporate market - had trouble issuing or rolling over their
issues.
While liquidity has slowly returned to the bond markets in general,
the mortgage sector clearly has been shaken, and this will likely
exacerbate the housing recession as financing becomes more expensive.
In the view of some, the likelihood of a broader U.S. recession has
become greater. Our view is that a period of diminished growth -
around 2% GDP growth in 2008 vs. the 2.5% long-term trend - is more
likely. We see U.S. exports boosted by the weaker dollar, multi-year
global economic expansion and monetary growth, and high corporate
profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and
lower consumption.
We wish to thank you for your business and confidence in Mellon
Institutional Funds. Please feel free to contact us with questions or
comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Management Discussion and Analysis
- -------------------------------------------------------------------------------
Over the past year, equity markets have faced many negative
crosscurrents, such as rising energy prices and turmoil in the credit
markets. In spite of these negative influences, equity markets posted
positive returns over the past year, though not without a noticeable
market decline in mid to late summer. At the very moment it appeared
that the equity markets were set for a meaningful decline, the U.S.
Federal Reserve changed course and cut key interest rates. Upon this
news, markets rallied in September, and thus provided attractive total
returns for the year under review. Within the context of such a
turbulent market, it is not surprising that generally speaking, larger
capitalization stocks outperformed smaller capitalization issues, as
investors searched for stability. While micro cap stocks provided a
positive absolute return over the past year, it is also not surprising
that this slice of the equity marketplace was also the weakest
performing sector, when compared to other equity capitalization
classifications.
For the one-year period ended September 30, 2007, the Fund provided a
total return of 8.85% as compared to 9.51% for the Dow Jones Wilshire
Micro Cap Index, the Fund's benchmark. While we were pleased that the
Fund achieved a positive absolute return, we were nonetheless
disappointed that the return was modestly below that of the benchmark.
Our goal remains to generate investment returns that exceed our
performance benchmark. We manage the Fund using a quantitative
valuation model along with a sector neutral approach to stock
selection based on the performance benchmark. Thus individual stock
selection within each economic sector is the primary engine that
drives investment performance.
Our stock selections within the health care and energy sectors were
especially rewarding. Within the health care sector, we experienced
beneficial stock selection among bio-technology and pharmaceutical
companies. Among our bio-technology holdings, we achieved positive
results both through owning a company that was subject to a very
attractive takeover offer, to owning issues that had very positive new
product announcements over the past year. Among our pharmaceutical
holdings, companies with products serving such diverse markets as
cardiovascular health to veterinarian/animal health also had a
positive impact upon relative performance. Within the energy related
sector, some of our investments among oil exploration companies
contributed positively to performance. As for negative influences, we
had disappointing stock selections among financial services companies,
especially among banks and thrift institutions. This group appeared to
be under pressure as smaller and more consumer oriented financial
institutions faced an environment of generally rising interest rates,
and growing consumer anxiety about their personal economic condition.
Such a mix caused many investors to become concerned about the future
business trends for these smaller financial organizations. We also had
some disappointing results among industrial services and freight
companies. These types of firms tend to be more economically
sensitive, and appeared to be under pressure again based upon an
uncertain interest rate and economic outlook.
In closing, we have just been through a fairly uncertain economic
environment, with issues such as rising energy prices and the subprime
credit market worries causing a high level of investor anxiety. In
spite of these negatives, the microcap sector of the equity market
generated competitive returns over the past year. Thus, we remain
convinced that this capitalization sector continues to provide
attractive and very dynamic investment opportunities, and should be a
portion of a well-diversified equity portfolio.
John R. O'Toole, CFA Peter D. Goslin, CFA
Portfolio Manager Portfolio Manager
Mellon Equity Associates, LLP Mellon Equity Associates, LLP
2
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Comparison of Change in Value of $100,000 Investment in
Mellon Equity Micro Cap Fund and the Dow Jones Wilshire Micro
Cap Index (Unaudited)
- -------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
Mellon Equity Dow Jones Wilshire
PERIOD Micro Cap Fund Micro Cap Index *
4/28/06 100,000 100,000
6/30/06 94,050 93,600
9/30/06 93,200 92,037
12/31/06 102,150 100,891
3/31/07 102,550 102,495
6/30/07 107,100 105,857
9/30/07 101,450 100,779
Average Annual Total Returns
(for period ended 9/30/2007)
- -------------------------------------------------------------------------------
Since
Inception
1 Year 4/28/2006
- -------------------------------------------------------------------------------
Fund 8.85% 1.02%
* Source: Wilshire Associates Incorporated
Average annual total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- ---------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 989.27 $6.73
Hypothetical (5% return
per year before expenses) $1,000.00 $1,018.30 $6.83
- ------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.35%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
--------------------------------------------------------------------------------------------------------
EMS Technologies, Inc. Technology 0.9%
Omrix Biohparmaceuticals, Inc. Health Care 0.9
Ducommun, Inc. Industrials 0.8
Enzon Pharmaceuticals, Inc. Health Care 0.8
Albany Molecular Research, Inc. Health Care 0.8
Digi International, Inc. Technology 0.8
Ambassadors Group, Inc. Information 0.8
Monarch Casino & Resort, Inc. Consumer Cyclicals 0.8
Landauer, Inc. Technology 0.8
Vital Signs, Inc. Health Care 0.8
-----
8.2%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
-----------------------------------------------------------
Consumer Cyclicals 5.8%
Consumer Hard Goods 4.1
Consumer Staples 3.3
Financials 17.2
Health Care 20.9
Industrials 11.4
Information 7.9
Materials 4.6
Oil and Gas Producer 3.7
Technology 17.7
Telecommunications 2.0
Utilities 1.7
Short-term and Other Net Assets (0.3)
-------
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--116.1%
EQUITIES--100.3%
Consumer Cyclicals--5.8%
AFC Enterprises, Inc. 2,100 (a) 31,605
Buffalo Wild Wings, Inc. 1,450 (a) 54,694
Cato Corp., Class A 1,650 33,726
Fred's, Inc., Class A 3,400 35,802
FTD Group, Inc. 3,400 50,592
G-III Apparel Group Ltd. 1,700 (a) 33,473
Hibbett Sports, Inc. 1,400 (a) 34,720
Jos A Bank Clothiers, Inc. 1,100 (a) 36,762
Kenneth Cole Productions, Inc., Class A 2,100 40,677
Maidenform Brands, Inc. 2,500 (a) 39,700
Monarch Casino & Resort, Inc. 2,600 (a) 73,970
Republic Airways Holding, Inc. 1,500 (a) 31,755
The Bon-Ton Stores, Inc. 1,700 (b) 38,624
West Marine, Inc. 2,000 (a) 23,100
559,200
Consumer Hard Goods--4.1%
Accuride Corp. 2,400 (a) 29,064
Aftermarket Technology Corp. 1,750 (a) 55,545
Arctic Cat, Inc. 2,600 42,536
Asbury Automotive Group, Inc. 2,000 39,620
Churchill Downs, Inc. 1,000 49,960
Kimball International, Inc., Class B 1,800 20,484
Movado Group, Inc. 1,200 38,304
Premier Exhibitions, Inc. 2,800 (a,b) 42,224
Steinway Musical Instruments, Inc. 1,700 (b) 50,354
Town Sports International Holdings, Inc. 1,800 (a) 27,378
395,469
Consumer Staples--3.3%
Coca-Cola Bottling Co. 600 36,180
Core-Mark Holding Co., Inc. 1,500 (a) 52,845
Imperial Sugar Co. 1,800 (b) 47,034
J & J Snack Food Corp. 1,400 48,748
Lifetime Brands, Inc. 1,800 36,522
Physicians Formula Holdings, Inc. 3,750 (a) 43,988
Spartan Stores, Inc. 2,250 50,693
316,010
Financials--17.2%
American Physicians Capital, Inc. 800 31,168
Ameris Bancorp 2,100 (b) 37,968
Amerisafe, Inc. 2,650 (a) 43,831
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--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------
Financials (continued)
Anchor Bancorp Wisconsin, Inc. 2,400 64,800
ASTA Funding, Inc. 1,300 (b) 49,816
BancFirst Corp. 1,100 (b) 49,357
Bank of the Ozarks, Inc. 1,400 42,742
Banner Corp. 1,750 (b) 60,182
City Bank Lynnwood WA 1,800 (b) 51,696
EMC Insurance Group, Inc. 2,000 51,980
First Cash Financial Services, Inc. 1,400 (a) 32,788
First Financial Corp. 1,500 (b) 45,450
First Merchants Corp. 2,100 45,276
First Place Financial Corp. 2,000 35,400
Great Southern Bancorp, Inc. 1,400 34,776
Greene Bankshares, Inc. 1,350 49,207
Hallmark Financial Services, Inc. 3,300 (a) 46,365
Hersha Hospitality Trust REIT 3,100 30,690
Horizon Financial Corp. 2,300 46,644
Imperial Capital Bancorp, Inc. 1,100 31,075
Intervest Bancshares Corp. 2,000 49,500
Lakeland Financial Corp. 2,000 46,220
MarketAxess Holdings, Inc. 2,500 (a) 37,500
Nara Bancorp, Inc. 2,500 (b) 39,050
National Penn Bancshares, Inc. 2,575 (b) 42,127
NYMAGIC, Inc. 1,100 30,591
Portfolio Recovery Associates, Inc. 850 45,110
Preferred Bank, Los Angeles 1,350 53,109
Republic Bancorp, Inc., Class A 2,000 (b) 31,680
Safety Insurance Group, Inc. 800 28,752
Sierra Bancorp 1,600 (b) 45,856
Simmons First National Corp., Class A 2,000 (b) 52,680
Southside Bancshares, Inc. 2,300 (b) 50,807
Sun Bancorp, Inc. 2,700 (a) 47,250
Taylor Capital Group, Inc. 2,000 55,860
Union Bankshares Corp. 1,250 (b) 28,388
Vineyard National Bancorp Co. 3,000 50,160
West Coast Bancorp 1,750 49,718
1,665,569
Health Care--20.9%
Albany Molecular Research, Inc. 5,000 (a) 75,500
Alliance Imaging, Inc. 6,000 (a) 54,360
Amsurg Corp. 1,800 (a) 41,526
Bentley Pharmaceuticals, Inc. 4,000 (a) 49,920
Cambrex Corp. 5,800 63,162
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--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Health Care (continued)
CryoLife, Inc. 5,000 (a) 47,250
Cutera, Inc. 1,600 (a) 41,936
Datascope Corp. 1,700 57,477
Emergent Biosolutions, Inc. 7,000 (a) 62,160
Enzon Pharmaceuticals, Inc. 9,100 (a,b) 80,171
Gentiva Health Services, Inc. 3,400 (a) 65,314
Greatbatch, Inc. 2,000 (a,b) 53,180
Hanger Orthopedic Group, Inc. 2,700 (a) 30,591
LifeCell Corp. 1,500 (a,b) 56,355
Martek Biosciences Corp. 1,800 (a) 52,254
Matria Healthcare, Inc. 2,200 (a,b 57,552
Medicines Co. 2,800 (a) 49,868
Medivation, Inc. 2,600 (a,b) 52,130
Merit Medical Systems, Inc. 4,300 (a) 55,814
Natus Medical, Inc. 3,750 (a) 59,775
Neurocrine Biosciences, Inc. 3,700 (a) 37,000
Northstar Neuroscience, Inc. 2,500 (a) 27,900
Noven Pharmaceuticals, Inc. 3,050 (a) 48,587
Omrix Biohparmaceuticals, Inc. 2,350 (a) 82,979
OSI Systems, Inc. 1,400 (a) 31,514
Pain Therapeutics, Inc. 7,300 (a,b) 68,255
Palomar Medical Technologies, Inc. 1,250 (a) 35,613
Par Pharmaceutical Cos., Inc. 1,500 (a) 27,840
Pozen, Inc. 3,000 (a,b) 33,180
Radiation Therapy Services, Inc. 1,850 (a,b) 38,517
Regeneration Technologies, Inc. 3,750 (a) 40,200
Salix Pharmaceuticals Ltd. 4,000 (a) 50,448
Sciele Pharma, Inc. 2,400 (a,b) 62,448
SuperGen, Inc. 7,500 (a) 32,550
Synovis Life Technologies, Inc. 3,000 (a) 64,710
Synta Pharmaceuticals Corp. 4,500 (a,b) 29,700
Trubion Pharmaceuticals, Inc. 3,000 (a,b) 36,390
U.S. Physical Therapy, Inc. 3,300 (a) 48,840
Viropharma, Inc. 5,600 (a) 49,840
Vital Signs, Inc. 1,400 72,996
2,025,802
Industrials--11.4%
AAON, Inc. 2,850 56,230
Apogee Enterprises, Inc. 2,250 58,365
Arkansas Best Corp. 2,100 68,586
Builders FirstSource, Inc. 3,000 (a) 32,340
CDI Corp. 1,700 47,396
Columbus McKinnon Corp. 2,000 (a) 49,780
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--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------------
Industrials (continued)
Comfort Systems USA, Inc. 4,700 66,740
Ducommun, Inc. 2,500 (a) 80,750
Electro Rent Corp. 2,800 39,228
Encore Wire Corp. 1,750 43,977
Hardinge, Inc. 1,250 43,537
Heico Corp. 1,400 69,104
Heidrick & Struggles International, Inc. 1,000 36,450
Kadant, Inc. 1,750 (a) 49,000
NN, Inc. 5,000 49,050
Powell Industries, Inc. 1,100 (a) 41,679
Saia, Inc. 2,300 (a) 38,019
Standard Parking Corp. 1,100 (a) 43,769
T-3 Energy Services, Inc. 1,100 (a) 46,904
TriMas Corp. 3,000 (a) 39,810
U.S. Concrete, Inc. 5,000 (a) 32,950
Volt Information Sciences, Inc. 1,350 (a) 23,814
Waste Industries USA, Inc. 1,800 51,516
1,108,994
Information--7.9%
Ambassadors Group, Inc. 1,950 74,295
Authorize.Net Holdings, Inc. 2,000 (a) 35,260
Blue Coat Systems, Inc. 500 (a,b) 39,380
Bowne & Co., Inc. 1,600 26,656
Chordiant Software, Inc. 3,500 (a) 48,510
COMSYS IT Partners, Inc. 2,750 (a) 46,227
Ennis, Inc. 2,100 46,284
iBasis, Inc. 5,300 56,975
Interwoven, Inc. 3,750 (a) 53,362
Kendle International, Inc. 1,600 (a) 66,448
MTC Technologies, Inc. 1,500 (a,b) 28,965
Online Resources Corp. 3,500 (a) 44,355
SI International, Inc. 1,900 (a) 54,283
SonicWALL, Inc. 4,900 (a) 42,777
Stanley, Inc. 2,200 (a) 60,610
Sykes Enterprises, Inc. 2,650 (a) 44,017
768,404
Materials--4.6%
Aceto Corp. 6,000 54,000
Calgon Carbon Corp. 2,100 (a,b) 29,316
Koppers Holdings, Inc. 1,800 69,498
Lydall, Inc. 5,000 (a) 46,400
Ryerson, Inc. 1,600 53,984
Schulman A, Inc. 2,150 42,420
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
Materials (continued)
Schweitzer-Mauduit International, Inc. 2,100 48,930
Superior Essex, Inc. 1,700 (a) 63,376
Tredegar Corp. 2,000 34,500
442,424
Oil And Gas Producer--3.7%
Callon Petroleum Co. 3,700 (a) 51,504
Dawson Geophysical Co. 900 (a) 69,759
Gulfport Energy Corp. 1,750 (a) 41,405
NATCO Group Inc., Class A 600 (a) 31,050
Stone Energy Corp. 1,800 (a) 72,018
Union Drilling, Inc. 2,500 (a) 36,450
Warren Resources, Inc. 4,600 (a) 57,684
359,870
Technology--17.7%
Actel Corp. 1,700 (a) 18,241
Advanced Energy Industries, Inc. 2,200 (a) 33,220
AMIS Holdings, Inc. 3,600 (a) 34,956
Ansoft Corp. 1,900 (a) 62,662
Bel Fuse, Inc., Class B 1,400 48,524
Cirrus Logic, Inc. 7,200 (a) 46,080
Cohu, Inc. 1,900 35,625
Commvault Systems, Inc. 1,400 (a) 25,928
Computer Programs & Systems, Inc. 1,650 43,494
CPI International, Inc. 2,200 (a) 41,822
CTS Corp. 4,350 56,115
Digi International, Inc. 5,300 (a) 75,472
Ditech Networks, Inc. 6,500 (a) 34,255
DivX, Inc. 2,750 (a) 40,892
Double-Take Software, Inc. 3,050 (a) 58,285
EMS Technologies, Inc. 3,500 (a) 85,855
Epicor Software Corp. 4,200 (a) 57,834
Exar Corp. 3,000 (a) 39,180
i2 Technologies, Inc. 1,800 (a,b) 27,450
Interactive Intelligence, Inc. 2,450 (a) 46,550
Ixia 3,600 (a) 31,392
Landauer, Inc. 1,450 73,892
LoJack Corp. 1,600 (a) 30,336
Manhattan Associates, Inc. 2,200 (a) 60,302
Mattson Technology, Inc. 3,250 (a) 28,112
Methode Electronics, Inc. 4,000 60,200
MIPS Technologies, Inc. 6,000 (a) 47,400
MTS Systems Corp. 1,000 41,600
Park Electrochemical Corp. 2,100 70,518
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------------
Technology (continued)
Radyne Corp. 3,000 (a) 31,620
Rimage Corp. 1,750 (a) 39,270
Rudolph Technologies, Inc. 3,800 (a) 52,554
Sonic Solutions, Inc. 4,800 (a) 50,256
Super Micro Computer, Inc. 5,000 (a) 48,800
Supertex, Inc. 850 (a) 33,898
Techwell, Inc. 3,850 (a) 40,887
Vignette Corp. 2,950 (a) 59,207
1,712,684
Telecommunications--2.0%
Atlantic Tele-Network, Inc. 2,000 72,700
FairPoint Communications, Inc. 1,700 32,062
Oplink Communications, Inc. 2,900 (a) 39,614
Shenandoah Telecommunications Co. 2,250 (b) 48,960
193,336
Utilities--1.7%
Central Vermont Public Service Corp. 1,450 52,983
CH Energy Group, Inc. 500 23,900
Energysouth, Inc. 600 30,252
Laclede Group, Inc. 1,050 33,894
Otter Tail Corp. 800 28,520
169,549
Total Equities (Cost $9,923,668) 9,717,311
INVESTMENT OF CASH COLLATERAL--15.8%
BlackRock Cash Strategies L.L.C. (Cost $1,525,413) 1,525,413 1,525,413
TOTAL UNAFFILIATED INVESTMENTS (Cost $11,449,081) 11,242,724
AFFILIATED INVESTMENTS--1.2%
Dreyfus Institutional Preferred Plus Money
Market Fund (Cost $112,677) 112,677 (c) 112,677
-----------
TOTAL INVESTMENTS--117.3% (Cost $11,561,758) 11,355,401
LIABILITIES IN EXCESS OF OTHER ASSETS--(17.3%) (1,672,308)
-----------
NET ASSETS--100% 9,683,093
===========
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 September 30, 2007.
(c) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $1,421,255 (Note 6)):
Unaffiliated investments (cost $11,449,081) $11,242,724
Affiliated investments (Note 1F) (cost $112,677) 112,677
Receivable for investments sold 281,995
Interest and dividends receivable 10,334
Prepaid expenses 6,525
-----------
Total assets 11,654,255
Liabilities
Collateral for securities on loan (Note 6) $ 1,525,413
Payable for investments purchased 391,929
Accrued professional fees 33,370
Accrued accounting, custody, administration and transfer agent fees (Note 2) 16,958
Accrued shareholder reporting fee (Note 2) 1,203
Accrued trustees' fees (Note 2) 1,036
Accrued administrative services expense (Note 2) 8
Accrued chief compliance officer fee (Note 2) 367
Other accrued expenses and liabilities 878
-----------
Total liabilities 1,971,162
-----------
Net Assets $ 9,683,093
===========
Net Assets consist of:
Paid-in capital $ 9,303,211
Accumulated net realized gain 579,319
Undistributed net investment income 6,920
Net unrealized depreciation (206,357)
-----------
Total Net Assets $ 9,683,093
===========
Shares of beneficial interest outstanding 477,196
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.29
===========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Statement of Operations
For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments $ 119,999
Dividend income from affiliated investments (Note 1 F) 1,807
Securities lending income (Note 6) 16,274
----------
Total investment income 138,080
Expenses
Investment advisory fee (Note 2) $ 97,153
Accounting, custody, administration and transfer agent fees (Note 2) 58,648
Registration fees 19,874
Professional fees 28,608
Trustees' fees and expenses (Note 2) 3,142
Insurance expense 108
Administrative service fees (Note 2) 16
Miscellaneous expenses 19,606
----------
Total expenses 227,155
Deduct:
Waiver of investment advisory fee (Note 2) (95,995)
----------
Net Expenses 131,160
----------
Net investment income 6,920
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 998,137
Change in unrealized appreciation (depreciation) on:
Investments (224,942)
----------
Net realized and unrealized gain (loss) on investments 773,195
----------
Net Increase in Net Assets from Operations $ 780,115
==========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
May 1, 2006
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
-------------------- ---------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 6,920 $ (6,221)
Net realized gain (loss) 998,137 (418,818)
Change in net unrealized appreciation (depreciation) (224,942) 18,585
----------- -----------
Net increase (decrease) in net assets from investment operations 780,115 (406,454)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 82,502 9,226,930
----------- -----------
Total Increase (Decrease) in Net Assets 862,617 8,820,476
Net Assets
At beginning of year 8,820,476 --
----------- -----------
At end of year (including undistributed net investment
income of $6,920 and $0, respectively) $ 9,683,093 $ 8,820,476
=========== ===========
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
May 1, 2006
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------- ---------------------
Net Asset Value, Beginning of Year $ 18.64 $ 20.00
------- -------
From Operations:
Net investment income (loss)* (a) 0.01 (0.01)
Net realized and unrealized gains (loss) on investments 1.64 (1.35)
------- -------
Total from operations 1.65 (1.36)
------- -------
Net Asset Value, End of Year $ 20.29 $ 18.64
======= =======
Total Return (b) 8.85% (6.80%)(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.35% 1.35%(d)
Net Investment Income (Loss) (to average daily net assets)* 0.07% (0.18%)(d)
Portfolio Turnover 167% 103%(c)
Net Assets, End of Year (000's omitted) $ 9,683 $ 8,820
- -------------
* 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 (loss) per share (a) $ (0.19) $ (0.19)
Ratios (to average daily net assets):
Expenses 2.34% 3.72%(d)
Net investment income (loss) (0.92%) (2.55%)(d)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Not annualized. Returns for periods of less than one year have not been
annualized.
(d) Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
(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 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, or if such quotations do not accurately reflect
fair value, 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. 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 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.
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 losses deferred
due to wash sales.
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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
16
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among 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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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 year
ended September 30, 2007. Pursuant to this arrangement, for the year ended
September 30, 2007, Mellon Equity voluntarily waived a portion of its
investment advisory fee in the amount of $95,995. This arrangement is
voluntary and temporary and may be discontinued or revised by Mellon Equity
at any time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$8,331, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of BNY Mellon 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 $50,317 for the year ended September 30,
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 $5,659 for the
year ended September 30, 2007. See Note 6 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged $71
for the year ended September 30, 2007, which amount is included in
miscellaneous expenses on the statement of operations. See Note 7 for
further details.
17
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,250, which amount 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 BNY Mellon and an affiliate of Mellon Equity, to provide
printing and fulfillment services for the Fund. Pursuant to this agreement,
the Fund was charged $1,241, which amount is included in miscellaneous
expenses in the statement of operations, for the year ended September 30,
2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was not charged an administrative
service fee by any BNY Mellon affiliates.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of Mellon Equity, replaced
Mellon Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
============ ============
Non-U.S. Government Securities $ 16,254,369 $ 16,132,917
============ ============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractionafl shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the period
May 1, 2006
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------- --------------------
Shares sold 4,090 473,106
-------- --------
Net increase (decrease) 4,090 473,106
======== ========
At September 30, 2007, two shareholders of record (including MBC
Investments Corp., a wholly-owned subsidiary of BNY Mellon and an affiliate
of Mellon Equity which holds approximately 52%) held in the aggregate 98.8%
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 year ended September 30, 2007, the Fund did not
assess any redemption fees.
18
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
(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.
In July 2006, FASB 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 implication of FIN 48 and its impact in
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $ 11,561,758
=============
Gross unrealized appreciation $ 686,993
Gross unrealized depreciation (893,350)
-------------
Net unrealized appreciation (depreciation) $ (206,357)
=============
Undistributed ordinary income $ 437,491
Undistributed capital gains 148,748
-------------
Total distributable earnings $ 586,239
=============
(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 year ended September 30, 2007 and
earned interest on the invested collateral of $2,579,964 of which
$2,563,690 was rebated to borrowers or paid in fees. At September 30, 2007,
the Fund had securities valued at $1,421,255 on loan of which $1,525,413
was collateralized with cash and $35,750 was collateralized with highly
liquid securities. See Schedule of Investments for further detail on the
security positions on loan and collateral held.
(7) Line of Credit:
On behalf of the Fund and other funds in the Trust, the Trust has access to
a credit facility, which enables each fund to borrow, in the aggregate, up
to $35 million under a committed line of credit and up to $15 million under
an uncommitted line of credit. For the year ended September 30, 2007, the
Fund had average borrowings outstanding of $1,000 for a total of one days
and incurred $0 of interest expense. At September 30, 2007, the Fund did
not have a loan balance outstanding.
19
Mellon Institutional Funds Investment Trust
Mellon Equity Micro Cap Fund
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and
Shareholders of Mellon Equity Micro Cap Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of Mellon
Equity Micro Cap Fund (the "Fund") at September 30, 2007, the results of
its operations for the year then ended, and the change in its net assets
and the financial highlights for the year then ended and for the period
from May 1, 2006 (commencement of operations) through September 30, 2006,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at September 30, 2007 by correspondence
with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
20
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age,
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 year ended September 30,
2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $528
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $528
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 25 None Fund: $528
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $536
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 *
None*
*Effective October 30, 2007, J. David Officer was elected as a Trustee of
the Trust.
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
22
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MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6915AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report Newton
International Equity Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Newton's investment philosophy is structured around the central tenet of our
business: no company, market or economy can be considered in isolation; each
must be understood in a global context.
We believe that, in a rapidly shrinking world, we can properly evaluate the
prospects for equities only by understanding events, trends and competitive
pressures globally. We also believe that a geographically constrained
perspective to stock selection limits a portfolio manager's ability to identify
and invest in the strongest companies and does not provide for sufficient
exposure to deep, long-term trends in economies.
The roots of the current equity market turmoil have been a concern of Newton for
some time. The very low level of interest rates for much of this decade and
problems of the post dot.com bubble have engendered a rapid acceleration in
consumer lending in the US and UK against a backdrop of soaring house prices and
a boom in Merger & Acquisition (M&A) activity, fed by debt and exemplified by
the prominence of private equity. With banks and insurers from Germany to
Singapore admitting exposure to potentially worthless US mortgage-backed
securities, markets are understandably nervous.
As banks tighten lending requirements we may see a more significant slow-down in
the US and this could have a negative impact on the rest of the world. However,
competing trends such as the urbanization and industrialization of Asia may
provide some offset.
Although global equity markets began the period with solid gains (on the back of
better data than expected from the US), they went through several changes of
fortune during the twelve months to September 30, 2007. Some of the factors
influencing these swings were:
o aggressive rhetoric in China from the government, prompting fears that the
authorities intended to curtail recent dramatic share price appreciation and
introduce a sharper capital gains tax regime;
o the acute deterioration in the US sub-prime mortgage market, followed by the
collapse of a number of sub-prime finance providers;
o the ever-growing pipeline of M&A transactions, ensuring strong performance
from Continental Europe;
o the yen's devaluation against a broad range of currencies, which proved to be
a key determinant of performance in Japan;
o a sharp sell-off in Thailand following its Central Bank's bungled attempt to
instigate exchange controls in order to curb the baht's appreciation;
o a rise in the Brazilian credit rating to one level below investment grade;
o a significant volatility in equity markets in the three months to September
2007, as one of the consequences of the US sub-prime mortgage crisis.
2
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Many of these events played particularly to our key long-term themes(1) of
'Global Realignment,' 'Debt & Credit' and 'Developing Economies.'
For the twelve months to September 30, 2007, the Fund produced a return of 26.9%
as compared to a return of 24.9% for its benchmark, the MSCI EAFE Index. Over
the period outperformance relative to the benchmark was achieved primarily in
the Industrials, Energy and Financials sectors, while poor relative performance
was seen in the Healthcare and Information Technology sectors.
In sector terms, Industrials was the top performer for the Fund: our 'Energy
Supply' theme was a primary driver for activity in this sector during 2007. We
remain positive on Telecoms, where we continue to see major opportunities for
expansion and distribution in the developing world. The sector made a good
contribution to the overall performance of the Fund during the year. The two
worst-performing areas over the period were Healthcare and Information
Technology.
During the months leading up to September 2007 we saw continuing credit fears
and concerns over a slowing US economy leading indices down before interest rate
cuts helped them rebound strongly. Prior to these rate cuts, we had seen a
concentrated period of heavy selling across asset classes in mid-August. This
became indiscriminate in some cases, in our view, and we therefore added to some
positions that we expect to be key beneficiaries of our 'Global Realignment'
theme. All of these stocks were sold down in the markets as investors reduced
their exposure to perceived 'risky' areas. We view this as ironic: the US dollar
appreciated at this time as monies were repatriated to the economy most exposed
to the catalyst of the market's concerns - the US itself.
We continue to believe that the well-documented sub-prime and credit issues will
take some time to play out. There is little clarity as to where the worst of the
debt sits as much is wrapped up in larger vehicles, and neither the investment
banks nor underlying investors can know with confidence to what extent they are
exposed. This major 'Debt and Credit' event reinforces our caution on bank
stocks: Australian and UK domestic banking exposure remains zero.
This said, we contend that the rest of the world will be better insulated from
US economic weakness as decoupling continues. Our macroeconomic outlook for Asia
ex-Japan, Continental Europe and the developing markets remains constructive.
3
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Over the next few months we expect the market to begin to differentiate more
rationally between the likely winners and losers, providing further opportunity
to increase favoured holdings. We do not see the recent turmoil greatly changing
our key themes of 'Debt & Credit', 'Energy Supply' and 'Global Realignment' and
so continue to represent these views within the Fund.
Paul Butler, Director of Investment Paul Markham, Director of Investment
Management (Global Equities) Management (Global Equities / EAFE)
Newton Investment Management Limited Newton Investment Management Limited
1 Rather than being unduly influenced by index benchmarks or fleeting market
trends, one strand of Newton's investment philosophy focuses on interpreting
the key forces, 'Themes', that drive change over the long term. Newton's
analysts interpret these themes to highlight areas of investment opportunity.
The themes referenced in this report include:
o Global Realignment - The western industrialised nations dominate the
world's GDP, wealth, consumption and market capitalisation in US dollar
terms, as well as consuming the lion's share of natural resources. The
stronger growth and increasing economic influence of the developing world
will progressively challenge this position. Some realignment over time is
inevitable; how it occurs will be crucially important to the longer term
global economic outlook.
o Debt & Credit - The era of disinflation has fostered a supercycle of
credit growth in many of the developed economies. In recent years the pace
of credit expansion has accelerated in response to global financial
deregulation, relatively loose monetary policy and innovations in
structured finance. The resulting high level of corporate and individual
leverage in these economies is in stark contrast to that prevailing in the
developing world where savings rates remain high.
o Energy Supply - Forecasts of strong developing world growth together with
increases in per capita energy usage point to continued strong demand for
petroleum products. When combined with uncertainties over supply, this
implies a structurally high real oil price. This theme has broad
implications across sectors and economies, particularly in the light of
measures to tackle climate change.
o Developing Economies - The developing economies are increasingly fully
engaged in the world trading system. Their influence on the global
economic cycle is growing and they are on an apparent convergence course
with the industrialised world. This secular trend will however be subject
to significant cyclical influences particularly from the larger economies,
such as China, and frictions regarding trade policies.
4
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Comparison of Change in Value of $100,000 Investment in
Newton International Equity Fund and the MSCI EAFE Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING IS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Newton International
PERIOD Equity Fund MSCI EAFE Index*
12/21/05 100,000 100,000
12/31/05 99,700 100,000
3/31/06 111,200 109,396
6/30/06 107,174 110,162
9/30/06 109,153 114,488
12/31/06 120,260 126,341
3/31/07 121,638 131,490
6/30/07 132,003 139,910
9/30/07 138,533 142,955
Average Annual Total Returns
(for period ended 9/30/2007)
================================================================================
Since
Inception
1 Year 12/21/2005
- --------------------------------------------------------------------------------
Fund 26.92% 20.07%
* Source: Lipper Inc.
Average annual total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
5
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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- -------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,139.40 $6.17
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.30 $5.82
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 1.15%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
6
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -----------------------------------------------------------------------------------------------------
Statoil ASA Norway Energy 2.7%
Toyota Motor Corp. Japan Consumer Discretionary 2.2
BP PLC United Kingdom Energy 2.0
Total SA France Energy 1.9
Vodafone Group PLC United Kingdom Information Technology 1.8
Nestle SA Switzerland Consumer Staples 1.8
Nokia Oyj Finland Information Technology 1.7
Anglo American PLC United Kingdom Materials 1.7
Deutsche Boerse AG Germany Financials 1.7
E On AG Germany Utilities 1.7
----
19.2%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- ---------------------------------------------------------
Europe ex U.K. 44.9%
United Kingdom 18.8
Asia ex Japan 16.7
America ex U.S. 9.4
Japan 9.2
Middle East/Africa 1.0
-----
100.0%
* Excludes short-term securities.
The Fund is actively managed. Current holdings may be different than those
presented above.
7
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--98.6%
EQUITIES--97.5%
Argentina--0.3%
Pampa Holding SA--GDR 7,171 (a) 157,142
Australia--1.2%
Telstra Corp. 233,652 593,000
Brazil--6.1%
All America Latina Logistica 40,517 577,235
Companhia de Bebidas das Americas--ADR 7,398 541,016
Diagnosticos da America SA 13,339 305,807
Petroleo Brasileiro SA--ADR 11,487 743,209
Porto Seguro SA 9,600 369,963
Tele Norte Leste Participacoes SA--ADR 20,321 456,410
2,993,640
Canada--1.1%
Oncolytics Biotech, Inc. 93,674 (a) 178,983
Teck Cominco Ltd. Class B 8,042 381,882
560,865
China--1.2%
Jiangsu Expressway Co., Ltd. 468,000 602,208
Colombia--0.6%
Suramericana de Inversiones SA 31,144 287,104
Denmark--1.1%
A P Moller-Maersk AS, Class B 39 535,882
Finland--1.7%
Nokia Oyj 22,182 843,297
France--8.4%
Alstom 3,124 635,124
AXA SA 11,435 511,692
France Telecom SA 17,554 588,002
Thales SA 8,569 502,339
Total SA 11,614 944,340
Veolia Environnement 5,573 479,925
Vivendi SA 10,682 450,883
4,112,305
Germany--12.0%
Allianz SE 2,117 494,637
Comdirect Bank AG 21,814 271,873
Deutsche Boerse AG 6,086 828,810
E On AG 4,449 822,599
Fresenius Medical Care AG & Co. KGaA 7,275 386,645
Gerry Weber International AG 10,024 323,907
K+S AG 3,899 714,790
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Germany (continued)
Praktiker Bau--und Heimwerkermaerkte AG 12,416 464,762
SAP AG 6,948 406,717
Siemens AG 5,041 693,112
Symrise AG 18,035 (a) 478,353
5,886,205
Greece--0.7%
Public Power Corp. 9,290 368,282
Hong Kong--4.0%
Esprit Holdings Ltd. 34,000 540,315
Jardine Matheson Holdings Ltd. 12,000 343,200
SRE Group Ltd. 1,100,000 475,590
Swire Pacific Ltd. Class A 48,500 588,198
1,947,303
Indonesia--1.4%
PT Astra International Tbk 172,500 363,307
PT Bank Central Asia Tbk 487,000 327,686
690,993
Italy--0.8%
Unipol Gruppo Finanziario SA 120,899 379,284
Japan--9.1%
Canon, Inc. 11,900 649,543
Japan Tobacco, Inc. 130 714,112
JFE Holdings, Inc. 7,600 538,557
Mitsubishi Corp. 24,000 760,512
Toyota Motor Corp. 18,000 1,062,418
Yamada Denki Co., Ltd. 7,280 720,585
4,445,727
Kazakhstan--0.5%
Kazkommertsbank--GDR 19,142 (a) 262,437
Luxembourg--1.1%
ArcelorMittal 7,106 560,870
Malaysia--1.5%
AMMB Holdings Berhad 269,500 343,504
Bursa Malaysia Bhd 121,000 390,896
734,400
Netherlands--1.6%
Koninklijke Philips Electronics NV 17,791 802,959
Norway--3.1%
Aker Kvaerner ASA 6,900 219,674
Statoil ASA 38,253 1,302,943
1,522,617
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
Russia--2.3%
AFK Sistema--GDR 11,598 (a) 385,634
EVRAZ GROUP SA--GDR 7,430 470,319
Oao Gazprom ADR 6,461 284,930
1,140,883
Singapore--1.9%
DBS Group Holdings Ltd. 21,000 305,434
Singapore Airlines Ltd. 49,466 619,532
924,966
South Africa--1.0%
MTN Group Ltd. 33,152 507,657
South Korea--2.3%
LG Telecom Ltd. 32,160 (a) 324,096
Samsung Fire & Marine Insurance Co., Ltd. 1,940 417,729
Shinsegae Co., Ltd. 550 382,938
1,124,763
Sweden--2.7%
Tele2 AB, Class B 27,043 584,733
Telefonaktiebolaget LM Ericsson, Class B 184,594 739,511
1,324,244
Switzerland--8.7%
ABB Ltd. 20,503 540,193
Bank Sarasin & Cie AG 70 307,983
Compagnie Financiere Richemont SA 7,518 498,422
Nestle SA 1,909 857,959
Nobel Biocare Holding AG 1,289 349,194
Novartis AG 9,942 548,916
Roche Holding AG 3,635 659,404
Syngenta AG 2,409 519,600
4,281,671
Taiwan--0.7%
Taiwan Semiconductor Manufacturing Co., Ltd. 169,000 329,402
Thailand--1.8%
Advanced Info Service PCL 121,900 337,333
Bangkok Bank Public Company Ltd. 58,600 211,918
Bank of Ayudhya PCL 396,400 329,136
878,387
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------
United Kingdom--18.6%
Admiral Group PLC 18,531 341,163
Anglo American PLC 12,435 836,624
BP PLC 82,855 961,845
British American Tobacco PLC 22,680 812,827
Cable & Wireless PLC 173,511 653,079
Eaga PLC 47,007 (a) 190,392
GlaxoSmithKline PLC 21,930 581,834
ICAP PLC 73,589 793,312
Old Mutual PLC 69,538 227,977
Prudential PLC 34,675 533,048
Smith & Nephew PLC 29,129 356,028
Standard Chartered PLC 22,697 753,801
Tesco PLC 51,777 465,232
Vodafone Group PLC 238,503 861,111
Xstrata PLC 11,529 765,056
9,133,329
TOTAL EQUITIES (Cost $39,156,319) 47,931,822
PREFERRED STOCKS--1.1%
Brazil--1.1%
Companhia Vale do Rio Doce ADR
(Cost $365,961) 18,392 523,252
TOTAL UNAFFILIATED INVESTMENTS (Cost $39,522,280) 48,455,074
AFFILIATED INVESTMENTS--1.2%
Dreyfus Institutional Preferred Plus Money Market Fund
(Cost $563,885) 563,885 (b) 563,885
----------
TOTAL INVESTMENTS--99.8% (Cost $40,086,165) 49,018,959
OTHER ASSETS, LESS LIABILITIES--0.2% 115,478
----------
NET ASSETS--100% 49,134,437
==========
Notes to Schedule of Investments:
ADR--American Depository Receipts
GDR--Global Depository Receipts
(a) Non-income producing security.
(b) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
At September 30, 2007 the Fund held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Deliver Amount Value Date September 30, 2007 to Receive (Depreciation)
- ---------------------------------------------------------------------------------------------------------------------------------
Malaysian Ringgit 1,450,000 11/15/2007 $ 426,408 $ 420,473 $ (5,935)
Norwegian Krone 2,132,221 10/15/2007 395,202 351,602 (43,600)
Singapore Dollar 625,135 11/15/2007 422,477 409,736 (12,741)
---------- ---------- --------
$1,244,087 $1,181,811 $(62,276)
========== ========== ========
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date September 30, 2007 to Deliver Appreciation
- ---------------------------------------------------------------------------------------------------------------------------------
Euro 41,274 10/1/2007 $ 58,857 $ 58,436 $ 421
Euro 56,608 10/2/2007 80,724 80,299 425
Malaysian Ringgit 1,450,000 11/15/2007 426,408 432,126 (5,718)
Malaysian Ringgit 2,438,370 1/15/2008 692,174 685,000 7,174
Norwegian Krone 2,132,221 10/15/2007 395,202 353,660 41,542
Russian Ruble 8,659,440 3/14/2008 346,479 342,000 4,479
Singapore Dollar 625,135 11/15/2007 422,477 417,613 4,864
Singapore Dollar 512,776 2/15/2008 348,712 343,000 5,712
Singapore Dollar 509,988 2/15/2008 346,815 342,000 4,815
Swedish Krona 2,284,091 2/15/2008 355,843 343,000 12,843
---------- ---------- --------
$3,473,691 $3,397,134 $ 76,557
========== ========== ========
Percentage of
Economic Sector Allocation Net Assets
- ---------------------------------------------------------
Consumer Discretionary 10.6%
Consumer Staples 7.7
Energy 9.0
Financials 21.0
Health Care 6.8
Industrials 11.5
Information Technology 6.7
Materials 11.8
Telecommunication Services 10.1
Utilities 3.4
Short-term and Other Assets 1.4
-----
100.0%
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investments in securities, at value (Note 1A):
Unaffiliated investments (cost $39,522,280) $48,455,074
Affiliated investments (Note 1H) (cost $563,885) 563,885
Cash 74,872
Foreign currency, at value (cost $83,826) 85,790
Receivable for investments sold 528,939
Interest and dividends receivable 135,248
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 82,275
Receivable from advisor (Note 2) 17,865
Prepaid expenses 2,583
-----------
Total assets 49,946,531
Liabilities
Payable for investments purchased $ 572,642
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 67,994
Accrued investment advisory fee (Note 2) 93,130
Accrued professional fees 41,882
Accrued accounting, custody, administration and transfer agent fees (Note 2) 33,065
Accrued trustees' fees (Note 2) 1,326
Accrued chief compliance officer fee (Note 2) 367
Accrued shareholder reporting fee (Note 2) 147
Other accrued expenses and liabilities 1,541
-----------
Total liabilities 812,094
-----------
Net Assets $49,134,437
===========
Net Assets consist of:
Paid-in capital $37,130,415
Accumulated net realized gain 2,718,817
Undistributed net investment income 334,026
Net unrealized appreciation 8,951,179
-----------
Total Net Assets $49,134,437
-----------
Shares of beneficial interest outstanding 1,824,077
-----------
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 26.94
===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statement of Operations
For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments
(net of foreign withholding taxes $112,484) $ 1,109,416
Dividend income from affiliated investments (Note 1 H) 18,858
Interest income 985
-----------
Total investment income 1,129,259
Expenses
Investment advisory fee (Note 2) $ 347,485
Accounting, custody, administration and transfer agent fees (Note 2) 135,208
Professional fees 49,809
Registration fees 19,758
Trustees' fees and expenses (Note 2) 4,301
Insurance expense 2,830
Miscellaneous expenses 32,004
-----------
Total expenses 591,395
Deduct:
Waiver of investment advisory fee (Note 2) (91,606)
-----------
Net Expenses 499,789
-----------
Net investment income 629,470
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 2,734,235
Foreign currency transactions and forward foreign currency exchange transactions 12,079
-----------
Net realized gain (loss) 2,746,314
Change in unrealized appreciation (depreciation) on:
Investments 6,785,579
Foreign currency translations and forward foreign currency exchange contracts 101,433
-----------
Change in net unrealized appreciation (depreciation) 6,887,012
-----------
Net realized and unrealized gain (loss) on investments 9,633,326
-----------
Net Increase in Net Assets from Operations $10,262,796
===========
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
December 21, 2005
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 629,470 $ 413,018
Net realized gain (loss) 2,746,314 326,318
Change in net unrealized appreciation (depreciation) 6,887,012 2,064,167
----------- -----------
Net increase (decrease) in net assets from investment operations 10,262,796 2,803,503
----------- -----------
Distributions to Shareholders (Note 1C)
From investment income (368,981) (464,918)
From net realized gains on investments (228,378) --
----------- -----------
Total distributions to Shareholders (597,359) (464,918)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 6,010,275 31,000,100
Dividend reinvestment 105,224 14,918
Cost of shares redeemed -- (102)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions 6,115,499 31,014,916
----------- -----------
Total Increase (Decrease) in Net Assets 15,780,936 33,353,501
Net Assets
At beginning of year 33,353,501 --
----------- -----------
At end of year [including undistributed net investment
income and distributions in excess of net investment
income of $334,026 and ($35,934), respectively] $49,134,437 $33,353,501
=========== ===========
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
December 21, 2005
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------ ------------------
Net Asset Value, Beginning of Year $21.51 $20.00
------ ------
From Operations:
Net investment income* (a) 0.35 0.27
Net realized and unrealized gains (loss) on investments 5.41 1.54
------ ------
Total from operations 5.76 1.81
------ ------
Less Distributions to Shareholders:
From net investment income (0.20) (0.30)
From net realized gains on investments (0.13) --
------ ------
Total distributions to shareholders (0.33) (0.30)
------ ------
Net Asset Value, End of Year $26.94 $21.51
====== ======
Total Return (b) 26.92% 9.15%(d)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.15% 1.15%(c)
Net Investment Income (to average daily net assets)* 1.45% 1.63%(c)
Portfolio Turnover 87% 84%(d)
Net Assets, End of Year (000's omitted) $49,134 $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) $0.30 $0.21
Ratios (to average daily net assets):
Expenses 1.36% 1.53%(c)
Net investment income 1.24% 1.25%(c)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Computed on an annualized basis.
(d) Not annualized. Returns for periods of less than one year have not been
annualized.
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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, or if such quotations do not
accurately reflect fair value, 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. 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.
17
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments. Net realized gains and losses on foreign
currency transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of
capital losses will be declared and distributed at least annually.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash.
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 and passive foreign investment companies (PFIC).
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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end will be 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 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. 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.
18
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
H. Affiliated issuers
Affiliated issuers are investment companies advised by Newton Capital
Management Ltd. ("Newton"), a wholly-owned subsidiary of The Bank of New
York Mellon Corporation ("BNY Mellon"), or its affiliates.
I. New accounting requirements
The Financial Accounting Standards Board ("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 year ended September 30, 2007. Pursuant to this agreement, for the
year ended September 30, 2007, Newton voluntarily waived a portion of its
investment advisory fee in the amount of $91,606. This arrangement is
voluntary and temporary and may be discontinued or revised by Newton at
any time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$6,630 for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of BNY Mellon 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 $128,578 for the year ended September
30, 2007.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at
the end of each quarter. Pursuant to these agreements, the Fund was
charged $2,780 for the year ended September 30, 2007, which amount is
included in miscellaneous expenses on the statement of operations. See
Note 7 for further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,250, which amount 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 BNY Mellon and an affiliate of Newton, to provide printing
and fulfillment services for the Fund. Pursuant to this agreement, the
Fund was charged $1,344, which amount is included in miscellaneous
expenses in the statement of operations, for the year ended September 30,
2007.
The Fund may pay 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
19
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 year ended September 30, 2007, the Fund was not charged an
administrative service fee by an affiliate of BNY Mellon.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of Newton, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
------------- -------------
Non-U.S. Government Securities $ 42,649,247 $ 37,112,861
============= =============
(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
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 269,340 1,549,732
Shares issued to shareholders in reinvestment of distributions 4,269 741
Shares redeemed - (5)
------- ---------
Net increase (decrease) 273,609 1,550,468
======= =========
At September 30, 2007, three shareholders of record, in the aggregate held
approximately 97.2% 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 year ended September 30, 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.
FASB 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 implication of FIN 48 and its impact in
the financial statements has not yet been determined.
20
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The tax basis components of distributable earnings and the federal tax
cost as of September 30, 2007 were as follows:
Cost for federal income tax purposes $40,130,731
===========
Gross unrealized appreciation $ 9,594,551
Gross unrealized depreciation (687,938)
-----------
Net unrealized appreciation (depreciation) $ 8,906,613
===========
Undistributed ordinary income $ 1,893,414
Undistributed capital gains 1,203,996
-----------
Total distributable earnings $ 3,097,410
===========
The tax character of distributions paid during the fiscal years ended
September 30, 2007 and September 30, 2006, was as follows:
2007 2006
----------- -----------
Ordinary income $ 597,359 $ 464,918
----------- -----------
Capital gains -- --
----------- -----------
(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 Foreign 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 September 30, 2007, the Fund held forward foreign currency exchange
contracts. See Schedule of Investments for further details.
(7) Line of Credit:
On behalf of the Fund and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the aggregate,
up to $35 million under a committed line of credit and up to $15 million
under an uncommitted line of credit. For the year ended September 30,
2007, the Fund had average borrowings outstanding of $194,782 for a total
of 78 days and incurred $1,925 of interest expense. At September 30, 2007,
the Fund did not have a loan balance outstanding.
21
Mellon Institutional Funds Investment Trust
Newton International Equity Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of Newton International Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Newton International Equity Fund
(the "Fund") at September 30, 2007, the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights for
the year then ended and for the period from December 21, 2005 (commencement of
operations) to September 30, 2006, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
December 4, 2007
22
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $612
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $612
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 25 None Fund: $612
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $646
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 *
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
23
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Trust, and J. David Officer was elected as
President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
24
THIS PAGE INTENTIONALLY LEFT BLANK
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6912AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report Standish Mellon
Intermediate Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related
to the difficulties experienced by mortgage securities backed by sub-prime
loans, and the high degree of leverage employed by many hedge funds, whose
impact on the markets has swollen significantly over the past decade. From
its peak of over 1550 in mid-July, the S&P 500 dropped by about 6.5%,
before rebounding to close the quarter at just under its peak for the
12-month period, resulting in an 11.8% return over that period. Part of the
rebound was due to the September 18 decision by the U.S. Federal Reserve
Board to cut the Federal Funds rate by 50 basis points to 4.75%. This ended
a string of nine consecutive meetings in which the Fed left rates
unchanged. The reduction was 25 basis points greater than anticipated,
driven by the Fed's concerns over the housing recession and tighter credit
availability.
Credit markets responded to the sub-prime troubles with a broad-based
flight to quality as investors fled to short-term Treasury securities. One
result was a significant steepening of the yield curve, as the yield on the
2-year Treasury note fell 86 basis points to 3.98%, while the 30-year
Treasury bond yield dropped just 25 basis points to 4.84%. In a dramatic
re-pricing of risk, spreads widened in the corporate bond sector compared
to Treasury issues, which has the effect of making corporate borrowing more
expensive. In another indication of just how disruptive this period was in
the credit markets, even some issuers of commercial paper - typically
viewed as the safest segment of the corporate market - had trouble issuing
or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the
mortgage sector clearly has been shaken, and this will likely exacerbate
the housing recession as financing becomes more expensive. In the view of
some, the likelihood of a broader U.S. recession has become greater. Our
view is that a period of diminished growth - around 2% GDP growth in 2008
vs. the 2.5% long-term trend - is more likely. We see U.S. exports boosted
by the weaker dollar, multi-year global economic expansion and monetary
growth, and high corporate profitability - especially for multinational
franchises - as being positives that partially offset the drag of the
housing sector and lower consumption.
We wish to thank you for your business and confidence in Mellon
Institutional Funds. Please feel free to contact us with questions or
comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
For the year ended September 30, 2007, the Standish Mellon Intermediate Tax
Exempt Bond Fund produced a total return after expenses of 3.26%. This result
trailed the benchmark performance index (Lehman Brothers Municipal 3-5-7-10 Year
Municipal Bond Index) return of 3.73%.
Tax-exempt interest rates changed only modestly during the last 12 months in
spite of highly visible turmoil from subprime mortgages, a midsummer contraction
of bond market liquidity and a half-point cut by the U.S. Federal Reserve in a
key overnight interest rate.
In the widening credit turmoil that roiled worldwide bond markets this summer,
investors fled risky assets for the safe haven of government bonds and notes. A
repricing of risk in July and August caused underperformance among many of the
income-oriented municipal revenue bond sectors which had consistently produced
excess returns over the last few years. Weightings in hospitals and housing
detracted from relative returns as investors abandoned those sectors in favor of
triple-A rated government-backed pre-refunded bonds. In addition, tax-exempt
bonds tied to corporations, particularly pre-paid natural gas and tobacco
securitization bonds, traded off in concert with trends among corporate bonds in
the taxable markets.
After another year of steady ratings upgrades, we believe municipal credit
quality is leveling out, albeit at a very high level. Average credit quality
among intermediate municipals is double-A. The Fund established a position in
bonds issued by the Commonwealth of Puerto Rico, which benefited during the
period from improving creditworthiness and strengthened financial management.
While U.S. gross domestic product may slow to below trend over the next year, we
believe that healthy corporate balance sheets, higher government spending,
export growth and income expansion should all help stave off recession. The
continuing downturn in housing and spreading financial contagion from subprime
mortgages may force the Federal Reserve to lower short-term interest rates again
by early 2008. Inflation does not appear to be a problem, which relieves upward
pressures on longer-term rates. Amidst heightened credit market volatility, the
Fund continues to emphasize high credit quality and a neutral interest rate
posture. As we write this, municipal bonds are priced attractively relative to
Treasury securities, producing a substantial after-tax yield advantage for
shareholders in all but the lowest federal tax brackets. In addition, the 2001
and 2003 tax cuts are set to expire in 2010, making tax-exempt bonds potentially
more valuable in coming years.
It has been our privilege to manage the Fund, and we thank you for your
continued support.
Sincerely,
Christine Todd, CFA Steven Harvey
Portfolio Manager Portfolio Manager
Standish Mellon Asset Standish Mellon Asset
Management Company, LLC Management Company, LLC
2
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Comparison of Change in Value of $100,000 Investment in
Standish Mellon Intermediate Tax Exempt Bond Fund and
the Lehman Brothers 3-5-7-10 Year Municipal Bond Index (Unaudited)
- --------------------------------------------------------------------------------
Standish Mellon Lehman Brothers
PERIOD Intermediate Tax Exempt 3-5-7-10 Year Muni Bond Index*
Bond Fund
9/30/97 100,000 100,000
12/31/97 102,078 101,971
3/31/98 103,040 103,085
6/30/98 104,363 104,353
9/30/98 107,228 107,272
12/31/98 107,585 108,098
3/31/99 108,314 109,061
6/30/99 106,456 107,517
9/30/99 106,860 108,430
12/31/99 106,658 108,447
3/31/00 108,612 110,108
6/30/00 109,928 111,810
9/30/00 112,123 114,138
12/31/00 115,678 117,598
3/31/01 118,235 120,649
6/30/01 119,060 121,664
9/30/01 122,198 124,957
12/31/01 121,351 124,243
3/31/02 122,242 125,258
6/30/02 126,473 130,082
9/30/02 131,557 135,055
12/31/02 131,898 135,582
3/31/03 133,288 137,058
6/30/03 136,226 139,967
9/30/03 136,688 140,863
12/31/03 137,617 141,682
3/31/04 139,137 143,495
6/30/04 136,296 140,605
9/30/04 140,487 144,910
12/31/04 141,663 145,867
3/31/05 140,494 144,565
6/30/05 143,781 147,811
9/30/05 143,550 147,469
12/31/05 144,238 148,160
3/31/06 144,385 148,123
6/30/06 144,547 148,370
9/30/06 148,685 152,654
12/31/06 149,823 153,747
3/31/07 151,160 155,113
6/30/07 150,500 154,558
9/30/07 153,530 158,342
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 11/2/1992
- --------------------------------------------------------------------------------
Fund 3.26% 3.00% 3.14% 4.38% 5.19%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- ------------------------------------------------------------------------------------------------
Actual $ 1,000.00 $ 1,015.70 $ 2.27
Hypothetical (5% return
per year before expenses) $ 1,000.00 $ 1,022.81 $ 2.28
- -----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.45%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Rate Maturity Investments
- -------------------------------------------------------------------------------------------------------
Golden State Tobacco Securitization Corp. 4.500% 6/1/2027 2.3%
Tennessee Energy Acquisition Corporation 5.250 9/1/2017 1.6
New York State Dormitory Authority Revenue 5.250 11/15/2023 1.4
Puerto Rico Public Finance Corp. LOC: Government
Development Bank for Puerto Rico 5.750 8/1/2027 1.2
Tobacco Settlement Funding Corp. NJ 4.500 6/1/2023 1.2
Wisconsin State COP MBIA NCL 5.000 3/1/2010 1.2
Puerto Rico Commonwealth Fuel Sales Tax Revenue 5.000 7/1/2018 1.2
Oklahoma DFA Revenue Hillcrest
Healthcare System Prerefunded 5.625 8/15/2019 1.2
Tobacco Settlement Financing Corporation NJ Prerefunded 6.250 6/1/2043 1.2
New York State Dormitory Authority
State University Educational Facilities MBIA IBC 5.250 5/15/2015 1.1
----
13.6%
* Excluding short-term investments.
Percentage of
Economic Sector Allocation Net Assets
- ------------------------------------------------------------
General Obligations 12.2%
Government Backed 11.3
Housing Revenue 4.3
Industrial Development 6.8
Insured Bonds 41.7
Lease Revenue 5.1
Revenue Bonds 12.3
Special Revenues 3.0
Short-term and Net Other Assets 3.3
-----
100.0%
Summary of Combined Ratings+
- --------------------------------------------------------------------------------
Percentage of
Quality Breakdown Investments
- --------------------------------------------------------------------------------
AAA 62.2%
AA 22.4
A 4.4
BBB 10.0
BB 1.0
-----
Total 100.0%
+ Based on ratings from Standard & Poor's and/or Moody's Investors Services.
If a security receives split (different) ratings from multiple rating
organizations, the Fund treats the security as being rated in the higher
rating category.
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS--96.7%
General Obligations--12.2%
ABAG CA Odd Fellows Homes 5.700% 8/15/2014 1,000,000 1,011,500
Austin TX Independent School District PSF-GTD NCL 5.000 8/1/2016 1,000,000 1,081,440
California State 5.000 10/1/2011 70,000 72,819
California State 5.000 6/1/2014 1,435,000 1,539,798
California State 5.000 8/1/2016 750,000 809,332
Commonwealth of Massachusetts NCL 6.000 11/1/2010 1,350,000 1,444,365
Commonwealth of Massachusetts 5.000 7/1/2012 2,000,000 2,118,320
Magnolia TX Independent School District Refunding PSF-GTD 5.000 8/15/2018 1,000,000 1,074,910
New York NY 5.250 9/1/2014 1,000,000 1,087,370
New York NY NCL 5.000 6/1/2011 1,000,000 1,045,830
New York NY Series B NCL 5.000 8/1/2011 770,000 806,783
New York NY Series H NCL 5.000 8/1/2011 1,700,000 1,781,209
New York NY NCL 5.000 8/1/2013 1,500,000 1,598,880
Pasadena TX Independent School District PSF-GTD NCL 5.000 2/15/2015 1,360,000 1,461,238
Puerto Rico Commonwealth Fuel Sales Tax Revenue (a) 5.000 7/1/2018 2,325,000 2,348,575
Puerto Rico Public Building Authority Revenue (a) 5.000 7/1/2028 1,000,000 1,040,130
San Antonio TX Apartment Systems Revenue AMT FSA 5.000 7/1/2013 1,000,000 1,055,540
San Antonio TX 5.000 2/1/2015 1,000,000 1,074,090
Spring Branch TX Independent School District PSF GTD 5.625 2/1/2014 1,000,000 1,104,100
Texas Refunding AMT NCL 5.000 8/1/2017 1,000,000 1,066,310
------------
24,622,539
------------
Government Backed--11.3%
Alpine UT School District Prerefunded 5.000 3/15/2011 25,000 25,359
Dallas TX Independent School District Prerefunded 5.500 2/15/2017 1,500,000 1,615,395
District of Columbia MBIA NCL Prerefunded 5.750 6/1/2010 10,000 10,561
Golden State Tobacco Securitization Corp. Prerefunded 5.000 6/1/2021 155,000 156,651
Goose Creek TX Independent School District PSF-GTD Prerefunded 7.000 8/15/2009 110,000 116,974
Goose Creek TX Independent School District PSF-GTD Unrefunded 7.000 8/15/2009 260,000 275,660
Goose Creek TX Independent School District PSF-GTD Escrowed to maturity 7.000 8/15/2009 230,000 244,582
Massachusetts DFA Williston School Prerefunded 6.000 10/1/2013 185,000 191,240
Massachusetts MBIA Prerefunded 5.500 11/1/2015 1,000,000 1,070,650
Massachusetts State FSA Prerefunded 5.000 12/1/2023 1,000,000 1,082,390
Met Govt Nashville & Davidson TN Industrial
Development Board Revenue Prerefunded 7.500 11/15/2010 1,000,000 1,095,460
Milwaukee WI Metropolitan Sewer District Prerefunded 5.250 10/1/2019 1,000,000 1,087,130
New Jersey State Transportation FSA 5.750 12/15/2014 770,000 871,009
Northern TOB Securitization Corp. Alaska Prerefunded 6.500 6/1/2031 1,000,000 1,073,170
Northern TOB Securitization Corp. Alaska Prerefunded 4.750 6/1/2015 425,000 428,553
Oklahoma DFA Revenue Prerefunded 5.625 8/15/2029 1,000,000 1,047,770
Oklahoma DFA Revenue Hillcrest Healthcare System Prerefunded 5.625 8/15/2019 2,185,000 2,289,377
Osceola County School Board FL COP AMBAC Prerefunded 5.250 6/1/2027 1,000,000 1,079,530
Palm Beach County FL Solid Waste AMBAC 6.000 10/1/2009 60,000 62,912
Puerto Rico Commonwealth Highway & Transportation Authority Revenue 5.750 7/1/2041 1,500,000 1,644,210
Texas Municipal Power Agency MBIA (b) 0.000 9/1/2016 10,000 7,008
Tobacco Settlement Authority IA 5.600 6/1/2035 2,000,000 2,152,080
Tobacco Settlement Funding Corporation NJ Prerefunded 5.000 6/1/2010 500,000 517,715
Tobacco Settlement Funding Corporation NJ Prerefunded 4.375 6/1/2019 215,000 216,183
Tobacco Settlement Funding Corporation NJ Prerefunded 6.750 6/1/2039 1,855,000 2,142,488
Tobacco Settlement Funding Corporation NJ Prerefunded 6.250 6/1/2043 2,000,000 2,259,300
------------
22,763,357
------------
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Housing Revenue--4.3%
California Housing Finance Agency AMT 4.600% 2/1/2041 1,500,000 1,500,495
Colorado HFA Single Family Project AMT (a) 6.800 2/1/2031 1,275,000 1,352,941
Colorado HFA Single Family Project AMT (a) 6.600 8/1/2032 990,000 1,046,925
Florida Housing Finance Corp. FSA 5.750 1/1/2017 25,000 25,142
Illinois Financial Authority Student Housing Revenue NCL 5.000 6/1/2012 1,160,000 1,130,780
Ohio HFA Mortgage Revenue AMT GNMA 5.350 9/1/2018 175,000 177,469
Rhode Island Housing & Mortgage Finance Corp. 4.950 10/1/2016 135,000 136,737
Utah HFA AMT SFM 5.400 7/1/2020 170,000 171,377
Virginia Housing Development Authority,
Commonwealth Mortgage Revenue AMT NCL 4.250 7/1/2013 2,000,000 1,990,320
Wyoming Community Development Authority Housing Revenue AMT 5.500 12/1/2017 1,000,000 1,068,000
------------
8,600,186
------------
Industrial Development--6.8%
Connecticut Gaming Authority Mohegan Tribe 5.375 1/1/2011 900,000 912,177
Dayton OH Special Facilities Revenue AMT NCL 6.200 10/1/2009 1,000,000 1,043,330
Gloucester NJ Resource Recovery (a) 6.850 12/1/2029 500,000 524,005
Golden State Tobacco Securitization Corp. 4.500 6/1/2027 4,735,000 4,434,612
Hendersonville TN Kroger 5.950 12/15/2008 120,000 121,478
Massachusetts DFA Waste Management Resource Recovery AMT (a) 6.900 12/1/2029 500,000 523,990
Northern TOB Securitization Corp. AK 4.625 6/1/2023 980,000 942,221
San Manuel Entertainment Series 2004-C 4.500 12/1/2016 1,000,000 975,740
Tobacco Settlement Authority of Southern California 4.750 6/1/2025 975,000 925,577
Tobacco Settlement Authority WA 6.500 6/1/2026 935,000 980,553
Tobacco Settlement Funding Corp. NJ 4.500 6/1/2023 2,540,000 2,386,482
------------
13,770,165
------------
Insured Bonds--41.7%
Alabama Agriculture & Mechanical University Revenue AMBAC NCL 5.000 11/1/2013 1,000,000 1,072,960
Atlanta GA Airport Revenue AMT FSA NCL 5.250 1/1/2012 900,000 948,852
Atlanta GA Airport Revenue AMT FSA NCL 5.250 1/1/2013 1,000,000 1,062,920
Broward County FL School Board COP AMBAC 5.000 7/1/2013 1,000,000 1,057,650
Broward County FL School Board COP FGIC 5.000 7/1/2013 1,000,000 1,057,650
Bourbonnais IL Industrial Project Revenue NCL RADIAN 5.000 11/1/2015 1,000,000 1,036,260
California State AMBAC 6.000 4/1/2016 1,000,000 1,155,300
Carroll TX Independent School District MBIA 5.000 2/15/2016 1,155,000 1,246,615
Charleston SC COP MBIA 6.000 12/1/2008 1,000,000 1,028,610
Chicago IL AMBAC AMT 5.500 1/1/2012 1,000,000 1,045,810
Chicago IL Transportation Authority AMBAC 5.250 6/1/2013 1,000,000 1,080,580
Chicago O'Hare International Airport IL Revenue FGIC 5.250 1/1/2014 1,000,000 1,076,990
Chicago O'Hare International Airport IL Revenue MBIA NCL 5.250 1/1/2017 1,000,000 1,090,090
Citizens Property Insurance Corp. FL MBIA 5.000 3/1/2014 1,000,000 1,070,620
Clark County NV AMBAC 5.000 11/1/2013 1,000,000 1,070,150
Clark County NV Airport Revenue AMT FGIC NCL 5.250 7/1/2012 1,000,000 1,060,120
Cleveland OH Waterworks Revenue MBIA 5.500 1/1/2013 1,500,000 1,574,385
Colorado State Department of Corrections
Penitentiary II Project B AMBAC 5.000 3/1/2015 1,000,000 1,078,850
Cook County IL High School FGIC NCL 7.875 12/1/2014 750,000 951,840
Cook County IL School District FSA NCL 6.750 5/1/2010 1,750,000 1,886,272
Denver Colorado City and County Airport Revenue AMT FGIC 5.250 11/15/2013 1,000,000 1,062,030
Detroit MI City School District FSA NCL 5.000 5/1/2014 1,000,000 1,075,260
Detroit MI Sewer Disposal Revenue FSA NCL 5.250 7/1/2019 1,000,000 1,102,350
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Insured Bonds (continued)
Detroit MI Sewer Disposal Revenue MBIA NCL 5.000% 7/1/2013 1,000,000 1,069,870
District of Columbia MBIA NCL 5.750 6/1/2010 15,000 15,811
Douglas County CO School District MBIA 7.000 12/15/2012 625,000 722,669
Fairfax County VA EDA Residential Recovery AMBAC AMT NCL 6.100 2/1/2011 1,000,000 1,069,590
Farmington NM Pollution Control Revenue FGIC (a) 3.550 4/1/2029 2,000,000 1,992,920
Fort Bend County TX MBIA NCL 5.000 3/1/2014 1,000,000 1,070,030
Golden State Tobacco Securitization Corp. AMBAC
(4.60% beginning 6/1/2010) (c) 0.000 6/1/2023 750,000 658,005
Golden State Tobacco Securitization Corp. AMBAC 5.000 6/1/2010 500,000 512,985
Harris County TX Health Facility Development Corp. MBIA 6.000 6/1/2013 1,000,000 1,108,910
Harris County TX Toll Revenue FGIC NCL 6.000 8/1/2012 1,000,000 1,102,630
Hawaii Harbor AMT FSA 5.000 1/1/2014 1,000,000 1,060,950
Hillsborough County FL Assessment Revenue FGIC 5.000 3/1/2013 1,000,000 1,057,660
Hillsborough County FL Utility Revenue AMBAC 5.500 8/1/2012 1,000,000 1,081,620
Honolulu Hawaii City & County Board Water Supply AMT MBIA 5.000 7/1/2014 1,000,000 1,061,580
Indianapolis IN Airport Authority AMT AMBAC 5.000 1/1/2017 1,000,000 1,052,740
Intermountain Power Agency UT MBIA NCL 6.500 7/1/2010 1,000,000 1,076,430
Louisville & Jefferson County KY Regional Airport
Authority Revenue FSA AMT 5.500 7/1/2011 1,355,000 1,434,606
Lubbock County TX FSA 4.500 2/15/2021 1,000,000 1,006,030
Massachusetts HEFA Lahey Clinic Medical Center FGIC 5.000 8/15/2014 1,000,000 1,071,260
Mesa AZ Utility System Revenue FGIC 5.000 7/1/2018 1,000,000 1,090,240
Mesa AZ Utility System Revenue MBIA NCL 6.000 7/1/2020 1,250,000 1,483,837
Metropolitan Washington DC Airports Authority
Airport System Revenue AMT AMBAC NCL 5.000 10/1/2015 1,000,000 1,059,420
Metropolitan Washington DC Airports Authority
Airport System Revenue AMT FGIC NCL 5.500 10/1/2012 1,715,000 1,839,235
Metropolitan Washington DC Airports Authority
Airport System Revenue AMT MBIA 5.000 10/1/2012 1,000,000 1,049,940
Miami Dade County FL Aviation Revenue AMT MBIA 5.250 10/1/2014 1,000,000 1,067,690
Midlothian TX Development Authority RADIAN 5.000 11/15/2013 530,000 546,865
Minneapolis and Saint Paul MN Metropolitan Airports
Commission Airports Revenue FGIC NCL 5.000 1/1/2016 1,000,000 1,073,940
Nassau County NY FGIC 6.000 7/1/2010 25,000 26,613
New Jersey Health Care Facilities Financing Authority Revenue AMBAC 4.800 8/1/2021 350,000 352,114
New Jersey State Transportation FSA 5.750 12/15/2014 230,000 258,932
New Jersey Transit Corporation COP AMBAC NCL 5.250 9/15/2014 1,000,000 1,085,270
New York State Dormitory Authority Presbyterian Hospital AMBAC 4.400 8/1/2013 10,000 10,030
New York State Dormitory Authority State University
Educational Facilities MBIA 6.000 5/15/2015 1,000,000 1,072,380
New York State Dormitory Authority State University
Educational Facilities MBIA IBC 5.250 5/15/2015 2,000,000 2,171,280
North Carolina Medical Care Community HCF Revenue AMBAC 5.000 10/1/2012 750,000 795,495
North Slope Boro Alaska MBIA 5.000 6/30/2016 1,000,000 1,083,850
Palm Beach County FL Public Improvement Revenue AMBAC 5.000 6/1/2015 1,000,000 1,081,140
Palm Beach County FL School Board COP MBIA 5.000 8/1/2011 1,000,000 1,043,050
Palm Beach County FL School Board COP AMBAC 5.000 8/1/2013 1,000,000 1,060,010
Palm Beach County FL Solid Waste Authority Revenue AMBAC 5.000 10/1/2011 1,000,000 1,047,860
Pasco County FL Solid Waste AMBAC AMT NCL 6.000 4/1/2010 1,000,000 1,054,080
Pennsylvania Economic DFA Resource Recovery Revenue;
Colver Project AMT AMBAC 5.000 12/1/2012 1,000,000 1,048,060
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Insured Bonds (continued)
Philadelphia PA School District FSA NCL 5.750% 2/1/2011 1,000,000 1,067,780
Platte River Power Authority CO Power Revenue FSA 5.000 6/1/2013 2,000,000 2,142,160
Port Authority NY & NJ AMT FGIC 5.000 10/1/2013 1,000,000 1,064,890
Port Saint Lucie FL Community Redevelopment Agency Revenue MBIA 5.000 1/1/2019 1,550,000 1,648,983
Port of Seattle WA Revenue AMBAC 5.000 10/1/2014 2,000,000 2,126,000
Puerto Rico Electric Power Authority Revenue XLCA 5.500 7/1/2016 500,000 561,915
Raleigh Durham NC Airport Authority AMT FGIC NCL 5.000 5/1/2014 1,190,000 1,258,187
Saint Louis MO Airport Revenue FSA NCL 5.000 7/1/2014 1,250,000 1,338,438
Saint Louis MO Airport Revenue FSA 5.000 7/1/2013 1,000,000 1,066,130
Stafford TX Economic Development FGIC 6.000 9/1/2015 525,000 600,563
Sweetwater County WY Improvement Project Powers
Board Lease Revenue MBIA 5.000 12/15/2009 1,120,000 1,154,978
Wisconsin State COP MBIA NCL 5.000 3/1/2010 2,295,000 2,368,486
------------
83,918,301
------------
Lease Revenue--5.1%
Greenville County SC School District 5.000 12/1/2011 1,000,000 1,047,700
New Jersey B PPTYS Lease Revenue King County Washington Project 5.000 12/1/2014 1,000,000 1,077,170
New Jersey Economic Development Authority Revenue
School Facilities Construction NCL 5.000 9/1/2012 1,000,000 1,058,780
New York State Dormitory Authority Revenue (a) 5.250 11/15/2023 2,500,000 2,658,600
New York State Thruway Authority Service Contract Revenue NCL 5.000 4/1/2011 1,000,000 1,045,580
Puerto Rico Public Finance Corp. LOC: Government
Development Bank for Puerto Rico (a) 5.750 8/1/2027 2,250,000 2,394,787
Tobacco Settlement Funding Corp. NY 5.250 6/1/2013 1,000,000 1,010,110
------------
10,292,727
------------
Revenue Bonds--12.3%
Alaska Student Loan Corp. Revenue AMT NCL 5.250 6/1/2014 1,000,000 1,078,470
Energy Northwest Washington Electricity Revenue 5.000 7/1/2011 1,000,000 1,048,580
Energy Northwest Washington Electricity Revenue 5.500 7/1/2015 1,000,000 1,112,360
Franklin County OH Revenue Refunding Trinity Health Credit NCL 5.000 6/1/2014 1,340,000 1,409,600
Illinois DFA Depaul University NCL 5.500 10/1/2011 1,000,000 1,053,360
Illinois HEFA Condell Medical Center 6.000 5/15/2010 270,000 274,544
Indiana Health Facility Financing Authority Revenue 5.000 11/1/2011 500,000 520,920
Lubbock TX Health Facilities Development St. Joseph Healthcare System 5.000 7/1/2008 2,000,000 2,021,160
Main Street National Gas, Inc. Georgia Gas Project Revenue 5.000 3/15/2018 1,000,000 1,025,350
Massachusetts HEFA Partners NCL 5.000 7/1/2012 1,250,000 1,300,162
Metropolitan Transportation Authority NY Revenue 5.250 11/15/2014 1,000,000 1,088,980
Michigan State Hospital Finance Authority 5.250 11/15/2010 1,000,000 1,035,650
New Hampshire HEFA Mondanock Hospital 5.250 10/1/2007 100,000 100,000
New Mexico State Hospital Equipment Loan Revenue
Presbyterian Healthcare Services Prerefunded 5.750 8/1/2012 1,000,000 1,084,160
New York City NY Industrial Development Agency
Special Facility Revenue AMT 5.500 1/1/2014 1,000,000 1,072,390
Puerto Rico Commonwealth Highway and Transportation Authority Revenue 5.000 7/1/2016 1,000,000 1,060,230
SA Energy Acquisition Public Facility Corporation TX Gas Supply Revenue 5.250 8/1/2014 1,000,000 1,055,630
Tennessee Energy Acquisition Corporation 5.250 9/1/2017 3,000,000 3,153,690
Texas Municipal Gas Acquisition and Supply Corporation I
Gas Supply Revenue 5.000 12/15/2011 1,000,000 1,036,290
Texas Municipal Gas Acquisition and Supply Corporation I
Gas Supply Revenue 5.000 12/15/2014 2,000,000 2,085,780
Texas Transportation Commission First Tier Revenue NCL TBA (d) 5.000 4/1/2016 1,000,000 1,079,640
------------
24,696,946
------------
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Special Revenues--3.0%
Florida Hurricane Catastrophe Funding Financial Corp. (a) 5.250% 7/1/2012 2,000,000 2,132,740
Jicarilla NM Apache Nation Revenue 5.000 9/1/2013 500,000 522,060
Puerto Rico Commonwealth Government Development Bank 5.000 12/1/2015 1,000,000 1,058,280
Puerto Rico Commonwealth Government Development Bank AMT 5.250 1/1/2015 600,000 635,118
Scottsdale AZ Excise Tax Revenue 5.000 7/1/2015 1,550,000 1,680,185
Wisconsin State Transportation 5.500 7/1/2010 15,000 15,750
------------
6,044,133
------------
TOTAL BONDS (Cost $193,878,407) 194,708,354
------------
SHORT-TERM INVESTMENTS--2.0%
Short-Term Bonds--2.0%
Kansas State Department of Transportation Highway Revenue (a) 4.130 9/1/2020 1,700,000 1,700,000
Massachusetts State Development Finance Agency Revenue (a) 3.870 10/1/2042 400,000 400,000
Massachusetts State Development Finance Agency Revenue RADIAN (a) 6.000 7/1/2032 1,000,000 1,000,000
Massachusetts State Development Finance Agency Revenue RADIAN (a) 6.000 1/1/2033 1,000,000 1,000,000
------------
Total Short-Term Bonds (Cost $4,100,000) 4,100,000
------------
Shares
Investment Companies--0.0% ------
Wells Fargo National Tax-Free Money Market Fund (Cost $18,780) 18,780 18,780
------------
Total Short-Term Investments (Cost $4,118,780) 4,118,780
------------
TOTAL INVESTMENTS--98.7% (Cost $197,997,187) 198,827,134
------------
OTHER ASSETS, LESS LIABILITIES--1.3% 2,652,618
------------
NET ASSETS--100% 201,479,752
============
Notes to Schedule of Investments:
AMBAC--American Municipal Bond Assurance Corporation
AMT--Alternative Minimum Tax
COP--Certificate of Participation
DFA--Development Finance Authority
EDA--Economic Development Authority
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
GTD--Guaranteed
HEFA--Heatlth & Educational Facilities Authority
HFA--Housing Finance Authority
MBIA--Municipal Bond Investors Assurance Insurance Corporation
NCL--Non-callable
PSF--Permanent School Fund
RADIAN--Radian Group
SFM--Single Family Mortgage
TBA--To Be Announced
TOB--Tobacco
XLCA--XL Capital Assurance Inc.
(a) Variable Rate Security; rate indicated is as of September 30, 2007.
Variable rate securities that reset monthly or more frequently are
considered short-term securities for reporting purposes.
(b) Zero coupon security.
(c) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date.
(d) Delayed delivery security.
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (cost $197,997,187) $198,827,134
Interest receivable 2,680,528
Receivable for Fund shares sold 1,351,716
Prepaid expenses 26,788
------------
Total assets 202,886,166
Liabilities
Payable for securities purchased $ 1,075,400
Payable for Fund shares redeemed 191,333
Distributions Payable 61,259
Accrued accounting, custody, administration and transfer agent fees (Note 2) 32,235
Accrued professional fees 28,145
Accrued administrative services expense (Note 2) 9,145
Accrued trustees' fees and expenses (Note 2) 4,964
Accrued shareholder reporting fee (Note 2) 1,711
Accrued chief compliance officer fee (Note 2) 367
Other accrued expenses and liabilities 1,855
-----------
Total liabilities 1,406,414
------------
Net Assets $201,479,752
------------
Net Assets consist of:
Paid-in capital $200,883,396
Accumulated net realized loss (251,710)
Undistributed net investment income 18,119
Net unrealized appreciation 829,947
------------
Total Net Assets $201,479,752
============
Shares of beneficial interest outstanding 9,329,109
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 21.60
============
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statement of Operations For the Year
Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income $ 6,296,097
Dividend income 169,491
------------
Total investment income 6,465,588
Expenses
Investment advisory fee (Note 2) $ 632,093
Accounting, custody, administration and transfer agent fees (Note 2) 132,984
Registration fees 63,236
Professional fees 35,531
Administrative service fee (Note 2) 24,557
Trustees' fees and expenses (Note 2) 16,599
Insurance expense 5,527
Miscellaneous expenses 26,828
-----------
Total expenses 937,355
Deduct:
Waiver of investment advisory fee (Note 2) (226,230)
-----------
Net expenses 711,125
------------
Net investment income 5,754,463
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on Investments 134,023
Change in unrealized appreciation (depreciation) on Investments (608,630)
------------
Net realized and unrealized gain (loss) on investments (474,607)
------------
Net Increase in Net Assets from Operations $ 5,279,856
============
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 5,754,463 $ 4,198,620
Net realized gain (loss) 134,023 (258,860)
Change in net unrealized appreciation (depreciation) (608,630) 304,871
------------ ------------
Net increase (decrease) in net assets from investment operations 5,279,856 4,244,631
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (5,754,463) (4,198,620)
------------ ------------
Total distributions to shareholders (5,754,463) (4,198,620)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 108,485,320 50,311,439
Value of shares isued to shareholders in reinvestment of distributions 5,083,310 3,487,897
Cost of shares redeemed (net of redemption fees of $1,133 and $0, respectively) (39,541,640) (35,231,940)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 74,026,990 18,567,396
------------ ------------
Total Increase (Decrease) in Net Assets 73,552,383 18,613,407
Net Assets
At beginning of year 127,927,369 109,313,962
------------ ------------
At end of year (including undistributed net investment income of
$18,119 and $18,119) $201,479,752 $127,927,369
============ ============
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- ------- --------
Net Asset Value, Beginning of Year $ 21.69 $ 21.71 $ 22.05 $ 22.78 $ 22.78
-------- -------- -------- -------- --------
From Investment Operations:
Net investment income* (a) 0.78 0.78 0.77 0.69 0.81
Net realized and unrealized gains (loss) on investments (0.09) (0.02) (0.29) (0.08) 0.07
-------- -------- -------- -------- --------
Total from operations 0.69 0.76 0.48 0.61 0.88
-------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.78) (0.78) (0.77) (0.71) (0.81)
From net realized gains on investments -- -- (0.05) (0.63) (0.07)
-------- -------- -------- -------- --------
Total distributions to shareholders (0.78) (0.78) (0.82) (1.34) (0.88)
-------- -------- -------- ------- --------
Net Asset Value, End of Year $ 21.60 $ 21.69 $ 21.71 $ 22.05 $ 22.78
======== ======== ======== ======== ========
Total Return (b) 3.26% 3.58% 2.18% 2.76% 3.88%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.45% 0.45% 0.45% 0.50% 0.65%
Net Investment Income (to average daily net assets)* 3.63% 3.61% 3.50% 3.16% 3.58%
Portfolio Turnover 10% 29% 35% 72% 42%
Net Assets, End of Year (000's omitted) $201,480 $127,927 $109,314 $111,887 $ 70,505
- ------------
* 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) $ 0.75 $ 0.74 $ 0.73 $ 0.65 $ 0.80
Ratios (to average daily net assets):
Expenses 0.59% 0.63% 0.62% 0.68% 0.68%
Net investment income 3.48% 3.43% 3.33% 2.97% 3.55%
(a) Calculated using the average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
Securities (including illiquid securities) for which quotations are not
readily available, or if such quotations do not accurately reflect fair
value, 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. 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 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 capital
loss carryovers.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments may include temporary book and tax
basis differences which will be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
15
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among 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 issuer
Affiliated issuers are investment companies advised by Standish Mellon
Asset Management Company LLC ("Standish Mellon"), a wholly-owned subsidiary
of The Bank of New York Mellon Corporation ("BNY Mellon"), or its
affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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 year ended September 30, 2007. Pursuant to this arrangement, for the
year ended September 30, 2007, Standish Mellon voluntarily waived a portion
of its investment advisory fee in the amount of $226,230. This arrangement
is voluntary and temporary and may be discontinued or revised by Standish
Mellon at any time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$10,606, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of BNY Mellon 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 $122,378 for the year ended September
30, 2007.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged
$1,504 for the year ended September 30, 2007, which is included in
miscellaneous expenses on the statement of operations. See Note 6 for
further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,245, which amount is included
in miscellaneous expenses in the statement of operations. 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 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.
16
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of BNY Mellon and an affiliate of Standish Mellon, to provide
printing and fulfillment services for the Fund. Pursuant to this agreement,
the Fund was charged $4,841, which is included in miscellaneous expenses in
the statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $18,458 for fees
payable to BNY Mellon Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of Standish, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
----------- -----------
Non-U.S. Government Securities $85,987,797 $15,337,465
=========== ===========
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 5,034,122 2,339,293
Shares issued to shareholders in
reinvestment of distributions 235,626 161,970
Shares redeemed (1,838,195) (1,638,284)
---------- ----------
Net increase (decrease) 3,431,553 (862,979)
========== ==========
At September 30, 2007, two shareholders of record held in the aggregate 84%
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 year ended September 30, 2007, the Fund received
$1,133 in redemption fees which 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.
17
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
In July 2006, FASB 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 implication of FIN 48 and its impact in
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $ 197,997,187
=============
Gross unrealized appreciation $ 1,729,255
Gross unrealized depreciation (899,308)
-------------
Net unrealized appreciation (depreciation) $ 829,947
=============
Undistributed ordinary income $ 74,464
Undistributed capital gains 4,915
-------------
Total distributable earnings $ 79,379
=============
The tax character of distributions paid during the fiscal years ended
September 30, 2007 and September 30, 2006 was as follows:
2007 2006
---------- ----------
Tax-Exempt Income $5,751,629 $4,195,245
Ordinary income 2,834 3,375
---------- ----------
Total Distributions $5,754,463 $4,198,620
========== ==========
At September 30, 2007, the Fund, for federal income tax purposes, has
capital loss carryovers which will reduce the Fund's taxable income arising
from net realized gain on investment, if any, to the extent permitted by
the Internal Revenue Code and thus will reduce the amount of distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal income tax. Such capital loss carryovers are as
follows:
Capital Loss
Carry Over Expiration Date
---------- ---------------
$25,970 9/30/2013
$86,973 9/30/2014
$138,767 9/30/2015
It is uncertain whether the Fund will be able to realize the benefits of
the losses before they expire.
(6) Line of Credit:
On behalf of the Fund, and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the aggregate,
up to $35 million under a committed line of credit and up to $15 million
under an uncommitted line of credit.For the year ended September 30, 2007,
the Fund had average borrowings outstanding of $533,000 for a total of
twelve days and incurred $1,038 of interest expense, which is included in
miscellaneous expenses on the statement of operations. At September 30,
2007, the Fund did not have an outstanding loan balance.
18
Mellon Institutional Funds Investment Trust
Standish Mellon Intermediate Tax Exempt Bond Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of Standish Mellon Intermediate Tax Exempt Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Standish Mellon Intermediate Tax
Exempt Bond Fund (the "Fund") at September 30, 2007, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2007 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
19
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $2,900
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $2,900
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 25 None Fund: $2,900
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $3,019
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 *
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of
the Trust.
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
21
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408 800.221.4795
www.melloninstitutionalfunds.com
6933AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
International Core Equity Fund
- -------------------------------------------------------------------------------
Year ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Management Discussion and Analysis
- -------------------------------------------------------------------------------
For the year ended September 30, 2007, The Boston Company International Core
Equity Fund had a total return of 22.4% compared to a return of 24.9% for its
benchmark, the MSCI EAFE Index. During this period, international stocks
continued to post strong returns compared to their U.S. peers. Over the past
five years, the MSCI EAFE Index has posted an annualized return of 23.6%, the
MSCI Emerging Market Index return was up a remarkable 38.7%, while the S&P 500
return of 15.5% was well below such overseas markets. As the Fund's fiscal year
came to a close, the U.S. sub-prime difficulties, which spread globally, were
calming down as the U.S. Federal Reserve Board reduced interest rates. However,
it is clear the problem has not gone away.
Although the returns for the 12-month period ended September 30, 2007 were
strong, events around the world caused equity markets to be volatile. In the
fourth quarter of 2006, as oil and gas prices fell and interest rates were
inching down, the market returns were very positive. In the first quarter of
2007, a crackdown by the Chinese government on local investors borrowing to buy
securities in their equity market caused a few days in which global markets
tumbled. While world-wide markets were strong in April and May , returns in June
trailed as inflation concerns heightened and defaults were increasing. The MSCI
EAFE return for the quarter was 2.2%, however performance over the quarter was
volatile. The major issues centered on the U.S. sub-prime exposure, widening
bond spreads and a lack of liquidity in the credit markets. The credit
tightening triggered quantitative models to perform in a perverse fashion as
stocks that were unattractive on many valuation measures were being purchased by
some large hedge funds to cover their short positions, thus pushing up prices of
these unattractive stocks. Faced with the prospect of economic fallout and under
intense political and market pressure, central bankers were compelled to expand
liquidity. The Federal Reserve Board cut rates by fifty basis points and the
market rallied.
The strong returns over the period were broad-based with all countries and
sectors reporting positive returns. Finland was the best performing country with
a 68% return while Japan was the laggard with a 7% return. The Materials sector
was the best performing sector with a 56% return, as the growth in the emerging
markets continues to fuel demand for materials as infrastructure expands.
Healthcare was the weakest sector reporting a 4.6% return. Failures in tests,
patent expirations and impeding lawsuits hurt the returns of global health care
stocks.
Stock selection for the Fund was mixed for the twelve-month period ended
September 30, 2007. Stock selection in Japan, Finland and Belgium was very
strong with each attributing more than fifty basis points in excess of the
relative return. Stock selection in the UK was weak, as the economy was hit
particularly hard with the concerns related to the sub-prime credit crisis. The
Fund's stock selection in the U.K. underperformed by 5.5% the benchmark return
of 22.4% and was responsible for negative eighty basis points to the relative
return.
2
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Management Discussion and Analysis
- -------------------------------------------------------------------------------
From the sector perspective, financials had the largest negative effect on the
portfolio, again reflecting sub-prime contagion. The financial portfolio
holdings were well diversified with attractive valuations, however companies
exposed to mortgage underwriting reported that there would be writeoffs and
earnings would be negatively affected. Financials underperformed the benchmark
index by 6%. The Industrial sector was the best performer with a 54.7% return as
compared to the benchmark's return of 38.3%. A significant story during the
third quarter of 2007 was the "quant blowup" caused by major hedge funds
liquidating positions in mid-August. From August 8 through August 10, stocks
that were rated highly in our models underperformed and those that ranked poorly
outperformed. During this time,factors such as valuation and momentum which have
been strong indicators of positive alpha had negative attribution to the
relative return. This had a negative effect on the portfolio.
Looking toward the future, while we believe that the sub-prime crisis has
subsided, it is clear it has not gone away completely. Commodity prices remain
firm with oil trading at an all time high of over $80a barrel. The threat of
inflation is lurking, as U.S. GDP numbers are being lowered. That said, the
reliance on the US for global growth is not as important as it has been in the
past. The emerging markets and in particular the "BRIC"s (Brazil, Russia, India
and China) continue to demand goods and services to address infrastructure
needs. Europe is benefiting from intra regional exports and 40% of Japanese
companies are trading below book value. Taken together, we believe that these
facts support positive future returns. As always, we remain disciplined in our
investment philosophy as we believe the best opportunity is through stock
selection. The Fund will continue to seek to invest in stocks which combine
better than peer-group business momentum and better than peer-group valuation
characteristics. This is the time tested philosophy the Fund has followed since
inception, and we believe this methodology will continue to produce attractive
long-term results for shareholders.
William S. Patzer
Portfolio Manager
The Boston Company Asset Management, LLC
3
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
International Core Equity Fund and the MSCI EAFE Index (Unaudited)
- -------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED BY A LINE CHART IN THE PRINTED DOCUMENT.]
TBC
International Core
PERIOD Equity Fund MSCI EAFE Index*
9/30/97 100,000 100,000
12/31/97 90,603 92,169
3/31/98 110,089 105,728
6/30/98 113,969 106,850
9/30/98 97,076 91,662
12/31/98 112,826 110,600
3/31/99 110,472 112,139
6/30/99 114,198 114,989
9/30/99 117,713 120,035
12/31/99 132,965 140,423
3/31/00 131,790 140,276
6/30/00 132,328 134,718
9/30/00 126,039 123,851
12/31/00 126,629 120,528
3/31/01 116,138 104,007
6/30/01 121,584 102,920
9/30/01 106,623 88,511
12/31/01 111,345 94,684
3/31/02 114,873 95,604
6/30/02 119,051 93,148
9/30/02 99,403 74,766
12/31/02 104,134 79,591
3/31/03 99,206 73,054
6/30/03 116,684 87,130
9/30/03 127,473 94,212
12/31/03 148,635 110,302
3/31/04 158,464 115,088
6/30/04 159,122 115,335
9/30/04 161,938 115,015
12/31/04 185,932 132,635
3/31/05 188,813 132,415
6/30/05 188,380 131,081
9/30/05 212,360 144,682
12/31/05 218,461 150,588
3/31/06 241,403 164,736
6/30/06 242,863 165,890
9/30/06 252,575 172,405
12/31/06 283,059 190,253
3/31/07 291,570 198,008
6/30/07 310,281 210,688
9/30/07 309,072 215,273
Average Annual Total Returns
(for period ended 9/30/2007)
Since
Inception
1 Year 3 Years 5 Years 10 Years 12/8/1988
- --------------------------------------------------------------------------------------------------------------------
Fund 22.37% 24.04% 25.47% 11.95% 9.05%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company 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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,046.30 $4.41
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.76 $4.36
- --------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.70%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
5
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- -------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- ----------------------------------------------------------------------------------------------------------
Nestle SA Switzerland Consumer Staples 2.1%
Royal Dutch Shell PLC United Kingdom Energy 1.9
BHP Billiton Ltd. Australia Materials 1.7
ING Groep NV CVA Netherlands Financials 1.7
Xstrata PLC United Kingdom Materials 1.6
HBOS PLC United Kingdom Financials 1.6
Toyota Motor Corp. Japan Consumer Discretionary 1.5
Komatsu Ltd. Japan Industrials 1.5
Royal Bank of Scotland Group PLC United Kingdom Financials 1.5
E On AG Germany Utilities 1.5
------
16.6%
* Excludes short-term securities.
Percentage of
Geographic Region Allocation* Investments
- ---------------------------------------------------------------
Europe ex U.K 52.3%
United Kingdom 20.9
Asia ex Japan 6.7
Japan 20.1
-----
100.0%
* Excludes short-term securities.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Schedule of Investments--September 30, 2007
- -------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--90.7%
Common Equities--88.5%
Australia--4.5%
AMP Ltd. 678,530 6,346,424
ASX Ltd. 210,300 10,030,837
BHP Billiton Ltd. 497,600 19,671,954
Coca-Cola Amatil Ltd. 549,690 4,390,154
Commonwealth Bank of Australia 257,400 12,880,421
Seven Network Ltd. 325,400 3,782,756
57,102,546
Austria--0.6%
OMV AG 55,800 3,726,301
Voestalpine AG 46,800 4,044,250
7,770,551
Belgium--2.6%
Delhaize Group 75,270 7,212,913
InBev NV 184,400 16,713,382
KBC Groep NV 59,200 8,144,764
32,071,059
Denmark--1.2%
Carlsberg AS 47,100 6,435,756
Danske Bank AS 204,800 8,318,751
14,754,507
Finland--2.9%
KCI Konecranes Oyj 145,900 5,869,186
Metso Corp. 56,900 3,919,033
Neste Oil Oyj 98,600 3,609,294
Nokia Oyj 402,800 15,313,312
Rautaruukki Oyj 127,900 7,749,556
36,460,381
France--8.8%
Air France-KLM 95,400 3,505,761
BNP Paribas 149,200 16,327,141
Bouygues SA 123,270 10,633,115
Cap Gemini SA 92,550 5,704,016
Lafarge SA 20,040 3,104,895
Sanofi-Aventis SA 123,200 10,432,068
Scor SE 139,550 3,739,178
Societe Generale 61,560 10,330,487
Suez SA 133,000 7,832,875
Total SA 158,620 12,897,475
Vinci SA 129,400 10,110,092
Vivendi SA 377,700 15,942,566
110,559,669
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Schedule of Investments--September 30, 2007
- -------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------
Germany--6.5%
BASF AG 63,780 8,822,177
Bayerische Motoren Werke AG 83,900 5,411,381
Deutsche Bank AG 88,900 11,457,599
E On AG 90,570 16,745,955
MAN AG 62,100 9,036,997
Merck KGaA 39,200 4,729,072
MTU Aero Engines Holding AG 63,300 3,854,350
Salzgitter AG 16,270 3,195,709
Siemens AG 49,680 6,830,748
Thyssenkrupp AG 182,500 11,622,542
81,706,530
Greece--0.7%
Coca-Cola Hellenic Bottling Co. S.A 96,800 5,590,490
National Bank of Greece S.A 56,500 3,601,434
9,191,924
Hong Kong--0.7%
Esprit Holdings Ltd. 203,300 3,230,763
The Wharf(Holdings) Ltd. 1,223,500 6,014,064
9,244,827
Ireland--1.2%
Allied Irish Banks PLC (AIB) 327,300 7,934,407
CRH PLC 193,800 7,696,593
15,631,000
Italy--3.0%
Banca Popolare di Milano Scarl (BPM) 191,900 2,835,008
Enel Spa 869,980 9,850,296
Eni Spa 380,900 14,116,817
Fiat Spa 114,500 3,463,105
Prysmian Spa 120,820 (a) 3,444,064
UniCredito Italiano Spa 451,900 3,866,456
37,575,746
Japan--18.1%
Aisin Seiki Co Ltd. 99,800 3,987,830
Canon, Inc. 9,350 510,355
KDDI Corp. 1,116 8,277,461
Kenedix, Inc. 4,566 7,949,856
Komatsu Ltd. 508,100 17,073,788
Makita Corp. 182,800 8,020,475
Marubeni 566,800 5,200,724
Mitsubishi Corp. 219,300 6,949,177
Mitsubishi UFJ Lease & Finance Co. 109,630 3,636,200
Mitsui & Co., Ltd. 487,800 11,847,845
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Schedule of Investments--September 30, 2007
- -------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
Japan (continued)
Mitsui OSK Lines Ltd. 565,400 9,160,002
NEC Electronics Corp. 126,400 (a) 3,631,235
Nikon Corp. 295,300 10,154,392
Nintendo Co., Ltd. 25,300 13,170,889
Nippon Steel Corp. 844,500 6,079,929
NTT Corp. 1,158 5,413,476
Olympus Corp. 145,300 5,970,367
Seven & I Holdings Co., Ltd. 159,400 4,100,522
Sony Corp. 223,900 10,856,821
Sumco Corp. 181,000 7,374,249
Sumitomo Electric Industries 237,500 3,783,625
Sumitomo Metal Industries Ltd. 1,882,600 10,980,604
Sumitomo Trust & Banking Co., Ltd. 864,200 6,537,737
Takeda Pharmaceutical Co., Ltd. 176,500 12,415,078
TDK Corp. 66,800 5,861,792
The Chiba Bank Ltd. 753,000 5,821,050
Tokyo Electron Ltd. 72,500 4,594,759
Toyo Suisan Kaisha Ltd. 194,200 3,651,711
Toyota Motor Corp. 293,600 17,329,224
Urban Corp. 473,300 7,676,137
228,017,310
Netherlands--3.6%
ASML Holding NV 229,600 (a) 7,612,273
Fugro NV 63,300 5,138,832
ING Groep NV CVA 435,200 19,319,129
Koninklijke DSM NV 133,200 7,189,350
Royal KPN NV 317,000 5,501,351
44,760,935
Norway--1.2%
DnB NOR ASA 331,500 5,081,849
Orkla ASA 533,400 9,521,645
14,603,494
Singapore--0.7%
DBS Group Holdings Ltd. 648,300 9,429,183
Spain--3.3%
ACS Actividades 169,400 9,348,542
Banco Santander SA 449,000 8,726,935
Mapfre SA 611,300 2,763,333
Repsol YPF SA 148,400 5,301,041
Telefonica SA 446,600 12,501,397
Union Fenosa SA 57,100 3,378,307
42,019,555
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Schedule of Investments--September 30, 2007
- -------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------
Sweden--2.5%
Nordea Bank AB 463,000 8,073,617
Sandvik AB 286,800 6,156,752
Skandinaviska Enskilda Banken AB 372,900 12,130,642
Svenska Cellulosa AB (SCA), Class B 263,200 4,914,489
31,275,500
Switzerland--7.4%
Baloise Holdings AG 50,810 5,143,437
Credit Suisse Group 219,300 14,567,234
Nestle SA 53,203 23,910,947
Roche Holding AG 80,240 14,555,868
Swiss Reinsurance 138,710 12,360,769
The Swatch Group AG 28,060 9,211,068
Zurich Financial Services AG 45,690 13,712,497
93,461,820
United Kingdom--19.0%
Aviva PLC 432,170 6,506,586
BAE Systems PLC 416,000 4,199,535
Barclays PLC 689,790 8,402,710
Barratt Developments PLC 225,990 3,457,893
BP PLC 1,120,100 13,002,994
British Airways PLC 1,095,700 (a) 8,590,027
BT Group PLC 1,662,600 10,441,115
Charter PLC 256,160 (a) 6,198,931
Dairy Crest Group PLC 253,600 3,263,027
Enterprise Inns PLC 446,400 5,405,883
Firstgroup PLC 266,600 3,754,783
GKN PLC 624,700 4,523,718
Greene King PLC 345,100 6,226,360
HBOS PLC 945,200 17,681,868
International Power PLC 1,792,100 16,542,467
National Grid PLC 732,800 11,752,283
Next PLC 85,450 3,433,004
Prudential PLC 241,200 3,707,891
Reckitt Benckiser PLC 105,300 6,186,336
Royal Bank of Scotland Group PLC 1,583,655 17,007,505
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Schedule of Investments--September 30, 2007
- -------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------
United Kingdom (continued)
Royal Dutch Shell PLC 66,900 2,760,277
Royal Dutch Shell PLC 527,500 21,710,566
SabMiller PLC 277,800 7,910,286
Shire PLC 169,600 4,166,674
SSL International PLC 395,800 3,441,006
Tesco PLC 429,830 3,862,151
Vodafone Group PLC 3,189,937 11,517,217
WPP Group PLC 250,870 3,397,249
Xstrata PLC 278,700 18,494,327
237,544,669
Total Common Equities (Cost $996,182,909) 1,113,181,206
PREFERRED STOCKS--1.8%
Germany
Fresenius SE 154,680 12,036,706
Porsche AG 4,888 10,383,847
Total Preferred Stocks (Cost $16,689,215) 22,420,553
SHORT-TERM INVESTMENTS--0.4% Rate Maturity Par Value
------ --------- ----------
U.S. Government--0.4%
U.S. Treasury Bill 3.90% 12/13/2007 4,800,000 (b,c) 4,761,000
(Cost $4,761,000)
TOTAL UNAFFILIATED INVESTMENTS (Cost $1,017,633,124) 1,140,362,759
AFFILIATED INVESTMENTS--5.8% Shares
--------
Dreyfus Institutional Preferred Plus Money Market 73,360,303 (d) 73,360,303
-------------
Fund (Cost $73,360,303)
TOTAL INVESTMENTS--96.5% (Cost $1,090,993,427) 1,213,723,062
OTHER ASSETS, LESS LIABILITIES--3.5% 43,654,716
-------------
NET ASSETS--100% 1,257,377,778
=============
Notes to Schedule of Investments:
a Non-income producing security.
b Denotes all or part of security segregated 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.
11
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Schedule of Investments--September 30, 2007
- -------------------------------------------------------------------------------
At September 30, 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 September 30, 2007 to Receive (Depreciation)
- -----------------------------------------------------------------------------------------------------------------------------------
Australian Dollar 1,770,002 10/2/2007 $ 1,570,700 $ 1,568,955 $ (1,745)
British Pound 4,227,964 10/1/2007 8,648,724 8,562,473 (86,251)
British Pound 8,470,625 10/2/2007 17,327,510 17,269,910 (57,600)
Swiss Franc 3,937,163 10/1/2007 3,383,314 3,362,223 (21,091)
Swiss Franc 7,248,353 10/2/2007 6,228,713 6,203,657 (25,056)
Danish Krone 3,189,165 10/1/2007 610,320 605,707 (4,613)
Danish Krone 17,379,312 10/2/2007 3,325,930 3,316,093 (9,837)
Euro 11,242,575 10/1/2007 16,031,912 15,925,108 (106,804)
Euro 14,068,749 10/2/2007 20,062,036 20,004,354 (57,682)
Japanese Yen 1,017,641,970 10/1/2007 8,859,075 8,796,283 ( 62,792)
Japanese Yen 1,569,663,691 10/2/2007 13,664,697 13,653,999 (10,698)
Norwegian Krone 2,840,296 10/1/2007 526,497 519,031 (7,466)
Norwegian Krone 4,966,857 10/2/2007 920,692 915,280 (5,412)
Singapore Dollar 480,927 10/1/2007 323,835 322,748 (1,087)
Singapore Dollar 818,166 10/2/2007 550,916 551,585 669
Swedish Krona 8,475,367 10/1/2007 1,316,030 1,300,042 (15,988)
Swedish Krona 57,161,643 10/2/2007 8,875,894 8,833,510 (42,384)
---------
$(515,837)
=========
At September 30, 2007 the Fund held the following futures contracts:
Unrealized
Underlying Face Appreciation
Contract Position Expiration Date Amount at Value (Depreciation)
- -----------------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (2702 Contracts) Long 12/18/2007 $98,406,948 $ (73,006)
TOPIX (243 Contracts) Long 12/31/2007 34,354,662 1,316,593
----------
$1,243,587
==========
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------
Consumer Discretionary 10.2%
Consumer Staples 8.2
Energy 6.5
Financials 24.5
Health Care 5.4
Industrials 11.0
Information Technology 5.1
Materials 9.0
Telecommunications Services 5.1
Utilities 5.3
Short-term and Net other assets 9.7
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Assets and Liabilities
September 30, 2007
- -----------------------------------------------------------------------------------------------------------------------------
Assets
Investments in securities:
Unaffiliated issuers, at value (Note 1 A) (cost $1,017,633,124) $1,140,362,759
Affiliated issuers, at value (Note 1 A) (cost $73,360,303) 73,360,303
Cash 1,575,000
Foreign Currency, at value (cost $17,662,960) 17,906,688
Receivable for investments sold 131,872,289
Interest and dividends receivable 6,869,293
Receivable for Fund shares sold 1,381,422
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 669
Prepaid expenses 173,299
--------------
Total assets 1,373,501,722
Liabilities
Payable for Fund shares redeemed $ 91,157,229
Payable for investments purchased 23,301,739
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 516,506
Payable for variation margin on open futures contracts (Note 6) 67,334
Accrued administrative service fees (Note 2) 594,507
Accrued accounting, administration, custody and transfer agent fees (Note 2) 378,097
Accrued professional fees 75,347
Accrued trustees' fees (Note 2) 29,561
Accrued chief compliance officer fee (Note 2) 388
Other accrued expenses and liabilities 3,236
--------------
Total liabilities 116,123,944
--------------
Net Assets $1,257,377,778
==============
Net Assets consist of:
Paid-in capital $ 914,640,766
Accumulated net realized gain 217,253,773
Undistributed net investment income 500,969
Net unrealized appreciation 124,982,270
--------------
Total Net Assets $1,257,377,778
==============
Shares of beneficial interest outstanding 27,314,211
==============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 46.03
==============
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Operations
For the Year Ended September 30, 2007
- -----------------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from affiliated investments (Note 1H) $ 29,653
Dividend income from unaffiliated investments (net of foreign withholding taxes 1,317,978
$32,436)
Interest income 4,641
Allocated investment income from portfolio (Note 9) 63,606,214
Allocated expenses from portfolio (Note 9) (17,664,258)
--------------
Net investment income 47,294,228
Expenses
Investment advisory fee (Note 2) $ 307,355
Accounting, administration, custody and transfer agent fees (Note 2) 151,337
Administrative service fees (Note 2) 1,009,252
Registration fees 241,933
Trustees' fees (Note 2) 6,061
Professional fees 143,065
Insurance expense 5,481
Miscellaneous expenses 177,772
--------------
Total expenses 2,042,256
Deduct:
Waiver of investment advisory fee (Note 2) (92,386)
--------------
Net expenses 1,949,870
--------------
Net investment income 45,344,358
--------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 35,875,585
Financial futures transactions 194,213
Foreign currency transactions and forward currency exchange transactions 291,995
Allocation of realized gain (loss) from portfolio (Note 9) 367,314,195
--------------
Net realized gain (loss) 403,675,988
Change in unrealized appreciation (depreciation) on:
Investments (2,159,019)
Financial futures contracts 650,870
Foreign currency translations and forward foreign currency exchange contracts 788,064
Allocation of unrealized depreciation from portfolio (Note 9) (28,029,393)
--------------
Net change in net unrealized appreciation (depreciation) (28,749,478)
--------------
Net realized and unrealized gain (loss) on investments 374,926,510
--------------
Net Increase in Net Assets from Operations $420,270,868
==============
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 45,344,358 $ 21,200,780
Net realized gain (loss) 403,675,988 38,731,387
Change in net unrealized appreciation (depreciation) (28,749,478) 123,661,754
----------------- -----------------
Net increase (decrease) in net assets from investment operations 420,270,868 183,593,921
Distributions to Shareholders (Note 1C)
From net investment income (37,760,225) (15,633,628)
From net realized gains on investments (55,518,833) (17,704,234)
----------------- -----------------
Total distributions to shareholders (93,279,058) (33,337,862)
----------------- -----------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 777,178,564 1,655,730,693
Value of shares issued in reinvestment of distributions 52,326,222 16,673,962
Cost of shares redeemed (net of redemption fees of $75,412
and $47,195, respectively) (1,914,206,731) (94,637,359)
----------------- -----------------
Net increase (decrease) in net assets from Fund share transactions (1,084,701,945) 1,577,767,296
----------------- -----------------
Total Increase (Decrease) in Net Assets (757,710,135) 1,728,023,355
Net Assets
At beginning of year 2,015,087,913 287,064,558
----------------- -----------------
At end of year (including undistributed net
investment income of $500,969 and $6,180,167, respectively) $ 1,257,377,778 $ 2,015,087,913
================= =================
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------
2007 2006 2005 2004 2003
--------- ---------- --------- --------- ---------
Net Asset Value, Beginning of Year $ 39.01 $ 34.34 $ 27.03 $ 21.62 $ 17.10
--------- ---------- --------- --------- ---------
From Investment Operations:
Net investment income (loss)* (a) 0.78 0.71 0.50 0.31 0.23
Net realized and unrealized gain (loss) on investments 7.82 5.59 7.73 5.49 4.55
--------- ---------- --------- --------- ---------
Total from operations 8.60 6.30 8.23 5.80 4.78
--------- ---------- --------- --------- ---------
Less Distributions to Shareholders:
From net investment income (0.60) (0.40) (0.39) (0.39) (0.26)
From net realized gains on investments (0.98) (1.23) (0.53) -- --
--------- ---------- --------- --------- ---------
Total distributions to shareholders (1.58) (1.63) (0.92) (0.39) (0.26)
--------- ---------- --------- --------- ---------
Net Asset Value, End of Year $ 46.03 $ 39.01 $ 34.34 $ 27.03 $ 21.62
========= ========== ========= ========= =========
Total Return 22.37%(b) 19.01% 31.06% 27.04% 28.23%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets)* (c) 0.77% 0.88% 1.01% 1.12% 1.16%
Net Investment Income (to average daily net assets)* 1.78% 1.91% 1.59% 1.22% 1.21%
Portfolio Turnover (d) 83% 51% 58% 80% 17%
Net Assets, End of Year (000's omitted) $1,257,378 $2,015,088 $287,065 $124,675 $ 77,727
- --------------
* 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) $ 0.78 N/A N/A N/A $ 0.19
Ratios (to average daily net assets):
Expenses (c) 0.78% N/A N/A N/A 1.34%
Net investment income 1.77% N/A N/A N/A 1.03%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) For the period October 1, 2006 to September 19, 2007 and for the fiscal
years ended September 30, 2003-2006, the ratio includes the Fund's share of
the TBC International Core Equity Portfolio's allocated expenses.
d) On September 19, 2007, the Fund, which had owned approximately 100% of the
Portfolio on such date, withdrew entirely from the Portfolio and received
the Portfolio's securities and cash in exchange for its interests in the
Portfolio. Effective September 20, 2007, the Fund began investing directly
in the securities in which the Portfolio had invested. Portfolio turnover
represents investment activity of both the Fund and the Portfolio for the
year. The amounts shown for 2003-2006 are the ratios for the Portfolio.
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
(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 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 represented in the MSCI Europe, Australia, Far East (EAFE) Index
and Canada. The Fund may invest up to 25% of assets in emerging market
countries. The Fund may also invest in equity index futures contracts based
primarily on the indices of countries included in the EAFE Index and
Canada.
Prior to September 20, 2007, the Fund had invested substantially all of its
investable assets in The Boston Company International Core Equity Portfolio
(the "Portfolio"), a subtrust of the Mellon Institutional Funds Master
Portfolio, the "Portfolio Trust", a New York trust. The Portfolio had
investment objectives, policies, limitations and accounting policies
substantially identical to those of the Fund. While investing in the
Portfolio, the Fund earned its proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on its
percentage ownership of the Portfolio's shares of beneficial interest. The
Portfolio's Statement of Operations for the period October 1, 2006 through
September 19, 2007 is included in Note 9. On September 19, 2007, the Fund,
which owned 100% of the Portfolio on that date, withdrew entirely from the
Portfolio and received the Portfolio's assets, including securities and
cash, and assumed the Portfolio's stated liabilities in exchange for its
interest in the Portfolio. Effective September 20, 2007, the Fund began
investing directly in the securities in which the Portfolio had invested.
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, or if such quotations do not accurately reflect
fair value, 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") is 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 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.
17
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
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. Dividends representing
a return of capital are reflected as a reduction of cost. Realized gains
and losses from securities sold are recorded on the identified cost basis.
Income, expenses and realized and unrealized gains and losses allocated
from the Portfolio represent the Fund's proportionate share of those items
earned by the Portfolio during the period October 1, 2006 through September
19, 2007.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless the shareholder elects
to receive them in cash.
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 be distributed 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 ("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.
On July 31, 2007, the Dreyfus Premier International Equity Fund ("Dreyfus
Feeder") withdrew from the master feeder structure via a redemption-in-kind
and received currency and securities with unrealized appreciation of
$57,244,763 for the value of their interest in the Portfolio. The Fund
realized no gain on this transaction. $40,597,582 of unrealized
appreciation had been allocated to that feeder fund. The Fund increased
paid in capital and decreased unrealized appreciation on investments by
$16,647,181 to recognize this difference. This reclassification had no
impact on the net assets or results of operations of the Fund.
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. 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.
18
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
I. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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:
Prior to September 20, 2007 the Fund did not directly incur any investment
advisory, custody, administration and commitment fees, which were incurred
by the Portfolio and allocated to the Fund based on its proportionate
interest in the Portfolio. The following disclosures relating to these fees
represent fees incurred by the Portfolio for the period prior to September
20, 2007, and by the Fund thereafter.
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 Fund's, and
previously 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
million, and 0.50% on assets over $2 billion.
For the period of September 1, 2007 through August 31, 2008, TBCAM has
agreed to rebate 0.25% of its management fee to the Fund. This rebate will
end on September 1, 2008, and on such date the Fund's contractual advisory
fee will again be in effect. This rebate will not change any existing
voluntary total expense limitation arrangements that are in effect, as
TBCAM will continue its commitment to maintain such total expense
limitations during this rebate period. For the period October 1, 2006
through September 19, 2007, TBCAM rebated $125,843 of its investment
advisory fees charged to the Portfolio. For the period September 20, 2007
through September 30, 2007, TBCAM rebated $92,386 of its investment
advisory fees charged to the Fund.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$107,940, for the year ended September 30, 2007.
The Trust, and previously the Portfolio Trust, entered into an agreement
with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY
Mellon and an affiliate of TBCAM, to provide custody, administration and
accounting services for the Portfolio/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
$1,401,006 for the period October 1, 2006 to September 19, 2007 and $43,397
for the period September 20, 2007 to September 30, 2007.
The Trust, and previously the Portfolio Trust, also entered into an
agreement with Mellon Bank to perform certain securities lending activities
and to act as the Portfolio/Fund's lending agent. Mellon Bank receives an
agreed upon percentage of the net lending revenues. Pursuant to this
agreement, the Fund was charged $47 for the period October 1, 2006 to
September 19, 2007 and $0 for the period September 20, 2007 to September
30, 2007. See Note 7 for further details.
19
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
The Trust, and previously the Portfolio Trust, entered into two separate
agreements with The Bank of New York that enables the Fund, and other funds
in the Trust, to borrow, in the aggregate, (i) up to $35 million from a
committed line of credit and (ii) up to $15 million from an uncommitted
line of credit. Interest is charged to each participating fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. The participating funds also pay an annual fee, computed at a rate of
0.020 of 1% of the committed and uncommitted amounts and allocated ratably
to the participating funds. 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 at the end of each quarter. Pursuant to these
agreements, the Fund was charged $14,389 for the period October 1, 2006 to
September 19, 2007 and the fund was charged $370 for the period September
20, 2007 to September 30, 2007, which is included in miscellaneous expenses
on the statement of operations. See Note 8 for further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,241, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $37,930, which amount is included in miscellaneous expenses in the
statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $156,191 payable to BNY
Mellon Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
-------------- ---------------
Non-U.S. Government Securities $2,160,460,433 $3,557,056,412
============== ===============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a par
value of one cent per share. Transactions in Fund shares were as
follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
-------------------- --------------------
Shares sold 18,088,840 45,334,340
Shares issued to shareholders in
reinvestment of distributions 1,212,198 479,216
Shares redeemed (43,638,985) (2,520,245)
----------- ----------
Net increase (decrease) (24,337,947) 43,293,311
=========== ==========
At September 30, 2007, one shareholder of record held approximately 23.5% of the
total outstanding shares of the Fund. Investment activities of this shareholder
could have a material impact on the Fund.
20
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that were acquired through reinvestment of
distributions. For the year ended September 30, 2007, the Fund received
$75,412 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.
In July 2006, FASB 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 implication of FIN 48 and its impact in
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $1,096,857,918
==============
Gross unrealized appreciation $ 173,086,322
Gross unrealized depreciation (36,820,393)
--------------
Net unrealized appreciation (depreciation) $ 136,265,929
==============
Undistributed ordinary income $ 0
Undistributed capital gains 223,118,045
--------------
Total distributable earnings $ 223,118,045
==============
The tax character of distributions paid during the fiscal year ended
September 30, 2007 were as follows:
2007 2006
----------- -----------
Ordinary income $55,585,861 $19,748,254
Capital gains 37,693,197 13,589,608
----------- -----------
Total distributions $93,279,058 $33,337,862
=========== ===========
(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, and previously 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 Fund deposits either cash or securities in an amount
equal to a certain percentage of the contract amount. Subsequent payments
are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security, and are recorded for
financial statement purposes as unrealized 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
21
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
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 September 30, 2007, the Fund held open financial futures contracts. See
the Schedule of Investments for further details.
Forward Foreign Currency Exchange Contracts
The Fund, and previously 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 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 September 30, 2007, the Fund held forward foreign currency exchange
contracts. See Schedule of Investments for further details.
(7) Security Lending:
The Fund, and previously the Portfolio, 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, and previously the Portfolio, loaned securities during the year
ended September 30, 2007 and earned interest on the invested collateral of
$392 of which $346 was rebated to borrowers or paid in fees. At September
30, 2007, the Fund did not have securities out on loan.
(8) Line of Credit:
On behalf of the Fund, and other funds in the Trust, and previously the
portfolios in the Portfolio Trust, the Trust has access to a credit
facility, which enables each fund to borrow, in the aggregate, up to $35
million under a committed line of credit and up to $15 million under an
uncommitted line of credit.
For the year ended September 30, 2007, the Fund and the Portfolio had
average borrowings outstanding of $14,676,875 for a total of eight days and
incurred $4,997 for the period October 1, 2006 to September 19, 2007 and
$13,135 for the period September 20, 2007 to September 30, 2007, of
interest expense. At September 30, 2007, the Fund did not have a loan
balance outstanding.
22
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
(9) Reorganization:
Prior to September 19, 2007, the Fund had utilized a Master Feeder Fund
structure where the Fund sought to achieve its investment objectives by
investing all of its investable assets in the Boston Company International
Core Equity Portfolio. Effective after the close of business on September
19, 2007, the Fund withdrew its assets from the Portfolio by means of a
redemption-in-kind and now the Fund invests directly in portfolio
securities.
Below is the Statement of Operations for The Boston Company International
Core Equity Portfolio for the period from October 1, 2006 to September 19,
2007:
Investment Income (Note 1B)
Dividend income from unaffiliated investments (net foreign withholding taxes $7,416,799) $ 67,122,282
Dividend income from affiliated investments 2,254,837
Interest income 934,626
Security lending income (Note 7) 47
------------
Net investment income 70,311,792
Expenses
Investment advisory fee (Note 2 ) $ 18,023,988
Accounting, administration and custody fees (Note 2) 1,401,006
Trustees' fees (Note 2) 121,522
Professional fees 3,167
Insurance expense 37,330
Miscellaneous expenses 22,223
-------------
Total expenses 19,609,236
Deduct:
Waiver of investment advisory fee (Note 2) (125,843)
------------
Net expenses 19,483,393
------------
Net investment income 50,828,399
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 391,895,359
Financial futures contracts (11,541,383)
Foreign currency transactions and forward currency exchange contracts 3,487,769
------------
Net realized gain (loss) 383,841,745
Change in unrealized appreciation (depreciation) on:
Investments (56,724,418)
Financial futures contracts 173,579
Foreign currency translations and forward currency exchange contracts 444,213
------------
Net change in unrealized appreciation (depreciation) (56,106,626)
------------
Net realized and unrealized gain (loss) on investments 327,735,119
------------
Net Increase in Net Assets from Operations $378,563,518
============
The accompanying notes are an integral part of the financial statements.
23
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Report of Independent Registered Public Accounting Firm
- -------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Trust and Shareholders of The
Boston Company International Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of The
Boston Company International Core Equity Fund (the "Fund") at September 30,
2007, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at September 30, 2007 by correspondence
with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
24
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $500
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $12,214
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $500
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $12,214
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $500
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $12,214
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $500
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $14,346
P.O. Box 5600 investment trust office) Beverly, MA 01915
11/14/43
Interested Trustees *
None*
*Effective October 30, 2007, J. David Officer was elected as a Trustee of
the Trust.
25
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)* President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56)** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management
BNY Mellon Asset Management Compliance and Chief Compliance Officer, Mellon Optima L/S
One Boston Place Officer Strategy Fund, LLC; formerly Director, Blackrock,
Boston, MA 02108 Inc.,Senior Vice President, State Street Research &
4/8/57 ManagementCompany ("SSRM"), and Vice President,SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Trust, and J. David Officer was elected as
President and Chief Executive Officer of the Trust.
**Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
26
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MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6924AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
International Small Cap Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
For the year ended September 30, 2007, The Boston Company International Small
Cap Fund had a total return of 24.5% compared to a return of 26.8% for its
benchmark, the S&P Citigroup World EMI ex-US Index. During this period,
international stocks continued to post strong returns compared to their U.S.
peers. Over the past five years, the S&P Citigroup World EMI ex-US Index has
posted an annualized return of 29.6%, while the MSCI EAFE Index and the MSCI
Emerging Market Index were up 23.6% and 38.7%, respectively. Meanwhile, the S&P
500 returned 15.5%, which was well below the overseas markets. As the Fund's
fiscal year came to a close, the U.S. sub-prime difficulties which spread
globally were calming down as the U.S. Federal Reserve Board reduced interest
rates. However, it is clear the problem has not gone away.
Although the returns for the 12-month period ended September 30, 2007 were
strong, events around the world caused equity markets to be volatile. In the
fourth quarter of 2006, as oil and gas prices fell and interest rates were
inching down, the market returns were very positive. In the first quarter of
2007, a crackdown by the Chinese government on local investors borrowing to buy
securities in their equity market caused a few days in which global markets
tumbled. While worldwide markets were strong in April and May, returns in June
trailed as inflation concerns heightened and defaults were increasing. The S&P
Citigroup World EMI ex-US Index returned -0.4% this past quarter, yet
performance over the quarter was volatile. The major issues centered on the U.S.
sub-prime exposure, widening bond spreads and a lack of liquidity in the credit
markets. The credit tightening triggered quantitative models to perform in a
perverse fashion as stocks that were unattractive on many valuation measures
were being purchased by some large hedge funds to cover their short positions,
thus pushing up prices of these unattractive stocks. Faced with the prospect of
economic fallout and under intense political and market pressure, central
bankers were compelled to expand liquidity. The Federal Reserve Board cut rates
by fifty basis points and the market rallied.
The strong returns over the period were broad-based with all countries except
one and all sectors reporting positive returns. South Korea and Slovenia were
the best performing countries with returns of 78.7% and 173%, respectively.
Japan, the only country with a negative return, was the weakest market in the
benchmark with a -1.9% return. The Materials sector was the best performing
sector with a 47% return, as growth in the emerging markets continues to fuel
demand for materials as infrastructure expands. Information Technology was the
weakest sector in the benchmark reporting a 16% return.
Stock selection for the Fund was mixed for the twelve month period ended
September 30, 2007. Stock selection in both Switzerland and Finland was very
strong. The Fund's stock selection in Switzerland, with a 51% return,
outperformed the benchmark return of 32% by 19%. The Fund's stock selection in
Finland, with an 83% return, outperformed the benchmark return of 51% by 32%.
Stock selection in the UK was weak, as the country was hit particularly hard
with concerns related to the sub-prime credit crisis. The Fund's stock selection
in the UK underperformed by 4.7% the benchmark return of 18.8% and was
responsible for negative eighty basis points to the relative return. Japan stock
selection was also weak contributing a negative forty-seven basis points to the
return.
2
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
From the sector perspective, financials had the largest negative effect on the
portfolio, again reflecting sub-prime contagion. The financial portfolio
holdings were well diversified with attractive valuations, however companies
exposed to mortgage underwriting reported that there would be writeoffs and
earnings would be negatively affected. Financials underperformed the benchmark
index by 5%. The Materials sector was the best performer with a 53.8% return as
compared to the benchmark's return of 46.9%. A significant story during the
third quarter of 2007 was the "quant blowup" caused by major hedge funds
liquidating positions in mid-August. From August 8 through August 10, stocks
that were rated highly in our models underperformed and those that ranked poorly
outperformed. During this time, factors such as valuation and momentum which
have been strong indicators of positive alpha had negative attribution to the
relative return. This had a negative effect on the portfolio.
Looking toward the future, while we believe that the sub-prime crisis has
subsided, it is clear it has not gone away completely. Commodity prices remain
firm with oil trading at an all time high of over $80 a barrel. The threat of
inflation is lurking, as U.S. GDP numbers are being lowered. That said, the
reliance on the US for global growth is not as important as it has been in the
past. The emerging markets and in particular the "BRIC"s (Brazil, Russia, India
and China) continue to demand goods and services to address infrastructure
needs. Europe is benefiting from intraregional exports and 40% of Japanese
companies are trading below book value. Taken together, we believe that these
facts support positive future returns. As always, we remain disciplined in our
investment philosophy as we believe the best opportunity is through stock
selection. The Fund will continue to seek to invest in stocks which combine
better than peer-group business momentum and better than peer-group valuation
characteristics. This is the time tested philosophy the Fund has followed since
inception, and we believe this methodology will continue to produce attractive
long-term results for shareholders.
William S. Patzer, CFA
Portfolio Manager
The Boston Company Asset Management, LLC
3
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
International Small Cap Fund and the S&P/CitiGroup EMI ex-US Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED IN THE PRINTED MATERIAL AS A LINE CHART]
TBC
PERIOD International Small Cap Fund* S&P/CitiGroup EMI ex-US Index**
9/30/97 100,000 100,000
12/31/97 86,676 89,727
3/31/98 105,476 105,167
6/30/98 107,599 104,791
9/30/98 85,145 88,920
12/31/98 95,417 100,629
3/31/99 104,297 102,072
6/30/99 119,189 108,349
9/30/99 131,512 113,873
12/31/99 134,667 124,282
3/31/00 142,049 126,797
6/30/00 146,573 124,578
9/30/00 142,297 118,017
12/31/00 140,148 111,450
3/31/01 126,928 99,575
6/30/01 135,983 102,602
9/30/01 117,917 86,792
12/31/01 126,589 93,951
3/31/02 135,750 99,599
6/30/02 145,755 101,597
9/30/02 124,275 83,697
12/31/02 128,190 87,107
3/31/03 124,828 83,093
6/30/03 149,623 102,380
9/30/03 169,751 115,853
12/31/03 196,861 133,907
3/31/04 219,363 146,516
6/30/04 222,907 147,793
9/30/04 226,173 147,891
12/31/04 262,234 172,395
3/31/05 275,262 178,844
6/30/05 277,835 177,802
9/30/05 317,091 197,386
12/31/05 341,702 210,482
3/31/06 390,053 235,991
6/30/06 385,452 233,697
9/30/06 392,309 241,738
12/31/06 446,257 272,407
3/31/07 465,161 290,603
6/30/07 491,171 307,738
9/30/07 488,429 306,567
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 1/2/1996*
- --------------------------------------------------------------------------------------------------------
Fund 24.50% 29.26% 31.49% 17.19% 18.31%
* Combined LP & MF Performance
** Source: Citigroup Global Markets Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company 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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,185.70 $5.99
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.45 $5.54
- --------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.10%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
5
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- ----------------------------------------------------------------------------------------------------
Inmet Mining Corp. Canada Materials 1.5%
Hyundai Mipo Dockyard South Korea Industrials 1.3
Actelion Ltd. Switzerland Heath Care 1.2
Deutsche Boerse AG Germany Financials 1.1
Rautaruukki Oyj Finland Materials 1.1
Union Fenosa SA Spain Utilities 1.1
Incitec Pivot Ltd. Australia Materials 1.0
International Power PLC United Kingdom Utilities 0.9
The Swatch Group AG Switzerland Consumer Discretionary 0.9
Charter PLC United Kingdom Industrials 0.9
----
11.0%
* Excluding short-term securities.
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------------------------
Europe ex U.K. 47.1%
United Kingdom 17.2
Asia ex Japan 13.1
Japan 15.6
Americas ex U.S. 7.0
----
100%
The Fund is actively managed. Current holdings may be different than those
presented above.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--92.8%
COMMON EQUITIES--90.8%
Australia--4.5%
Babcock & Brown Ltd. 134,960 3,289,903
Challenger Financial Services Group Ltd. 713,800 3,927,242
Cochlear Ltd. 33,800 2,338,342
Computershare Ltd. 176,500 1,455,057
Goodman Fielder Ltd. 1,031,900 2,362,527
Incitec Pivot Ltd. 68,800 5,222,484
Oxiana Ltd. 738,100 2,541,361
Seven Network Ltd. 205,352 2,387,205
Sims Group Ltd. 65,260 1,869,390
25,393,511
Austria--0.4%
Andritz AG 35,500 2,452,684
Belgium--1.6%
Mobistar SA 29,900 2,615,804
NV Union Miniere SA 19,360 4,626,995
Omega Pharma SA 20,400 1,789,060
9,031,859
Canada--6.5%
Astral Media, Inc. 77,500 3,416,734
Axcan Pharma, Inc. 91,500 (a) 1,890,914
Canaccord Captial, Inc. 105,900 2,021,301
Canadian West Bank 66,200 1,897,325
Crescent Point Energy Trust 81,700 1,712,216
Gildan Activewear, Inc. 93,300 (a) 3,695,783
Inmet Mining Corp. 80,400 8,065,064
Martinrea International, Inc. 115,400 (a) 1,984,453
Metro, Inc. 56,000 1,971,038
Northbridge Financial Corp. 42,000 1,474,055
Sherritt International Corp. 281,300 4,503,516
Trinidad Energy Services Income Trust 114,900 1,503,267
WestJet Airlines Ltd. 133,000 (a) 2,308,508
36,444,174
Denmark--0.7%
D/S Norden A/S 17,100 1,826,042
Sydbank A/S 46,000 2,002,718
3,828,760
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Finland--2.7%
Elisa Oyj 46,100 1,433,101
KCI Konecranes Oyj 79,800 3,210,151
Nokian Renkaat Oyj 65,200 2,553,099
Rautaruukki Oyj 94,900 5,750,061
Wartsila Oyj 29,800 2,041,875
14,988,287
France--8.2%
Air France-KLM 52,500 1,929,271
Alstom 11,650 2,368,501
Arkema 25,900 (a) 1,577,426
Bourbon SA 23,350 1,524,341
Business Objects SA 38,000 (a) 1,696,084
CNP Assurances 35,040 4,482,543
Compagnie Generale de Geophysique SA 13,700 (a) 4,476,720
Compagnie Generale des Etablissements Michelin 23,500 3,159,417
Eramet 8,950 3,259,594
Euler Hermes SA 28,160 3,753,396
Haulotte Group 66,400 2,504,455
Ipsen SA 43,100 2,486,081
Ipsos 47,600 1,774,320
Lagardere SCA 25,690 2,186,680
Neuf Cegetel 42,500 (a) 1,859,967
Nexans SA 21,330 3,508,553
Pierre & Vacances 13,100 1,817,809
SEB SA 9,700 1,805,102
46,170,260
Germany--6.7%
Aareal Bank AG 68,400 3,365,075
Deutsche Boerse AG 43,040 5,861,316
Hannover Rueckversicheru 32,400 1,643,881
Hypo Real Estate Holding AG 65,990 3,752,777
Lanxess 46,900 2,225,746
MAN AG 29,200 4,249,280
MTU Aero Engines Holding AG 45,200 2,752,237
Salzgitter AG 21,700 4,262,254
Software AG 30,360 2,850,435
Stada Arzneimittel AG 37,260 2,429,761
Vivacon AG 98,000 2,550,401
Wincor Nixdorf AG 21,540 1,781,530
37,724,693
Greece--0.3%
Metka SA 70,710 1,764,568
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Hong Kong--1.5%
CITIC International Financial Holdings Ltd. 1,972,000 1,578,331
Pacific Basin Shipping Ltd. 658,000 1,381,805
Wing Hang Bank Ltd. 223,400 2,569,931
Wing Lung Bank 286,900 2,973,698
8,503,765
Ireland--0.7%
Grafton Group PLC 172,570 1,932,750
Greencore Group PLC 289,500 1,882,491
3,815,241
Italy--3.7%
Azimut Holding SPA 301,600 4,644,881
Banca Popolare di Milano Scarl (BPM) 101,390 1,497,871
Cementir SPA 167,100 1,689,438
Credito Emiliano SPA 181,800 2,493,954
Fondiaria-Sai SPA 48,540 2,279,350
Indesit Co. SPA 73,200 1,261,993
Marr SPA 139,800 1,524,067
Milano Assicurazioni SPA 280,450 2,347,540
Pirelli & C Real Estate SPA 22,600 1,155,359
Recordati SPA 240,440 2,273,211
21,167,664
Japan--14.5%
ABC-MART, Inc. 80,100 1,739,788
Ardepro Co., Ltd. 8,230 2,135,057
Asahi Pretec Corp. 81,300 2,654,087
Atrium Co., Ltd. 63,100 1,735,841
Chiyoda Integre Co., Ltd. 45,900 986,968
Chugoku Marine Paints Ltd. 136,600 1,770,675
Comsys Holdings Corp. 152,100 1,668,373
Dowa Holdings Co., Ltd. 292,800 3,708,749
Goldcrest Co., Ltd. 39,390 1,810,562
Hisamitsu Pharmaceutical Co., Ltd. 74,600 2,026,221
Hitachi Construction Machinery Co., Ltd. 77,700 3,104,753
Hitachi Kokusai Electric, Inc. 152,500 1,905,088
Hogy Medical Co., Ltd. 37,400 1,761,417
Izumi Co. Ltdronics, Inc. 145,300 1,982,111
Joint Corp. 73,700 1,969,696
K's Holdings Corp. 78,900 1,720,593
Kenedix, Inc. 1,840 3,203,622
Kintetsu World Express, Inc. 52,200 1,785,897
Kyowa Exeo Corp. 191,500 2,008,858
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Japan (continued)
Makino Milling Machine Co., Ltd. 169,400 1,787,349
Makita Corp. 48,300 2,119,196
Mitsumi Electric Co., Ltd. 61,000 2,490,555
Mori Seiki Co., Ltd. 89,300 2,308,880
Nihon Dempa Kogyo Co., Ltd. 29,200 1,820,075
Nippon Chemi-Con Corp. 175,100 1,551,770
Nippon Sheet Glass Co., Ltd. 264,000 1,613,372
Nissin Kogyo Co., Ltd. 121,300 3,495,282
NSD Co., Ltd. 162,800 2,576,568
Sanyo Shokai Ltd. 175,600 1,291,739
Takeuchi MFG. Co., Ltd. 47,300 2,709,445
Toho Pharmaceutical Co., Ltd. 103,000 1,770,915
Tokai Rika Co., Ltd. 108,000 3,008,618
Tosoh Corp. 466,000 3,022,286
Toyo Suisan Kaisha Ltd. 234,300 4,405,746
Tsuruha Holdings, Inc. 44,700 1,494,281
Urban Corp. 99,000 1,605,615
Yamaguchi Financial Group, Inc. 288,000 3,008,618
81,758,666
Luxembourg--0.4%
Oriflame Cosmetics SA SDR 37,400 2,270,679
Netherlands--4.3%
Aalberts Industries NV 128,380 3,060,928
ASM International NV 67,200 1,918,461
Core Laboratories NV 16,500 (a) 2,101,935
Fugro NV 51,200 4,156,528
Imtech NV 22,200 1,824,088
Koninklijke BAM Groep NV 57,400 1,529,821
Nutreco Holding NV 51,690 3,653,802
Sligro Food Group NV 55,597 2,531,453
TomTom NV 44,000 (a) 3,420,175
24,197,191
Norway--1.4%
Ementor ASA 323,000 (a) 2,921,831
Tandberg ASA 104,700 2,518,180
TGS Nopec Geophysical Co. ASA 115,300 (a) 2,361,698
7,801,709
Portugal--0.3%
Banco BPI SA 223,750 1,882,498
Singapore--0.4%
Wing Tai Holdings Ltd. 961,800 2,499,864
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
South Korea--5.2%
Daegu Bank 66,070 1,224,053
Daelim Industrial Co., Ltd. 15,540 2,879,036
Hite Brewery Co., Ltd. 15,070 2,108,383
Honam Petrochemical Corp. 19,080 3,149,065
Hyundai Mipo Dockyard 19,080 6,569,243
Jusung Engineering Co., Ltd. 104,900 (a) 3,084,282
Korea Zinc Co., Ltd. 23,460 4,436,091
Pusan Bank 161,760 2,970,344
Simm Tech Co., Ltd. 241,900 2,723,325
29,143,822
Spain--4.0%
Banco Pastor SA 61,600 1,020,719
Bankinter SA 135,600 1,954,926
Bolsas y Mercados Espanoles 43,800 2,719,456
Fomento de Construcciones y Contratas SA 45,300 3,665,925
Gestevision Telecinco SA 55,900 1,467,524
Obrascon Huarte Lain SA 34,400 1,288,169
Sol Melia SA 65,000 1,224,435
Tubacex SA 226,330 2,220,496
Union Fenosa SA 95,040 5,623,017
Viscofan SA 70,400 1,642,387
22,827,054
Sweden--1.3%
Alfa Laval AB 41,200 2,651,729
Getinge AB 72,200 1,748,917
NCC AB 78,000 1,956,026
Trelleborg AB 50,800 1,198,988
7,555,660
Switzerland--5.0%
Actelion Ltd. 110,900 (a) 6,146,816
Galenica Holding AG 4,780 2,043,525
Georg Fischer AG 4,200 2,892,756
Holcim Ltd. 17,800 1,967,071
Julius Baer Holding AG 43,700 3,268,957
Rieter Holding AG 5,110 2,766,435
Sika AG 1,694 3,301,531
The Swatch Group AG 14,250 4,677,752
Vontobel Holding AG 27,900 1,430,124
28,494,967
Ukraine--0.5%
Michael Page International PLC 353,500 2,982,868
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
United Kingdom--16.0%
Amlin PLC 357,400 2,408,966
Antofagasta PLC 107,200 1,672,073
Barratt Developments PLC 149,020 2,280,168
Bellway PLC 47,800 1,008,109
Berkley Group Holdings PLC 50,200 1,472,562
BPP Holdings 114,900 1,438,441
British Airways PLC 265,200 (a) 2,079,105
Britvic PLC 283,200 1,871,184
Burren Energy PLC 196,600 3,378,186
Carphone Warehouse Group PLC 234,500 1,671,731
Cattles PLC 279,700 1,996,819
Charter PLC 192,810 (a) 4,665,896
Cookson Group PLC 212,300 3,313,563
Croda International PLC 152,200 1,992,578
Daily Mail and General Trust PLC 166,400 2,144,443
Dairy Crest Group PLC 151,600 1,950,611
Dana Petroleum PLC 70,300 (a) 1,671,022
DS Smith PLC 376,270 1,437,411
Enterprise Inns PLC 172,500 2,088,967
Firstgroup PLC 142,800 2,011,189
Galliford Try PLC 548,600 1,649,658
GKN PLC 330,900 2,396,187
Greene King PLC 82,100 1,481,264
Halfords Group PLC 204,100 1,480,062
Inchcape PLC 292,200 2,516,419
Informa PLC 274,900 2,814,489
International Power PLC 532,700 4,917,231
Interserve PLC 184,500 1,794,600
Invensys PLC 346,810 (a) 2,201,021
John Wood Group PLC 453,500 3,675,930
Kelda Group PLC 88,567 1,561,707
Kier Group PLC 49,010 1,831,656
Mcbride PLC 527,200 1,876,486
Morgan Crucible Co. PLC 316,810 1,921,517
Morgan Sindall PLC 59,600 1,908,013
N Brown Group PLC 234,133 1,302,725
Petrofac Ltd. 298,000 2,801,061
Regus Group PLC 688,500 1,732,327
Restaurant Group PLC 301,214 1,665,182
Savills PLC 222,300 1,670,021
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------
United Kingdom (continued)
Speedy Hire PLC 75,330 1,668,849
Sthree PLC 185,100 1,109,417
Thomas Cook Group PLC 255,590 1,456,095
89,984,941
TOTAL COMMON EQUITIES (Cost $428,684,904) 512,685,385
PREFFERED STOCKS--1.8%
Germany--1.8%
Fresenius AG 50,300 3,914,186
Fuchs Petrolub AG 24,900 2,298,039
Hugo Boss AG 35,000 2,374,219
ProSiebenSat.1 Media AG 51,100 1,606,024
TOTAL PREFERRED STOCKS (Cost $7,483,309) 10,192,468
SHORT-TERM INVESTMENTS--0.2% Rate Maturity Par Value
U.S. Government--.2% ---- -------- ---------
U.S. Treasury Bill (Cost $1,388,625) 3.90% 12/13/2007 1,400,000 (b,c) 1,388,625
TOTAL UNAFFILIATED INVESTMENTS (Cost $437,556,838) 524,266,478
AFFILIATED INVESTMENTS--0.3% Shares
Dreyfus Institutional Preferred Plus Money Market Fund ----------
(Cost $1,633,445) 1,633,445 (d) 1,633,445
-----------
TOTAL INVESTMENTS--93.1% (Cost $439,190,283) 525,899,923
OTHER ASSETS, LESS LIABILITIES--6.9% 38,795,923
-----------
NET ASSETS--100% 564,695,846
===========
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.
At September 30, 2007 the Fund held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date September 30, 2007 to Deliver Appreciation
- ----------------------------------------------------------------------------------------------------------------------------
Euro 1,649,421 10/1/2007 $2,352,074 $2,336,405 $15,669
=======
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Local Unrealized
Principal Contract Value at USD Amount Appreciation
Contracts to Deliver Amount Value Date September 30, 2007 to Receive (Depreciation)
- -------------------------------------------------------------------------------------------------------------------------------
Australian Dollar 1,387,534 10/2/2007 $1,231,298 $1,229,930 $ 1,368)
British Pound 616,924 10/1/2007 1,261,980 1,249,394 (12,586)
British Pound 2,988,573 10/2/2007 6,113,425 6,093,103 (20,322)
Canadian Dollar 2,236,682 10/2/2007 2,249,278 2,250,862 1,584
Danish Krone 1,217,378 10/2/2007 232,973 232,284 (689)
Euro 6,745,294 10/2/2007 9,618,789 9,591,134 (27,655)
Japanese Yen 405,383,880 10/1/2007 3,529,067 3,504,053 (25,014)
Japanese Yen 526,461,720 10/2/2007 4,583,109 4,579,521 (3,588)
Norwegian Krone 2,649,051 10/2/2007 491,047 488,160 (2,887)
Singapore Dollar 234,957 10/2/2007 158,210 158,402 192
South Korea Won 2,907,334,459 10/1/2007 3,177,762 3,172,883 (4,879)
Swedish Krona 3,905,138 10/2/2007 606,379 603,483 (2,896)
Swiss Franc 2,001,171 10/2/2007 1,719,662 1,712,745 (6,917)
---------
$(107,025)
=========
At September 30, 2007 the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- ------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (1501 Contracts) Long 12/18/2007 54,666,480 $126,356
Topix (100 Contracts) Long 12/31/2007 14,137,721 604,560
--------
$730,916
========
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------
Consumer Discretionary 15.8%
Consumer Staples 5.6
Energy 5.2
Financials 17.7
Health Care 5.8
Industrials 20.0
Information Technology 5.5
Materials 13.5
Telecommunication Services 1.1
Utilities 2.1
Short-term and Other Assets 7.7
-----
100.0%
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investments in securities:
Unaffiliated issuers, at value (Note 1A) (cost $437,556,838) $524,266,478
Afffiliated issuers, at value (Note 1A) (cost $1,633,445) (Note 1H) 1,633,445
Cash Collateral at broker for futures contracts 2,790,000
Receivable for investments sold 42,431,770
Interest and dividends receivable 1,643,908
Foreign Currency (cost $1,146,134) 1,254,822
Receivable for Fund shares sold 83,670
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 17,445
Prepaid expenses 27,452
------------
Total assets 574,148,990
Liabilities
Payable for investments purchased $ 5,818,462
Payable for Fund shares redeemed 3,172,222
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 108,801
Payable for variation margin on open futures contracts (Note 6) 28,941
Accrued accounting, administration, custody and transfer agent fees (Note 2) 185,537
Accrued administrative service fees (Note 2) 56,002
Accrued professional fees 59,003
Accrued trustees' fees (Note 2) 14,396
Accrued chief compliance officer fee (Note 2) 367
Accrued shareholders reporting expense (Note2) 7,280
Other accrued expenses and liabilities 7,012
-----------
Total liabilities 9,458,023
------------
Net Assets $564,690,967
============
Net Assets consist of:
Paid-in capital $298,595,817
Accumulated net realized gain 179,279,267
Distributions in excess of net investment income (1,042,463)
Net unrealized appreciation 87,858,346
------------
Total Net Assets $564,690,967
============
Shares of beneficial interest outstanding 21,129,396
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 26.73
============
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Operations For the Year
Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments (net foreign withholding taxes $42,530) $ 647,159
Dividend income from affiliated investments (Note 1H) 18,137
Interest income 1,269
Allocated investment income from portfolio (Note 9) 14,108,960
Allocated expenses from portfolio (Note 9) (8,623,752)
------------
6,151,773
Expenses
Investment advisory fee (Note 2) $ 178,854
Accounting, administration, custody and transfer agent fees (Note 2) 67,434
Administrative service fees (Note 2) 116,109
Trustees' fees (Note 2) 3,958
Registration fees 49,086
Professional fees 85,185
Insurance expense 3,349
Miscellaneous expenses 68,295
------------
Total expenses 572,270
Deduct:
Waiver of investment advisory fee (Note 2) (29,167)
------------
Net expenses 543,103
------------
Net investment income 5,608,670
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 21,353,186
Financial futures transactions 411,930
Foreign currency transactions and forward foreign currency exchange transactions 257,462
Allocation of realized gain from portfolio (Note 9) 214,179,162
Net realized gain (loss) ------------ 236,201,740
Change in unrealized appreciation (depreciation) on:
Investments (5,461,681)
Financial futures contracts 156,049
Foreign currency translations and forward foreign currency exchange contracts 141,616
Allocation of unrealized depreciation from portfolio (Note 9) (69,417,596)
------------
Net change in net unrealized appreciation (depreciation) (74,581,612)
------------
Net realized and unrealized gain (loss) on investments 161,620,128
------------
Net Increase in Net Assets from Operations $167,228,798
============
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 5,608,670 $ 5,296,981
Net realized gain (loss) 236,201,740 61,512,475
Change in net unrealized appreciation (depreciation) (74,581,612) 63,997,049
------------- -------------
Net increase (decrease) in net assets from investment operations 167,228,798 130,806,505
------------- -------------
Distributions to Shareholders (Note 1 C)
From net investment income (6,095,758) (5,719,295)
From net realized gains on investments (85,487,253) (33,657,881)
------------- -------------
Total distributions to shareholders (91,583,011) (39,377,176)
------------- -------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 82,897,738 225,167,277
Value of shares issued in reinvestment of distributions 59,663,488 25,672,328
Cost of shares redeemed (net of redemption fees
of $7,754 and $24,385, respectively) (412,206,585) (108,488,250)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions (269,645,359) 142,351,355
------------- -------------
Total Increase (Decrease) in Net Assets (193,999,572) 233,780,684
Net Assets
At beginning of year 758,690,539 524,909,855
------------- -------------
At end of year [including distributions in excess of net investment
income of ($1,042,463) and ($53,607), respectively] $ 564,690,967 $ 758,690,539
============= =============
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
--------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- -------
Net Asset Value, Beginning of Year $ 24.03 $ 20.84 $ 15.93 $ 12.05 $ 8.91
-------- -------- -------- -------- -------
From Investment Operations:
Net investment income* (a) 0.13 0.18 0.23 0.14 0.10
Net realized and unrealized gains (loss) on investments 5.48 4.52 5.86 3.86 3.13
-------- -------- -------- -------- -------
Total from operations 5.61 4.70 6.09 4.00 3.23
-------- -------- -------- -------- -------
Less Distributions to Shareholders:
From net investment income (0.19) (0.19) (0.17) (0.12) (0.09)
From net realized gains on investments (2.72) (1.32) (1.01) -- --
-------- -------- -------- -------- -------
Total distributions to shareholders (2.91) (1.51) (1.18) (0.12) (0.09)
-------- -------- -------- -------- -------
Net Asset Value, End of Year $ 26.73 $ 24.03 $ 20.84 $ 15.93 $ 12.05
======== ======== ======== ======== =======
Total Return 24.50%(b) 23.72% 40.20% 33.35% 36.47%(b)
Ratios/Supplemental data:
Expenses (to average daily net assets) * (c) 1.10% 1.11% 1.16% 1.27% 1.39%
Net Investment Income (to average daily net assets)* 0.68% 0.79% 1.26% 0.99% 1.01%
Portfolio Turnover (d) 88% 65% 50% 72% 15%(e)
Net Assets, End of Year (000's omitted) $564,691 $758,691 $524,910 $212,032 $89,570
- ----------------
* The investment advisor voluntarily agreed not to impose a portion of its investment advisory fee and/or reimburse 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) $0.13 N/A N/A N/A $0.08
Ratios (to average daily net assets):
Expenses (c) 1.12% N/A N/A N/A 1.65%
Net investment income 0.66% N/A N/A N/A 0.75%
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) For the period October 1, 2006 to September 19, 2007 and for the fiscal
years ended September 30, 2003-2006, the ratio includes the Fund's share of
the TBC International Small Cap Portfolio's allocated expenses.
(d) On September 19, 2007, the Fund, which had owned approximately 100% of the
Portfolio on such date, withdrew entirely from the Portfolio and received
the Portfolio's securities and cash in exchange for its interests in the
Portfolio. Effective September 20, 2007, the Fund began investing directly
in the securities in which the Portfolio had invested. Portfolio turnover
represents investment activity of both the Fund and the Portfolio for the
year. The amounts shown for 2004-2006 are the ratios for the Portfolio.
(e) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 23, 2003. The Portfolio turnover for
the period January 24, 2003 to September 30, 2003 was 46%.
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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 S&P Citigroup
World Extended Market Ex.-U.S. (EMI Ex-U.S.) Index. The EMI Ex-U.S. Index
is made up of those companies representing the lowest 20% of each country's
total available market capitalization. The Fund may invest up to 25% of
assets in emerging market countries.
Prior to September 20, 2007, the Fund had invested substantially all of its
investable assets in The Boston Company International Small Cap Portfolio
(the "Portfolio"), a subtrust of the Mellon Institutional Funds Master
Portfolio, the "Portfolio Trust", a New York trust. The Portfolio had
investment objectives, policies, limitations and accounting policies
substantially identical to those of the Fund. While investing in the
Portfolio, the Fund earned its proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on its
percentage ownership of the Portfolio's shares of beneficial interest. The
Portfolio's Statement of Operations for the period October 1, 2006 through
September 19, 2007 is included in Note 9. On September 19, 2007, the Fund,
which owned 100% of the Portfolio on that date, withdrew entirely from the
Portfolio and received the Portfolio's assets, including securities and
cash, and assumed the Portfolio's stated liabilities in exchange for its
interest in the Portfolio. Effective September 20, 2007, the Fund began
investing directly in the securities in which the Portfolio had invested.
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, or if such quotations do not accurately reflect
fair value, 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") is 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 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.
19
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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. Dividends representing
a return of capital are reflected as a reduction of cost. Realized gains
and losses from securities sold are recorded on the identified cost basis.
Income, expenses and realized and unrealized gains and losses allocated
from the Portfolio represent the Fund's proportionate share of those items
earned by the Portfolio during the period October 1, 2006 through September
19, 2007.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid.
C. Distributions to shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's distributions from capital gains, if any, after reduction of capital
losses will be declared and distributed at least annually. Dividends from
net investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless the shareholder elects
to receive them in cash.
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, passive foreign investment companies (PFIC) and equalization.
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 be distributed 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 ("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.
On July 31, 2007, the Dreyfus Premier International Small Cap Fund
("Dreyfus Feeder") withdrew from the master feeder structure via a
redemption-in-kind and received currency and securities with unrealized
appreciation of $79,724,556 for the value of their interest in the
Portfolio. The Fund realized no gain on this transaction. $59,333,708 of
unrealized appreciation had been allocated to that feeder fund. The Fund
increased paid in capital and decreased unrealized appreciation on
investments by $20,390,848 to recognize this difference. This
reclassification had no impact on the net assets or results of operations
of the Fund.
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. 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.
20
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
I. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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:
Prior to September 20, 2007 the Fund did not directly incur any investment
advisory, custody, administration and commitment fees, which were incurred
by the Portfolio and allocated to the Fund based on its proportionate
interest in the Portfolio. The following disclosures relating to these fees
represent fees incurred by the Portfolio for the period prior to September
20, 2007, and by the Fund thereafter.
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 Fund's average daily net assets.
For the period of September 1, 2007 through August 31, 2008, TBCAM has
agreed to rebate 0.25% of its management fee to the Fund. This rebate will
end on September 1, 2008, and on such date the Fund's contractual advisory
fee will again be in effect. This rebate will not change any existing
voluntary total expense limitation arrangements that are in effect, as
TBCAM will continue its commitment to maintain such total expense
limitations during this rebate period. For the period October 1, 2006
through September 19, 2007, TBCAM rebated $103,350 of its investment
advisory fees charged to the Portfolio. For the period September 20, 2007
through September 30, 2007, TBCAM rebated $29,167 of its investment
advisory fees charged to the Fund.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$45,781, for the year ended September 30, 2007.
The Trust, and previously the Portfolio Trust, entered into an agreement
with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY
Mellon and an affiliate of TBCAM, to provide custody, administration and
accounting services for the Portfolio/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
$697,943 for the period October 1, 2006 to September 19, 2007 and $21,653
for the period September 20, 2007 to September 30, 2007.
The Trust, and previously the Portfolio Trust, also entered into an
agreement with Mellon Bank to perform certain securities lending activities
and to act as the Portfolio/Fund's lending agent. Mellon Bank receives an
agreed upon percentage of the net lending revenues. Pursuant to this
agreement, Mellon Bank earned 110,671 for the period October 1, 2006 to
September 19, 2007 and $0 for the period September 20, 2007 to September
30, 2007. See Note 7 for further details.
The Trust, and previously the Portfolio Trust, entered into two separate
agreements with The Bank of New York that enable the Fund, and other funds
in the Trust, to borrow, in the aggregate, (i) up to $35 million from a
committed line of credit and (ii) up to $15 million from an uncommitted
line of credit. Interest is charged to each participating fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. The
21
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
participating funds also pay an annual fee, computed at a rate of 0.020 of
1% of the committed and uncommitted amounts and allocated ratably to the
participating funds. 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 at the end of each quarter. Pursuant to these
agreements, the Fund was charged $8,904 for the period October 1, 2006 to
September 19, 2007 and $287 for the period September 20, 2007 to September
30, 2007, which is included in miscellaneous expenses on the statement of
operations. See Note 8 for further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,255, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $12,684, which amount is included in miscellaneous expenses in the
statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $107,882 for fees
payable to BNY Mellon Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
------------- --------------
Non-U.S. Government Securities $ 959,625,642 $1,678,420,187
============= ==============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 3,243,701 9,977,957
Shares issued to shareholders in reinvestment of 2,442,525 1,232,495
distributions (16,126,541) (4,831,166)
----------- ----------
Shares redeemed (10,440,315) 6,379,286
Net increase (decrease) =========== =========
At September 30, 2007, four shareholders of record, in the aggregate, held
approximately 47.7% 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 year ended September 30, 2007, the Fund received
$7,754 in redemption fees and is reflected in the cost of shares redeemed.
22
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
In July 2006, FASB 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 implication of FIN 48 and its impact on
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $442,963,380
============
Gross unrealized appreciation $127,590,141
Gross unrealized depreciation (23,023,185)
------------
Net unrealized appreciation (depreciation) $104,566,956
============
Undistributed ordinary income $ 0
Undistributed capital gains 181,925,976
------------
Total distributable earnings $181,925,976
============
The tax character of distributions paid during the fiscal years ended September 30, 2007 and September 30, 2006 was as
follows:
2007 2006
------------ ------------
Ordinary income $ 7,794,858 $14,680,095
Capital gains 83,788,153 24,697,081
------------ -----------
Total distributions $91,583,011 $39,377,176
============ ============
(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, and previously 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 Fund deposits either cash or securities in an amount
equal to a certain percentage of the contract amount. Subsequent payments
are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security, and are recorded for
financial statement purposes as unrealized 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 September 30, 2007, the Fund held open financial futures contracts. See
the Schedule of Investments for further details.
23
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts
The Fund, and previously 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 Fund primarily to
protect the value of the Fund's foreign securities from adverse currency
movements. Unrealized appreciation and depreciation of forward foreign
currency exchange contracts is included in the Statement of Assets and
Liabilities.
At September 30, 2007, the Fund held forward foreign currency exchange
contracts. See Schedule of Investments for further details.
(7) Security Lending:
The Fund, and previously the Portfolio, 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, and previously the Portfolio, loaned securities during the year
ended September 30, 2007 and earned interest on the invested collateral of
$129,601 of which $18,930 was rebated to borrowers or paid in fees. At
September 30, 2007, the Fund did not have any securities out on loan.
(8) Line of Credit:
On behalf of the Fund and other funds in the Trust, and previously the
Portfolios in the Portfolio Trust, the Trust has access to a credit
facility, which enables each fund to borrow, in the aggregate, up to $35
million under a committed line of credit and up to $15 million under an
uncommitted line of credit. For the year ended September 30, 2007, the Fund
had average borrowings outstanding of $10,974,467 for a total of fifteen
days and incurred interest expense of $26,806 for the period October 1,
2006 to September 19, 2007 and $10 for the period September 20, 2007 to
September 30, 2007. At September 30, 2007, the Fund did not have a loan
balance outstanding.
24
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(9) Reorganization:
Prior to September 19, 2007, the Fund had utilized a Master Feeder Fund
structure where the Fund sought to achieve its investment objectives by
investing all of its investable assets in the Boston Company International
Small Cap Portfolio. Effective after the close of business on September 19,
2007, the Fund withdrew its assets from the Portfolio by means of a
redemption-in-kind and now the Fund invests directly in portfolio
securities.
Below is the Statement of Operations for The Boston Company International
Small Cap Portfolio for the period October 1, 2006 to September 19, 2007:
Investment Income (Note 1B)
Dividend income from Unaffiliated investments $ 18,908,869
Dividend income from Affiliated investments 756,109
Interest income 149,085
Security lending income (Note 7) 110,671
-------------
Net investment income 19,924,734
Expenses
Investment advisory fee (Note 2) $ 11,328,812
Accounting, administration and custody fees (Note 2) 697,943
Trustees' fees (Note 2) 62,482
Insurance expense 21,353
Miscellaneous expenses 15,848
------------
Total expenses 12,126,438
Deduct:
Waiver of investment advisory fee (Note 2) (103,350)
------------
Net expenses 12,023,088
-------------
Net investment income 7,901,646
-------------
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments 275,894,656
Financial futures transactions 19,954
Foreign currency transactions and forward foreign currency exchange transactions (465,473)
------------
Net realized gain 275,449,137
Change in unrealized appreciation (depreciation) on:
Investments (130,633,931)
Financial futures transactions 574,867
Foreign currency translations and forward foreign currency exchange contracts 270,065
------------
Net change in net unrealized appreciation (depreciation) (129,788,999)
-------------
Net realized and unrealized gain (loss) on investments 145,660,138
-------------
Net Increase in Net Assets from Operations $ 153,561,784
=============
The accompanying notes are an integral part of the financial statements.
25
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Trust and Shareholders of The
Boston Company International Small Cap Fund:
In our opinion, the accompanying statement of assets and liabilities, including
schedule of investments, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of The Boston Company International Small Cap
Fund (the "Fund") at September 30, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
26
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $500
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $8,447
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $500
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $8,447
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $500
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $8,447
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $500
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $9,494
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees *
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
27
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
28
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MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6939AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
Large Cap Core Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Stock prices were buoyed throughout the reporting period by positive U.S. and
global economic growth and strong corporate earnings. However, the market's
advance slowed during the second half of the reporting period as turmoil in the
sub-prime mortgage market spread to other areas of the financial markets,
derailing investor confidence. The fund participated fully in the market's rise,
producing higher returns than its benchmark due to the success of our security
selection process in a variety of market sectors.
For the 12-month period ended September 30, 2007, The Boston Company Large Cap
Core Fund returned 20.3% as compared to its benchmark, the S&P 500 Index, which
returned 16.4%. The portfolio outperformed the S&P 500 Index, thanks largely to
strong stock selection in the Consumer Discretionary and Information Technology
sectors. Within Consumer Discretionary, an initial overweight in Hilton Hotels
and a consistent overweight in McDonald's helped to boost performance. We
liquidated Hilton Hotels after a private equity group offered shareholders a
significant premium to the high end of the 52-week trading range, harvesting a
return of more than 60% for the period. In the Information Technology sector, it
was the telecommunications equipment and computer hardware industries that
claimed the strongest relative performance. The superstar in the
telecommunications equipment industry was Research In Motion. The maker of the
multiple "Smartphones" experienced several successful new product launches and
increased demand for this new breed of products, which resulted in several
strong quarterly earnings reports that beat Wall Street's estimates soundly. In
the computer hardware arena, Apple also enjoyed a strong, positive response from
consumers to new product releases. This resulted in solid revenue, cash flow,
gross margin and earnings growth.
While we would prefer that all of our portfolio picks add value, we did have
several stocks that slowed performance. Within Financials, two stocks in the
capital markets industry (ETRADE Financial and Merrill Lynch) and one specialty
insurance firm (Ambac Financial Group) accounted for much of the fund's
underperformance. As expected, many financial institutions slipped during the
period on the negative sentiment surrounding this past summer's sub-prime loan
and liquidity crunch. Merrill Lynch stumbled due to investor perceptions that
there was significant sub-prime loan exposure on the company's books. However,
we feel that these views are unfounded and continue to hold the stock due to its
well-diversified revenue stream and historically-attractive valuation. ETRADE
Financial, a firm that had some exposure to mortgage loans on its books, also
suffered. While they were not forced to liquidate and realize massive losses
like some firms, they did decide to reduce loan exposure and ride out the
mortgage storm. This was not an encouraging sign and the position was
liquidated.
The fund continues to rely on the disciplined process that has produced
distinguished performance in the past. Based on our bottom-up stock selection
process, we have identified what we believe are a relatively large number of
attractive investments among technology companies. By contrast, we have reduced
the fund's exposure to consumer discretionary stocks, where we see cautionary
business trends and little earnings clarity. We have also trimmed the fund's
energy positions in light of current valuations. We believe that these
strategies should position the fund for continued, albeit slowing, economic
growth.
Sean Fitzgibbon, CFA Jeffery McGrew, CFA
Portfolio Manager Portfolio Manager
The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
2
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Large Cap Core Fund and the Standard & Poor's 500
- --------------------------------------------------------------------------------
Standard & Poor's 500
TBC Composite Stock
PERIOD Large Cap Core Fund Price Index *
9/30/97 100,000 100,000
12/31/97 100,845 102,871
3/31/98 113,593 117,210
6/30/98 111,474 121,102
9/30/98 90,673 109,083
12/31/98 108,113 132,291
3/31/99 100,563 138,879
6/30/99 108,630 148,650
9/30/99 101,816 139,392
12/31/99 107,924 160,116
3/31/00 113,769 163,783
6/30/00 111,894 159,432
9/30/00 118,635 157,887
12/31/00 128,172 145,542
3/31/01 121,262 128,298
6/30/01 123,487 135,801
9/30/01 110,112 115,876
12/31/01 117,751 128,257
3/31/02 120,413 128,611
6/30/02 109,598 111,390
9/30/02 90,626 92,158
12/31/02 97,118 99,922
3/31/03 93,345 96,775
6/30/03 108,052 111,665
9/30/03 110,334 114,620
12/31/03 123,558 128,567
3/31/04 126,135 130,743
6/30/04 126,703 132,992
9/30/04 124,895 130,505
12/31/04 137,159 142,548
3/31/05 135,413 139,486
6/30/05 136,621 141,395
9/30/05 141,595 146,490
12/31/05 144,885 149,542
3/31/06 151,715 155,832
6/30/06 148,235 153,587
9/30/06 155,477 162,279
12/31/06 167,657 173,141
3/31/07 169,894 174,254
6/30/07 181,335 185,186
9/30/07 187,001 188,944
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 1/3/1991
- --------------------------------------------------------------------------------
Fund 20.27% 14.40% 15.60% 6.46% 12.78%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- -----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,100.90 $4.21
Hypothetical (5% return
per year before expenses) $1,000.00 $1,021.06 $4.05
- -----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.80%, multiplied
by the average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
4
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- --------------------------------------------------------------------------------
ConocoPhillips Energy 3.4%
General Electric Co. Industrials 2.9
Altria Group, Inc. Consumer Staples 2.4
AT&T, Inc. Telecommunications Services 2.4
Chevron Corp. Energy 2.3
Bank of America Corp. Financials 2.3
Verizon Communications, Inc. Telecommunications Services 2.2
Cisco Systems, Inc. Technology 2.1
American International Group, Inc. Financials 2.1
JPMorgan Chase & Co. Financials 2.1
----
24.2%
*Excludes short-term securities.
Percentage of
Economic Sector Allocation Net Assets
- ------------------------------------------------------
Consumer Discretionary 7.9%
Consumer Staples 9.0
Energy 11.7
Financials 19.6
Health Care 10.3
Industrials 10.0
Materials 3.0
Technology 20.0
Telecommunications Services 4.5
Utilities 3.0
Short-term and Net other Assets 1.0
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--99.0%
EQUITIES--99.0%
Consumer Discretionary--7.9%
Best Buy Co., Inc. 20,130 926,383
Coach, Inc. 12,700 (a) 600,329
Johnson Controls, Inc. 7,420 876,376
McDonald's Corp. 33,968 1,850,237
Omnicom Group, Inc. 32,880 1,581,199
Ross Stores, Inc. 16,770 429,983
Target Corp. 18,500 1,176,045
TJX Cos., Inc. 29,150 847,391
Walt Disney Co. 40,640 1,397,610
9,685,553
Consumer Staples--9.0%
Altria Group, Inc. 41,650 2,895,924
Cadbury Schweppes PLC--ADR 17,180 799,214
Coca-Cola Enterprises, Inc. 41,090 995,200
CVS Caremark Corp. 25,160 997,091
Pepsico, Inc. 20,500 1,501,830
Supervalu, Inc. 31,260 1,219,453
The Kroger Co. 54,330 1,549,492
Wal-Mart Stores, Inc. 23,630 1,031,450
10,989,654
Energy--11.7%
Chesapeake Energy Corp. 32,440 1,143,834
Chevron Corp. 30,162 2,822,560
ConocoPhillips 47,460 4,165,564
ENSCO International, Inc. 15,620 876,282
Exxon Mobil Corp. 6,984 646,439
Marathon Oil Corp. 12,920 736,698
Nabors Industries Ltd. 27,000 (a) 830,790
National-Oilwell Varco, Inc. 12,000 (a) 1,734,000
XTO Energy, Inc. 21,920 1,355,533
14,311,700
Financials--19.6%
American Express Co. 31,260 1,855,906
American International Group, Inc. 38,139 2,580,103
Bank of America Corp. 56,060 2,818,136
CIT Group, Inc. 19,640 789,528
Citigroup, Inc. 35,736 1,667,799
CME Group 2,295 1,347,968
Fannie Mae 21,800 1,325,658
JPMorgan Chase & Co. 55,100 2,524,682
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------
Financials (continued)
Merrill Lynch & Co., Inc. 17,780 1,267,358
Metlife, Inc. 20,570 1,434,346
Morgan Stanley 22,920 1,443,960
T Rowe Price Group, Inc. 23,490 1,308,158
Wachovia Corp. 35,920 1,801,388
Wells Fargo & Co. 51,080 1,819,470
23,984,460
Health Care--10.3%
Baxter International, Inc. 34,690 1,952,353
Becton Dickinson & Co. 7,920 649,836
Cigna Corp. 19,430 1,035,425
Covidien Ltd. 6,537 271,285
Hospira, Inc. 23,360 (a) 968,272
Merck & Co., Inc. 27,470 1,419,924
Pfizer, Inc. 79,060 1,931,436
Schering-Plough Corp. 71,210 2,252,372
Thermo Fisher Scientific, Inc. 22,590 (a) 1,303,895
Zimmer Holdings, Inc. 10,190 (a) 825,288
12,610,086
Industrials--10.0%
Dover Corp. 16,820 856,979
Eaton Corp. 14,820 1,467,773
Emerson Electric Co. 24,300 1,293,246
General Electric Co. 84,190 3,485,466
Goodrich Corp. 14,800 1,009,804
L-3 Communications Holdings, Inc. 8,320 849,805
Raytheon Co. 9,690 618,416
Textron, Inc. 34,940 2,173,617
Tyco International Ltd. 6,537 289,851
US Airways Group, Inc. 10,482 (a) 275,153
12,320,110
Materials--3.0%
Air Products & Chemicals, Inc. 15,620 1,527,011
Allegheny Technologies, Inc. 11,340 1,246,833
Rohm & Haas Co. 16,050 893,503
3,667,347
Technology--20.0%
Amphenol Corp., Class A 23,850 948,276
Apple Computer, Inc. 12,530 (a) 1,923,856
Broadcom Corp., Class A 21,850 (a) 796,214
Cisco Systems, Inc. 78,510 (a) 2,599,466
Cognizant Technology Solutions Corp., Class A 22,840 (a) 1,821,947
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------
Technology (continued)
EMC Corp. 76,090 (a) 1,582,672
Google, Inc., Class A 3,100 (a) 1,758,537
Hewlett-Packard Co. 40,900 2,036,411
Intel Corp. 68,390 1,768,565
McAfee, Inc. 24,110 (a) 840,716
Microsoft Corp. 70,290 2,070,743
National Semiconductor Corp. 41,210 1,117,615
Oracle Corp. 73,710 (a) 1,595,821
Qualcomm, Inc. 34,090 1,440,643
Research In Motion Ltd. 7,040 (a) 693,792
Texas Instruments, Inc. 42,640 1,560,198
24,555,472
Telecommunication Services--4.5%
AT&T, Inc. 67,970 2,875,811
Verizon Communications, Inc. 60,270 2,668,756
5,544,567
Utilities--3.0%
PG&E Corp. 29,170 1,394,326
Sempra Energy 40,000 2,324,800
3,719,126
TOTAL UNAFFILIATED INVESTMENTS (Cost $104,552,327) 121,388,075
AFFILIATED INVESTMENTS--0.6%
Dreyfus Institutional Preferred Plus Money Market Fund (Cost $722,661) 722,661 (b) 722,661
-----------
TOTAL INVESTMENTS--99.6% (Cost $105,274,988) 122,110,736
OTHER ASSETS, LESS LIABILITIES--0.4% 480,701
-----------
NET ASSETS--100% 122,591,437
===========
Notes to Schedule of Investments:
ADR - American Depository Receipts
(a) Non-income producing security.
(b) Affilated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Assets and Liabilities September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investments in securities:
Unaffiliated issuers, at value (Note 1A) (cost $104,552,327) $121,388,075
Affiliated issuers, at value (Note 1A) (cost $722,661) 722,661
Receivable for Fund shares sold 26,094
Receivable for securities sold 608,724
Interest and dividend receivable 155,380
Prepaid expenses 5,772
------------
Total assets 122,906,706
Liabilities
Payable for Fund shares redeemed $ 180,000
Accrued administrative service fee (Note 2) 36,827
Accrued professional fees 36,203
Accrued accounting, administration, custody and transfer agent fees (Note 2) 27,041
Accrued trustees' fees (Note 2) 4,422
Accrued shareholder reporting expense (Note2) 567
Accrued chief compliance officer fee (Note 2) 367
Other accrued expenses and liabilities 29,842
----------
Total liabilities 315,269
------------
Net Assets $122,591,437
============
Net Assets consist of:
Paid-in capital $ 97,045,306
Accumulated net realized gain 8,209,635
Undistributed net investment income 500,748
Net unrealized appreciation 16,835,748
------------
Total Net Assets $122,591,437
============
Shares of beneficial interest outstanding 2,832,707
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 43.28
============
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Operations
For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments
(net of foreign withholding taxes of $3,653) $ 2,057,603
Dividend income from affiliated investments (Note 1F) 109,478
Interest income 7,622
-----------
Total investment income 2,174,703
Expenses
Investment advisory fee (Note 2) $ 588,140
Administrative service fee (Note 2) 145,212
Accounting, administration, custody and transfer agent fees (Note 2) 111,547
Professional fees 42,010
Registration fees 20,898
Trustees' fees (Note 2) 16,035
Insurance expense 4,426
Miscellaneous expenses 14,168
----------
Total expenses 942,436
-----------
Net investment income 1,232,267
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 8,647,246
Financial futures transactions 71,668
----------
Net realized gain (loss) 8,718,914
Change in unrealized appreciation (depreciation) on:
Investments 11,178,828
-----------
Net realized and unrealized gain (loss) 19,897,742
-----------
Net Increase in Net Assets from Operations $21,130,009
===========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 1,232,267 $ 481,678
Net realized gain (loss) 8,718,914 3,865,493
Change in net unrealized appreciation (depreciation) 11,178,828 866,918
------------- ------------
Net increase (decrease) in net assets from investment operations 21,130,009 5,214,089
------------- ------------
Distributions to Shareholders (Note 1C)
From net investment income (945,029) (480,413)
From net realized gains on investments (4,041,460) (5,953,616)
------------- ------------
Total distributions to shareholders (4,986,489) (6,434,029)
------------- ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 33,886,547 51,023,432
Value of shares issued in reinvestment of distributions 4,223,879 5,246,418
Cost of shares redeemed (25,407,412) (7,340,989)
------------- ------------
Net increase (decrease) in net assets from Fund share transactions 12,703,014 48,928,861
------------- ------------
Total Increase (Decrease) in Net Assets 28,846,534 47,708,921
Net Assets
At beginning of year 93,744,903 46,035,982
------------- ------------
At end of year (including undistributed net
investment income of $500,748 and $213,510) $ 122,591,437 $ 93,744,903
============= ============
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-----------------------------------------------------------
2007 2006 2005 2004 2003
-------- ------- -------- -------- -------
Net Asset Value, Beginning of Year $ 37.58 $ 39.57 $ 35.24 $ 31.43 $ 26.13
-------- ------- -------- -------- -------
From Investment Operations:
Net investment income * (a) 0.43 0.36 0.41 0.23 0.36
Net realized and unrealized gains (loss) on investments 7.01 3.22 4.28(b) 3.92(b) 5.30
-------- ------- -------- -------- -------
Total from operations 7.44 3.58 4.69 4.15 5.66
-------- ------- -------- -------- -------
Less Distributions to Shareholders:
From net investment income (0.33) (0.39) (0.36) (0.34) (0.36)
From net realized gains on investments (1.41) (5.18) -- -- --
-------- ------- -------- -------- -------
Total distributions to shareholders (1.74) (5.57) (0.36) (0.34) (0.36)
-------- ------- -------- -------- -------
Net Asset Value, End of Year $ 43.28 $ 37.58 $ 39.57 $ 35.24 $ 31.43
======== ======= ======== ======== =======
Total Return 20.27% 9.84%(c) 13.34% 13.23%(c) 21.76%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets) * (d) 0.80% 0.90% 0.85% 0.83% 0.71%
Net Investment Income (to average daily net assets)* 1.05% 0.98% 1.10% 0.67% 1.23%
Portfolio Turnover (e) 59% 103% 85% 66% 104%
Net Assets, End of Year (000's omitted) $122,591 $93,745 $46,036 $56,067 $64,150
- --------
* 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
Ratios (to average daily net assets):
Expenses (d) N/A 0.99% N/A 0.84% 0.93%
Net investment income N/A 0.89% N/A 0.66% 1.01%
(a) Calculated based on average shares outstanding.
(b) Amount includes litigation proceeds received by the Portfolio of $0.04 for
the year ended September 30, 2007, $0.02 for the year ended September 30,
2005 and $0.02 for the year ended September 30, 2004.
(c) Total return would have been lower in the absence of expense waivers.
(d) For the period October 1, 2006 to September 19, 2007 and for the fiscal
years ended September 30, 2003-2006, the ratio includes the Fund's share of
the TBC Large Cap Core Portfolio's (the "Portfolio") allocated expenses.
(e) On September 19, 2007, the Fund, which had owned 100% of the Portfolio on
such date, withdrew entirely from the Portfolio and received the
Portfolio's securities and cash in exchange for its interest in the
Portfolio. Effective September 20, 2007, the Fund began investing directly
in securities. Portfolio turnover represents investment activity of both
the Fund and the Portfolio for the year. The amounts shown for 2003-2006
are the ratios for the Portfolio.
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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 appear to be
undervalued relative to underlying business fundamentals. The Fund focuses
on companies with total market capitalizations which are greater than the
market capitalization of companies in the bottom 5% of the S&P 500 Index.
The Fund may invest without limit in securities of U.S. companies and of
foreign companies that are listed or traded in the U.S., but not more than
10% of it assets in other foreign securities.
Prior to September 20, 2007, the Fund had invested substantially all of its
investable assets in The Boston Company Large Cap Core Portfolio (the
"Portfolio"), a subtrust of the Mellon Institutional Funds Master
Portfolio, a New York trust. The Portfolio had investment objectives,
policies and limitations substantially identical to those of the Fund. On
September 19, 2007, the Fund, which had owned 100% of the Portfolio on such
date, withdrew entirely from the Portfolio and received the Portfolio's
assets, including securities and cash, and assumed its stated liabilities,
in exchange for its interests in the Portfolio. This redemption in kind
transaction was effected based upon the net assets value of the Fund's
interests in the Portfolio. Effective September 20, 2007, the Fund began
investing directly in securities. Accordingly, the financial statements of
the Fund and Portfolio have been presented on a consolidated basis, and
represent all the activities of both the Fund and the Portfolio.
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, or if such quotations do not accurately reflect
fair value, 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. 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 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.
13
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among the funds of the Trust taking into consideration,
among other things, the nature and type of expense and the relative size of
the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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 Fund's average daily net assets.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon and an affiliate of TBCAM, to provide personnel
and facilities to perform transfer agency and certain shareholder services
for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a
fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement, the Fund was charged
$10,838, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of BNY Mellon 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 $100,709 for the year ended September 30,
2007.
14
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged
$3,393 for the year ended September 30, 2007, which amount is included in
miscellaneous expenses on the statement of operations. See Note 7 for
further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $3,121, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $567, which amount is included in miscellaneous expenses in the
statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $130,312 for fees
payable to BNY Mellon Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
----------- -----------
Non-U.S. Government Securities $78,879,365 $67,941,124
=========== ===========
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a par
value of one cent per share. Transactions in Fund shares were as
follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 859,821 1,384,404
Shares issued to shareholders in reinvestment of 107,105 146,598
distributions
Shares redeemed (628,855) (199,694)
-------- ---------
Net increase (decrease) 338,071 1,331,308
======== =========
15
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 2007, two shareholders of record held in the aggregate 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 were acquired through reinvestment of
distributions. For the year ended September 30, 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.
In July 2006, FASB 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 on
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $ 105,357,588
===============
Gross unrealized appreciation $ 18,601,505
Gross unrealized depreciation (1,848,357)
---------------
Net unrealized appreciation (depreciation) $ 16,753,148
===============
Undistributed ordinary income $ 4,010,225
Undistributed capital gains 4,782,756
---------------
Total distributable earnings $ 8,792,981
===============
The tax character of distributions paid during the fiscal years ended September
30, 2007 and September 30, 2006, was as follows:
2007 2006
---------- ----------
Ordinary income $1,833,219 $1,406,425
Capital Gains 3,153,270 5,027,604
---------- ----------
Total Distributions $4,986,489 $6,434,029
========== ==========
(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:
16
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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 September 30, 2007, the Fund did not hold any open financial futures
contracts.
(7) Line of Credit:
On behalf of the Fund, and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the aggregate,
up to $35 million under a committed line of credit and up to $15 million
under an uncommitted line of credit. For the year ended September 30, 2007,
the Fund had average borrowings outstanding of $815,154 for a total of
twenty-six days and incurred $3,410 of interest expense. At September 30,
2007, the Fund did not have an outstanding loan balance.
17
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of The Boston Company Large Cap Core Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Large Cap Core
Fund (the "Fund") at September 30, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
18
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 (67) Trustee Trustee since 11/3/1986 Chairman Emeritus,
61 Meadowbrook Road Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since 9/13/1989 William Joseph Maier,
c/o Harvard University Professor of Political
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since 11/3/1986 Trustee, Mertens
P.O. Box 2333 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since 11/3/1986 Trustee, Essex Street
c/o Essex Street Associates Associates (family
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Number of Trustee
Portfolios in Other Remuneration
Name (Age) Fund Complex Directorships (period ended
Address, and Overseen by Held by September 30,
Date of Birth Trustee Trustee 2007)
- -------------------------------------------------------------------------------------
Samuel C. Fleming (67) 25 None Fund: $1,910
61 Meadowbrook Road Portfolio: $500
Weston, MA 02493
9/30/40
Benjamin M. Friedman (63) 25 None Fund: $1,910
c/o Harvard University Portfolio: $500
Littauer Center 127
Cambridge, MA 02138
8/5/44
John H. Hewitt (72) 25 None Fund: $1,910
P.O. Box 2333 Portfolio: $500
New London, NH 03257
4/11/35
Caleb Loring III (64) 25 None Fund: $1,993
c/o Essex Street Associates Portfolio: $500
P.O. Box 5600
Beverly, MA 01915
11/14/43
19
Principal Officers who are Not Trustees
Name (Age) Term of Office
Address, and Position(s) and Length of
Date of Birth Held with Trust Time Served
- -------------------------------------------------------------------------------
Barbara A. McCann (46) * President, Chief President and CEO
BNY Mellon Asset Management Executive Officer since 2007; Secretary
One Boston Place and Secretary since 2003
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President
BNY Mellon Asset Management Treasurer and since 1999;
One Boston Place Chief Financial Treasurer
Boston, MA 02108 Officer since 2002
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996
BNY Mellon Asset Management President
One Boston Place
Boston, MA 02108
8/19/51
Mary T. Lomasney (50) Chief Compliance Since 2005
BNY Mellon Asset Management Officer
One Boston Place
Boston, MA 02108
4/8/57
Name (Age)
Address, and Principal Occupation(s)
Date of Birth During Past 5 Years
- ----------------------------------------------------------------------------------------
Barbara A. McCann (46) * Senior Vice President and Head of Operations,
BNY Mellon Asset Management BNY 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 (42) Vice President and Mutual Funds Controller,
BNY Mellon Asset Management BNY Mellon Asset Management; formerly Assistant
One Boston Place Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice President and Manager, Mutual Fund Operations,
Boston, MA 02108 Standish Mellon Asset Management Company, LLC
8/19/51
Mary T. Lomasney (50) First Vice President, BNY Mellon Asset Management and
BNY Mellon Asset Management Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
20
THIS PAGE INTENTIONALLY LEFT BLANK
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6930AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
Small/Mid Cap Growth Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper typically viewed as the safest segment of the corporate market
had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth around 2% GDP growth in 2008 vs. the 2.5% long-term
trend is more likely. We see U.S. exports boosted by the weaker dollar,
multi-year global economic expansion and monetary growth, and high corporate
profitability especially for multinational franchises as being positives that
partially offset the drag of the housing sector and lower consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Small/mid-cap stocks rallied early in the reporting period amid moderate
economic growth, stable short-term interest rates and rising corporate earnings.
At the time, investors maintained an ample appetite for risk, which benefited
shares of smaller companies more than their larger counterparts. However, the
market environment changed dramatically in mid-June 2007, when credit concerns
in the sub-prime mortgage sector spread to other areas of the financial markets.
In the ensuing market turbulence, newly risk-averse investors engaged in a
"flight to quality", and larger, higher-quality companies returned to favor.
The Federal Reserve Board attempted to improve market liquidity by reducing key
short-term interest rates in August and September. These moves bolstered
investor confidence that a recession could be avoided, sparking a market rally
late in the reporting period.
For the 12-month period ended September 30, 2007, The Boston Company Small/Mid
Cap Growth Fund returned 26.31% as compared to the fund's benchmark, the Russell
2500 Growth Index, which returned 21.27% over the same period. The portfolio
enjoyed strong relative returns from exposure to the Energy, Industrials,
Consumer Staples, and Healthcare sectors. Within Energy, investments in both the
equipment and services and the consumable fuels segments were strong
contributors to performance, as strong stock selection led to significantly
higher returns relative to the benchmark. Exploration and production companies
such as Range Resources, Cabot Oil & Gas, and Penn Virginia Corp. were among the
stronger performers, while equipment and services stocks FMC Technologies,
Cameron International Corp., and W-H Energy Services led this segment higher.
Healthcare also proved to be a relatively strong area for the portfolio, led by
pharmaceuticals, equipment and supplies, and providers and services.
Pharmaceuticals were driven by investments in Adams Respiratory Therapeutics and
MGI Pharma, while within equipment and supplies, we benefited from investments
in diversified diagnostic and medical device companies Cytyc Corp. and Viasys
Healthcare Inc. Industrials continued to hold up well relative to the benchmark,
benefiting from strength among our portfolio selections in the construction and
engineering, distributors, and commercial services segments. Engineering and
construction firms Foster Wheeler, Quanta services, and Washington Group
International all surged during the period, the latter of which was acquired by
URS Corporation.
Conversely, the portfolio was negatively affected by exposure to the Financials
and Information Technology sectors. With regard to Information Technology, the
portfolio's investments in the software, computers and peripherals, and
electronic equipment and instruments segments underperformed relative to the
benchmark. Software services providers Amdocs Ltd, BEA Systems and Sybase Inc.
led the relative decline in the software segment, while the portfolio also saw
declines in scalable server manufacturer Rackable Systems, component
manufacturer SMART Modular Technologies, and National Instruments Corp. Within
the Financials sector, exposure to commercial banks and capital markets segments
hurt portfolio performance as well. Commercial bank Capitol Bancorp suffered a
decline as problems in their business in Great Lakes region could not be offset
by strength in the their California business, compressing margins and hurting
their earnings. Within capital markets, investment service firms Piper Jaffray
Cos. and Jefferies Group Inc. both declined on profit concerns.
As we move into the fourth quarter, we believe that the slower U.S. economy will
continue to challenge our focus on uncovering companies that can grow in spite
of this deceleration. We, as always, are sensitive to valuation and fundamentals
that belie a company's ability to achieve and sustain growth.
B. Randall Watts, Jr., CFA Todd Wakefield, CFA
Portfolio Manager Portfolio Manager
The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
2
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Comparison of change in value of $100,000 investment
in The Boston Company Small / Mid Cap Growth Fund
with the Russell 2500 Growth Index and the Russell 2000 Growth Index
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
TBC
PERIOD Small / Mid Cap Growth Fund Russell 2000 Growth Index * Russell 2500 Growth Index *
9/30/97 100,000 100,000 100,000
12/31/97 89,993 91,804 91,994
3/31/98 102,007 102,712 102,247
6/30/98 94,858 96,813 97,259
9/30/98 72,783 75,166 75,661
12/31/98 91,535 92,933 94,845
3/31/99 97,754 91,372 93,846
6/30/99 107,112 104,845 109,617
9/30/99 104,820 99,690 105,814
12/31/99 163,944 132,980 147,466
3/31/00 201,773 145,324 169,804
6/30/00 183,247 134,611 158,071
9/30/00 175,723 129,263 153,425
12/31/00 132,341 103,153 123,738
3/31/01 104,237 87,470 99,096
6/30/01 124,048 103,193 120,169
9/30/01 93,871 74,215 87,634
12/31/01 111,839 93,634 110,333
3/31/02 111,148 91,799 107,076
6/30/02 98,824 77,391 89,268
9/30/02 81,777 60,738 72,250
12/31/02 85,814 65,299 78,232
3/31/03 82,013 62,767 75,728
6/30/03 97,794 77,923 92,933
9/30/03 109,312 86,080 102,198
12/31/03 125,438 96,997 114,465
3/31/04 135,460 102,411 120,766
6/30/04 135,114 102,506 120,928
9/30/04 129,700 96,345 114,148
12/31/04 148,015 110,874 131,165
3/31/05 142,601 103,306 125,490
6/30/05 148,476 106,900 129,955
9/30/05 159,418 113,654 138,130
12/31/05 160,801 115,478 141,888
3/31/06 178,194 132,064 158,666
6/30/06 171,168 122,489 148,948
9/30/06 171,859 120,337 147,157
12/31/06 183,644 130,890 159,289
3/31/07 192,003 134,130 165,715
6/30/07 210,687 143,101 177,291
9/30/07 217,079 143,123 178,452
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 1/1/1988**
- --------------------------------------------------------------------------------
Fund 26.31% 18.73% 21.56% 8.06% 13.88%
* Source: Lipper Inc.
** Combined Limited Partnership & Mutual Fund Performance
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
The Boston Company 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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
Actual $1,000.00 $1,130.60 $5.34
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.05 $5.06
- -------
+ Expenses are equal to the Fund's annualized expense ratio of 1.00%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ----------------------------------------------------------------------------------------
NeuStar, Inc., Class A Telecommunication Services 2.1%
Herbalife Ltd. Consumer Staples 2.1
Hologic, Inc. Heath Care 2.0
Respironics, Inc. Heath Care 1.7
PerkinElmer, Inc. Heath Care 1.7
Plum Creek Timber Co. Inc.-REIT Financials 1.7
Ritchie Bros. Auctioneers, Inc. Industrials 1.6
Waddell & Reed Financial, Inc., Class A Financials 1.6
VCA Antech, Inc. Heath Care 1.5
Bucyrus International, Inc., Class A Industrials 1.5
-----
17.5%
* Excludes short-term securities and investment in cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
Consumer Discretionary 16.0%
Consumer Staples 8.6
Energy 9.5
Financials 12.5
Health Care 24.3
Industrials 15.2
Materials 8.8
Technology 31.9
Telecomunication Services 2.8
Utilities 1.0
Short-term and Other Assets (30.6)
------
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--148.1%
Equities--130.6%
Consumer Discretionary--16.0%
Bright Horizons Family Solutions, Inc. 9,080 (a) 388,987
DeVry, Inc. 3,970 146,930
Dollar Tree Stores, Inc. 8,100 (a,b) 328,374
Entravision Communications Corp., Class A 15,090 (a) 139,130
Guess?, Inc. 7,010 (b) 343,700
Interface, Inc., Class A 19,710 355,766
J.Crew Group, Inc. 2,140 (a,b) 88,810
Lions Gate Entertainment Corp. 31,588 (a) 325,672
Petsmart, Inc. 9,830 (b) 313,577
Steiner Leisure Ltd. 6,890 (a) 299,026
Texas Roadhouse, Inc., Class A 22,560 (a,b) 263,952
Tiffany & Co. 5,840 305,724
WMS Industries, Inc. 8,430 (a) 279,033
3,578,681
Consumer Staples--8.6%
Hain Celestial Group, Inc. 7,480 (a,b) 240,332
Hansen Natural Corp. 4,320 (a) 244,858
Herbalife Ltd. 13,520 614,619
Inter Parfums, Inc. 11,180 264,631
Longs Drug Stores Corp. 6,700 332,789
Ruddick Corp. 6,820 228,743
1,925,972
Energy--9.5%
Cameron International Corp. 1,540 (a) 142,127
CNX Gas Corp. 8,870 (a,b) 255,190
Denbury Resources, Inc. 8,000 (a) 357,520
FMC Technologies, Inc. 2,650 (a) 152,799
Overseas Shipholding Group, Inc. 2,340 179,782
Penn Virginia Corp. 9,490 417,370
Range Resources Corp. 9,850 400,501
W-H Energy Services, Inc. 3,020 (a) 222,725
2,128,014
Financials--12.5%
Arch Capital Group Ltd. 5,520 (a) 410,743
GFI Group, Inc. 3,220 (a) 277,306
Max Capital Group Ltd. 11,260 315,730
OptionsXpress Holdings, Inc. 10,260 268,196
Plum Creek Timber Co., Inc.--REIT 10,990 491,912
Portfolio Recovery Associates, Inc. 2,760 (b) 146,473
Raymond James Financial, Inc. 6,480 212,868
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--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Financials (continued)
RLI Corp. 3,950 224,044
Waddell & Reed Financial, Inc., Class A 16,800 454,104
2,801,376
Health Care--24.3%
Arrow International, Inc. 5,870 267,026
Beckman Coulter, Inc. 4,360 (b) 321,594
Covance, Inc. 4,290 (a) 334,191
Cytyc Corp. 3,730 (a) 177,734
Dentsply International, Inc. 5,360 223,190
Exelixis, Inc. 17,410 (a) 184,372
Hologic, Inc. 9,690 (a) 591,090
Integra LifeSciences Holdings Corp. 4,430 (a) 215,209
MGI Pharma, Inc. 5,440 (a) 151,123
NuVasive, Inc. 2,700 (a,b) 97,011
PDL BioPharma, Inc. 11,590 (a,b) 250,460
Pediatrix Medical Group, Inc. 6,220 (a) 406,912
PerkinElmer, Inc. 17,050 498,031
Psychiatric Solutions, Inc. 9,560 (a) 375,517
Respironics, Inc. 10,427 (a) 500,809
Thermo Fisher Scientific, Inc. 5,440 (a) 313,997
TomoTherapy, Inc. 4,970 (a) 115,453
VCA Antech, Inc. 10,330 (a) 431,278
5,454,997
Industrials--15.2%
AAR Corp. 5,220 (a) 158,375
Bucyrus International, Inc., Class A 5,870 428,099
Copart, Inc. 10,430 (a) 358,688
Foster Wheeler Ltd. 1,630 (a) 213,986
Hub Group, Inc., Class A Shares 6,970 (a) 209,309
Hubbell, Inc., Class B 6,080 347,290
MSC Industrial Direct Co. Inc., Class A 6,880 348,059
Quanta Services, Inc. 4,850 (a,b) 128,283
Ritchie Bros. Auctioneers, Inc. 7,340 477,834
Stericycle, Inc. 3,250 (a) 185,770
UAP Holding Corp. 7,390 231,750
URS Corp. 2,880 (a) 162,576
Washington Group International, Inc. 1,910 (a) 167,717
3,417,736
Materials--8.8%
Aber Diamond Corp. 9,360 366,350
Airgas, Inc. 7,280 375,866
AptarGroup, Inc. 7,620 288,569
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Materials (continued)
Kinross Gold Corp. 27,250 (a) 408,205
Schnitzer Steel Industries, Inc., Class A 2,500 183,225
Silver Wheaton Corp. 25,000 (a) 350,500
1,972,715
Technology-31.9%
ADC Telecommunications, Inc. 4,870 (a) 95,501
Akamai Technologies, Inc. 6,720 (a,b) 193,066
AMIS Holdings, Inc. 15,130 (a) 146,912
Arris Group, Inc. 3,940 (a) 48,659
Atheros Communications, Inc. 6,320 (a) 189,410
BEA Systems, Inc. 13,880 (a) 192,516
BMC Software, Inc. 10,300 (a) 321,669
Business Objects SA-ADR 3,780 169,609
Citrix Systems, Inc. 6,330 (a) 255,226
Cognos, Inc. 6,030 (a) 250,426
Diodes, Inc. 6,905 (a) 221,650
Euronet Worldwide, Inc. 3,600 (a) 106,387
FLIR Systems, Inc. 5,650 (a) 312,954
Foundry Networks, Inc. 12,910 (a) 229,411
Global Payments, Inc. 8,870 392,231
Harris Corp. 2,760 159,500
Ingram Micro, Inc., Class A 12,430 (a) 243,752
Iron Mountain, Inc. 8,180 (a) 249,326
MasTec, Inc. 12,220 (a) 171,935
McAfee, Inc. 8,450 (a) 294,652
Microsemi Corp. 11,370 (a,b) 316,996
MPS Group, Inc. 7,110 (a) 79,277
Net Gear, Inc. 10,330 (a) 314,239
RF Micro Devices, Inc. 34,920 (a) 235,012
Solera Holdings, Inc. 19,670 (a) 353,863
Synopsys, Inc. 11,200 (a) 303,296
Tessera Technologies, Inc. 9,850 (a) 369,375
VeriFone Holdings, Inc. 7,570 (a,b) 335,578
Verisign, Inc. 10,550 (a,b) 355,957
Wright Express Corp. 7,230 (a) 263,823
7,172,208
Telecommunication Services-2.8%
NeuStar, Inc., Class A 18,120 (a,b) 621,335
Utilities--1.0%
Ormat Technologies, Inc. 4,790 221,969
Total Equities (cost $26,501,779) 29,295,003
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- -------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.3%
U.S. Government--0.3%
U.S. Treasury Bill (Cost $59,512) 3.90% 12/13/2007 60,000 (c,d) 59,556
INVESTMENT IN CASH COLLATERAL--17.2%
BlackRock Cash Strategies L.L.C (Cost $3,858,175) 3,858,175 3,858,175
TOTAL UNAFFILIATED INVESTMENTS (Cost $30,419,466) 33,212,734
AFFILIATED INVESTMENT--12.5%
Dreyfus Institutional Prefered Plus Money Market Fund (Cost $2,809,344) 2,809,344 (e) 2,809,344
-----------
TOTAL INVESTMENTS--160.6% (Cost $33,228,810) 36,022,078
LIABILITIES IN EXCESS OF OTHER ASSETS--(60.6%) (13,589,774)
-----------
NET ASSETS-100.0% 22,432,304
===========
Notes to Schedule of Investments:
ADR--American Depository Receipt.
REIT--Real Estate Investment Trust.
(a) Non-income producing security.
(b) Security, or a portion of thereof, was on loan at September 30, 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 September 30, 2007 the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value (Loss)
- -----------------------------------------------------------------------------------------------------------
Russell 2000 Index (3 Contracts) Long 11/30/2007 $1,219,800 $ (442)
=======
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 Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $3,726,436 (Note 7)):
Unaffiliated investments (cost $30,419,466) $33,212,734
Affiliated investments (Note 1F)(cost $2,809,344) 2,809,344
Cash collateral at broker for futures contracts 45,000
Receivable for investments sold 661,566
Receivable for Fund shares sold 228,638
Interest and dividends receivable 16,743
Prepaid expenses 12,605
-----------
Total assets 36,986,630
Liabilities
Collateral for securities on loan (Note 7) $ 3,858,175
Payable for fund shares redeemed 7,985,583
Payable for investments purchased 2,637,781
Payable for variable margin on open futures contracts (Note 6) 13,961
Accrued professional fees 32,837
Accrued accounting, custody, administration and transfer agent fees (Note 2) 21,184
Accrued administrator service fees (Note 2) 1,427
Accrued trustees' fees (Note 2) 1,315
Accrued chief compliance officer fee (Note 2) 367
Accrued shareholder reporting expense (Note 2) 57
Other accrued expenses and liabilities 1,639
Total liabilities 14,554,326
-----------
Net Assets $22,432,304
===========
Net Assets consist of:
Paid-in capital $15,967,559
Accumulated net realized gain 3,654,607
Undistributed net investment income 17,312
Net unrealized appreciation 2,792,826
-----------
Total Net Assets $22,432,304
===========
Shares of beneficial interest outstanding 1,270,441
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 17.66
===========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Statement of Operations
For the Year Ended September 30, 2007
- -------------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments
(net of foreign withholding taxes $1,065) $ 167,865
Dividend income from affiliated investments (Note 1F) 71,150
Interest income 8,316
Securities lending income (Note 7) 6,857
-----------
Total investment income 254,188
Expenses
Investment advisory fee (Note 2) $ 142,123
Accounting, custody, administration and transfer agent fees (Note 2) 74,651
Professional fees 38,163
Registration fees 16,715
Trustees' fees and expenses (Note 2) 3,772
Administrative service fees (Note 2) 2,801
Insurance expense 2,190
Miscellaneous expenses 11,595
----------
Total expenses 292,010
Deduct:
Waiver of investment advisory fee (Note 2) (55,134)
----------
Net Expenses 236,876
----------
Net investment income 17,312
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 3,637,316
Financial futures transactions 46,439
----------
Net realized gain (loss) 3,683,755
Change in unrealized appreciation (depreciation) on:
Investments 1,756,374
Financial futures contracts 4,467
----------
Net change in unrealized appreciation (depreciation) 1,760,841
-----------
Net realized and unrealized gain (loss) on investments 5,444,596
-----------
Net Increase in Net Assets from Operations $ 5,461,908
===========
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
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
-------------------- --------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 17,312 $ (32,907)
Net realized gain (loss) 3,683,755 3,538,082
Change in net unrealized appreciation (depreciation) 1,760,841 (1,959,349)
Net increase from payments by affiliates -- 6,357
------------ -----------
Net increase (decrease) in net assets from investment operations 5,461,908 1,552,183
------------ -----------
Distributions to Shareholders (Note 1E)
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 7,037,277 99,425
Value of shares issued to shareholders in reinvestment of distibutions 1,270,011
Cost of shares redeemed (net of redemption fees of $221 and $0, respectively) (10,455,435) (972,218)
------------ -----------
Net increase (decrease) in net assets from Fund share transactions (2,148,147) (872,793)
------------ -----------
Total Increase (Decrease) in Net Assets 2,043,750 679,390
Net Assets
At beginning of year 20,388,554 19,709,164
------------ -----------
At end of year (including undistributed
net investment income of $17,312 and $0, respectively) $ 22,432,304 $20,388,554
============ ===========
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
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- ------- -------- -------
Net Asset Value, Beginning of Year $ 14.92 $ 13.84 $ 11.26 $ 9.48 $ 7.10
-------- -------- -------- -------- -------
From Operations:
Net investment income (loss)*(a) 0.01 (0.02) (0.04) (0.08) (0.01)
Net realized and unrealized gains (loss) on investments 3.74(b) 1.10 2.62 1.86(b) 2.39(b)
Net increase from payments by affiliates - 0.00(c) - - -
-------- -------- ------- -------- -------
Total from operations 3.75 1.08 2.58 1.78 2.38
-------- -------- ------- -------- -------
Less Distributions to Shareholders:
From net investment income - - - - (0.00)(c)
From net realized gains on investments (1.01) - - - -
-------- -------- ------- -------- -------
Total distributions to shareholders (1.01) - - - (0.00)(c)
-------- -------- ------- -------- -------
Net Asset Value, End of Year $ 17.66 $ 14.92 $ 13.84 $ 11.26 $ 9.48
======== ======== ======== ======== =======
Total Return (d) 26.31% 7.80%(e) 22.91% 18.78% 33.54%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.00% 1.00% 1.00% 0.98% 0.74%
Net Investment Income (to average daily net assets)* 0.07% (0.16%) (0.32%) (0.69%) (0.17%)
Portfolio Turnover 180% 161% 167% 157% 252%
Net Assets, End of Year (000's omitted) $ 22,432 $ 20,389 $ 19,709 $ 19,222 $21,852
- -------------
* 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 reimbusement, would have been:
Net investment income per share (a) $ (0.03) $ (0.07) $ (0.09) $ (0.12) $ (0.07)
Ratios (to average daily net assets):
Expenses 1.23% 1.29% 1.38% 1.33% 1.40%
Net investment income (loss) (0.16%) (0.45%) (0.70%) (1.04%) (0.83%)
(a) Calculated using the average shares outstanding.
(b) Amounts include litigation proceeds received by the Fund of $0.19 for the
year ended September 30, 2007, $0.03 for the year ended September 30, 2004
and $0.01 for the year ended September 30, 2003 relating to securities
litigation.
(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 was 7.77%.
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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, or if such quotations do not accurately reflect
fair value, 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 Funds
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 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.
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 losses deferred
due to wash sales and the timing of recognition of realized and unrealized
gains and 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 be distributed in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among 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 The Bank of New
York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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 year ended September
30, 2007. Pursuant to this arrangement, for the year ended September 30,
2007, TBCAM voluntarily waived a portion of its investment advisory fee in
the amount of $55,134. This arrangement is voluntary and temporary and may
be discontinued or revised by TBCAM at any time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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 $7,511, for the
year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of BNY Mellon 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 $67,140 for the year ended September 30,
2007.
The Trust also entered into an agreement with Mellon Bank to perform
certain securities lending activities and to act as the Funds lending
agent. Mellon Bank receives an agreed upon percentage of the net lending
revenues. Pursuant to this agreement, Mellon Bank earned $2,923 for the
year ended September 30, 2007. See Note 7 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged
$860 for the year ended September 30, 2007, which amount is included in
miscellaneous expenses on the statement of operations. See Note 8 for
further details.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust reimburses BNY Mellon Asset Management for a portion of the salary
of the Trust's Chief Compliance Officer. For the year ended September 30,
2007, the Fund was charged $4,250, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $1,828, which amount is included in miscellaneous expenses in the
statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $1,357 for fees paid to
BNY Mellon Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank of
New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon
being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
============= =============
Non-U.S. Government Securities $ 45,709,883 $ 40,801,248
============= =============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 428,261 6,818
Shares issued to shareholders in reinvestment of distributions 84,274 -
Shares redeemed (608,335) (64,826)
--------- -------
Net increase (decrease) (95,800) (58,008)
========= ========
At September 30, 2007, two shareholders of record held in the aggregate
71.2% 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
set brokerage commissions, market impact, and other costs associated with 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 year ended September 30, 2007, the Fund charged $221
in redemption fees which is reflected in the cost of shares redeemed.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
In July 2006, FASB 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 implication of FIN 48 and its impact in
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $ 33,289,402
============
Gross unrealized appreciation $ 3,013,019
Gross unrealized depreciation (280,343)
------------
Net unrealized appreciation (depreciation) $ 2,732,676
============
Undistributed ordinary income $ 2,149,692
Undistributed capital gains 1,582,377
------------
Total distributable earnings $ 3,732,069
============
The tax character of distributions paid during the fiscal years ended
September 30, 2007 and September 30, 2006 was as follows:
2007 2006
----------- ---------
Ordinary income - -
Capital gains $ 1,270,011 -
=========== =========
(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 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 September 30, 2007, the Fund held open financial futures contracts. See
the Schedule of Investments for further details.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(7) Security Lending:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value of
the securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on the
next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and also receives compensation from the investment of the collateral.
As with other extensions of credit, the Fund bears the risk of delay in
recovery or even loss of rights in its securities on loan should the
borrower of the securities fail financially or default on its obligations to
the Fund. In the event of borrower default, the Fund generally has the right
to use the collateral to offset losses incurred. The Fund may incur a loss
in the event it was delayed or prevented from exercising its rights to
dispose of the collateral. The Fund also bears the risk in the event that
the interest and/or dividends received on invested collateral is not
sufficient to meet the Fund's obligations due on the loans.
The Fund loaned securities during the year ended September 30, 2007 and
earned interest on the invested collateral of $118,385 of which $111,528 was
rebated to borrowers or paid in fees. At September 30, 2007, the Fund had
securities valued at $3,726,436 on loan of which $3,858,175 was
collateralized with cash and $10,945 was collateralized with highly liquid
securities. See Schedule of Investments for further detail on the security
positions on loan and collateral held.
(8) Line of Credit:
On behalf of the the Fund, and other funds in the Trust, the Trust has
access to a credit facility, which enables each fund to borrow, in the
aggregate, up to $35 million under a committed line of credit and up to $15
million under an uncommitted line of credit. For the year ended September
30, 2007, the Fund had average borrowings outstanding of $1,200,000 for a
total of four days and incurred $767 of interest expense. At September 30,
2007, the Fund did not have a loan balance outstanding.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small/Mid Cap Growth Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company Small/Mid Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of The Boston
Company Small/Mid Cap Growth Fund (the Fund) at September 30, 2007, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
19
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $563
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $563
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 25 None Fund: $563
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $582
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*
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
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)* President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56)** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Trust, and J. David Officer was elected as
President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
21
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6928AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
Small Cap Growth Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Small-cap stocks rallied early in the reporting period amid moderate economic
growth, stable short-term interest rates and rising corporate earnings. At the
time, investors maintained an ample appetite for risk, which benefited shares of
smaller companies more than their larger counterparts. However, the market
environment changed dramatically in mid-June 2007, when credit concerns in the
sub-prime mortgage sector spread to other areas of the financial markets. In the
ensuing market turbulence, newly risk-averse investors engaged in a "flight to
quality," and larger, higher-quality companies returned to favor.
The Federal Reserve Board attempted to improve market liquidity by reducing key
short-term interest rates in August and September. These moves bolstered
investor confidence that a recession could be avoided, sparking a market rally
late in the reporting period.
For the 12-month period ended September 30, 2007, The Boston Company Small Cap
Growth Fund returned 19.61% as compared to the fund's benchmark, the Russell
2000 Growth Index, which returned 18.94% over the same period. The fund enjoyed
strong relative returns from exposure to the Energy, Healthcare, Industrials,
and Materials sectors. Within Energy, investments in both the equipment and
services and the consumable fuels segments were strong contributors to
performance, as strong stock selection led to significantly higher returns
relative to the benchmark. Exploration and production companies such as Arena
Resources, Cabot Oil & Gas, and Penn Virginia Corp. were among the stronger
performers, while equipment and services stocks W-H Energy Services, T-3 Energy
Services, and Oil States led this group higher. Healthcare also proved to be a
relatively strong area for the portfolio, led by pharmaceuticals, biotechnology,
and equipment and suppliers. Sirtris Pharmaceuticals, Inc., a biopharmaceutical
company, enjoyed strong returns as the company has had success with emerging
treatments for aging and effects thereof. Within equipment and supplies, we
benefited from investments in diversified diagnostic and medical device
companies Cytyc Corp. and Viasys Healthcare Inc., as well as, biotechnology
companies Sima Therapeutics, InterMune Inc., and Sangamo BioSciences, Inc.
Industrials continued to hold up well relative to the benchmark, benefiting from
strength among our portfolio selections in the electrical equipment, commercial
services, and transportation infrastructure segments, while our Materials
investments rose sharply on continued strength in the metal commodities and
agriculture chemicals due to the ethanol push which has driven corn harvesting
to an all-time high.
Conversely, the portfolio was affected negatively by exposure to the Information
Technology and Consumer Discretionary sectors. With regard to Information
Technology, the portfolio's investments in the semiconductors, computers and
peripherals, and software segments underperformed relative to the benchmark.
Rudolph Technologies, a provider of process control metrology and data analysis
systems for the semiconductor industry, fell as weakness in demand from memory
manufacturers hurt revenues. The portfolio also saw declines in high performance
chip and software provider Ikanos Communications, scalable server manufacturer
Rackable Systems, and business software provider BEA Systems. Within the
Consumer Discretionary sector, exposure to the catalog/internet retail area hurt
on a relative basis as this was among the best performing segments within the
sector for the Index and our investments in US Auto Parts Network and Shutterfly
Inc. declined.
As we move into the fourth quarter, we believe that the slower U.S. economy will
continue to challenge our focus on uncovering companies that can grow in spite
of this deceleration. We, as always, are sensitive to valuation and fundamentals
that belie a company's ability to achieve and sustain growth.
B. Randall Watts, Jr., CFA P. Hans von der Luft
Portfolio Manager Portfolio Manager
The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Growth Fund and the Russell 2000 Growth Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
TBC
PERIOD Small Cap Growth Fund Russell 2000 Growth Index *
9/30/97 100,000 100,000
12/31/97 91,558 91,804
3/31/98 106,275 102,712
6/30/98 101,098 96,813
9/30/98 82,165 75,166
12/31/98 104,648 92,933
3/31/99 122,730 91,372
6/30/99 139,925 104,845
9/30/99 141,441 99,690
12/31/99 238,250 132,980
3/31/00 278,603 145,324
6/30/00 258,785 134,611
9/30/00 242,716 129,263
12/31/00 189,023 103,153
3/31/01 151,563 87,470
6/30/01 175,887 103,193
9/30/01 132,629 74,215
12/31/01 155,458 93,634
3/31/02 153,963 91,799
6/30/02 135,437 77,391
9/30/02 112,290 60,738
12/31/02 116,141 65,299
3/31/03 111,385 62,767
6/30/03 133,671 77,923
9/30/03 146,852 86,080
12/31/03 168,685 96,997
3/31/04 180,915 102,411
6/30/04 179,692 102,506
9/30/04 171,901 96,345
12/31/04 194,776 110,874
3/31/05 187,211 103,306
6/30/05 195,274 106,900
9/30/05 209,724 113,654
12/31/05 211,037 115,478
3/31/06 235,815 132,064
6/30/06 224,717 122,489
9/30/06 225,079 120,337
12/31/06 244,149 130,890
3/31/07 247,818 134,130
6/30/07 265,393 143,101
9/30/07 269,108 143,123
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 12/23/1996
- --------------------------------------------------------------------------------
Fund 19.61% 16.11% 19.11% 10.41% 13.52%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust The Boston Company
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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- ---------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,085.70 $5.70
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.55 $5.57
- --------
+ Expenses are equal to the Fund's annualized expense ratio of 1.10%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- ----------------------------------------------------------------------------------------------
Respironics, Inc. Health Care 1.8%
Hologic, Inc. Health Care 1.7
Wright Medical Group, Inc. Health Care 1.6
NeuStar, Inc., Class A Telecommunication Services 1.5
Bucyrus International, Inc., Class A Industrials 1.5
Penn Virginia Corp. Energy 1.5
Bright Horizons Family Solutions, Inc. Consumer Discretionary 1.4
Pediatrix Medical Group, Inc. Health Care 1.4
Psychiatric Solutions, Inc. Health Care 1.3
Copart, Inc. Industrials 1.3
----
15.0%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
Consumer Discretionary 11.3%
Consumer Staples 4.8
Energy 6.7
Financials 7.6
Health Care 22.4
Industrials 12.3
Materials 5.3
Technology 22.8
Telecommunication Service 1.4
Utilities 0.8
Short-term and Other Assets 4.6
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--118.3%
Equities--95.4%
Consumer Discretionary--11.3%
Bright Horizons Family Solutions, Inc. 58,670 (a) 2,513,423
DeVry, Inc. 24,710 914,517
Entravision Communications Corp., Class A 111,610 (a,b) 1,029,044
Iconix Brand Group, Inc. 70,460 (a) 1,676,243
Interface, Inc., Class A 126,420 2,281,881
J.Crew Group, Inc. 13,970 (a,b) 579,755
Lions Gate Entertainment Corp. 202,380 (a) 2,086,538
Pacific Sunwear of California, Inc. 92,590 (a) 1,370,332
Red Robin Gourmet Burgers, Inc. 33,490 (a) 1,436,721
Skechers USA, Inc., Class A 44,520 (a,b) 983,892
Steiner Leisure Ltd. 47,290 (a) 2,052,386
Texas Roadhouse, Inc., Class A 159,330 (a,b) 1,864,161
True Religion Apparel, Inc. 63,520 (a,b) 1,117,952
WMS Industries, Inc. 36,020 (a,b) 1,192,262
21,099,107
Consumer Staples--4.8%
Hain Celestial Group, Inc. 47,420 (a,b) 1,523,605
Hansen Natural Corp. 26,760 (a) 1,516,757
Inter Parfums, Inc. 69,370 (b) 1,641,988
Longs Drug Stores Corp. 44,730 2,221,739
Nu Skin Enterprises, Inc., Class A 63,200 1,021,312
Ruddick Corp. 31,220 1,047,119
8,972,520
Energy--6.7%
Alpha Natural Resources, Inc. 55,000 (a) 1,277,650
Berry Petroleum Co., Class A 36,030 (b) 1,426,428
Dril-Quip, Inc. 11,470 (a) 566,044
Oil States International, Inc. 25,630 (a,b) 1,237,929
Overseas Shipholding Group, Inc. 14,770 1,134,779
Parallel Petroleum Corp. 68,210 (a,b) 1,158,888
Penn Virginia Corp. 59,260 2,606,255
T-3 Energy Services, Inc. 40,590 (a) 1,730,758
W-H Energy Services, Inc. 18,700 (a) 1,379,125
12,517,856
Financials--7.6%
Arch Capital Group Ltd. 23,610 (a) 1,756,820
First Cash Financial Services, Inc. 66,650 (a) 1,560,943
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------
Financials (continued)
First Mercury Financial Corp. 72,360 (a) 1,556,464
GFI Group, Inc. 13,100 (a,b) 1,128,172
Hallmark Financial Services, Inc. 35,660 (a) 501,023
Max Capital Group Ltd. 43,790 1,227,872
Montpelier Re Holdings Ltd. 64,290 1,137,933
OptionsXpress Holdings, Inc. 65,540 1,713,216
Portfolio Recovery Associates, Inc. 17,740 (b) 941,462
RLI Corp. 16,910 959,135
Waddell & Reed Financial, Inc., Class A 67,620 1,827,769
14,310,809
Health Care--22.4%
Amedisys, Inc. 31,180 (a) 1,197,936
Applera Corp.- Celera Genomics Group 76,080 (a,b) 1,069,685
Array Biopharma, Inc. 70,750 (a,b) 794,523
Arrow International, Inc. 34,920 1,588,511
Covance, Inc. 23,010 (a) 1,792,479
Cytyc Corp. 24,840 (a) 1,183,626
Dexcom, Inc. 23,440 (a,b) 234,166
Enzon Pharmaceuticals, Inc. 137,100 (a,b) 1,207,851
Exelixis, Inc. 110,810 (a,b) 1,173,478
Hologic, Inc. 50,140 (a,b) 3,058,540
Integra LifeSciences Holdings Corp. 27,590 (a,b) 1,340,322
MGI Pharma, Inc. 33,630 (a) 934,241
Natus Medical, Inc. 139,810 (a,b) 2,228,571
NuVasive, Inc. 17,500 (a,b) 628,775
NxStage Medical, Inc. 42,250 (a) 612,202
Pediatrix Medical Group, Inc. 38,230 (a) 2,501,007
PerkinElmer, Inc. 65,280 1,906,829
Phase Forward, Inc. 55,050 (a) 1,101,550
Poniard Pharmaceuticals, Inc. 101,930 (a,b) 577,943
Psychiatric Solutions, Inc. 60,940 (a) 2,393,723
Respironics, Inc. 66,250 (a) 3,181,987
Sangamo Biosciences, Inc. 53,980 (a,b) 761,658
Sirtris Pharmaceuticals, Inc. 64,690 (a,b) 1,104,905
Thermo Fisher Scientific, Inc. 38,490 (a) 2,221,643
Thoratec Corp. 73,480 (a,b) 1,520,301
TomoTherapy, Inc. 32,330 (a) 751,026
VCA Antech, Inc. 48,690 (a) 2,032,807
Wright Medical Group, Inc. 103,330 (a,b) 2,771,311
41,871,596
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
Industrials--12.3%
AAR Corp. 32,800 (a) 995,152
Bucyrus International, Inc., Class A 37,040 2,701,327
Copart, Inc. 68,840 (a) 2,367,408
Endeavor Acquisition Corp. 50,390 (a,b) 597,121
Hub Group, Inc., Class A 43,900 (a,b) 1,318,317
Hurco Companies, Inc. 12,850 (a) 694,671
McGrath RentCorp. 49,810 (b) 1,655,684
MSC Industrial Direct Co. Inc., Class A 43,880 2,219,889
OceanFreight, Inc. 27,160 631,198
Quanta Services, Inc. 30,600 (a,b) 809,370
Ritchie Bros. Auctioneers, Inc. 33,210 2,161,971
Stanley, Inc. 66,930 (a) 1,843,921
Stericycle, Inc. 20,560 (a) 1,175,210
UAP Holding Corp. 47,450 (b) 1,488,032
URS Corp. 9,210 (a) 519,904
Washington Group International, Inc. 21,530 (a,b) 1,890,549
23,069,724
Materials--5.3%
American Vanguard Corp. 47,910 (b) 935,203
Century Aluminum Co. 42,310 (a,b) 2,227,622
Flotek Industries, Inc. 12,390 (a) 547,018
H.B. Fuller Co. 36,570 1,085,398
Horsehead Holding Corp. 28,350 (a) 635,607
Kinross Gold Corp. 71,110 (a) 1,065,228
Schnitzer Steel Industries, Inc., Class A 15,470 (b) 1,133,796
Silver Wheaton Corp. 157,600 (a,b) 2,209,552
9,839,424
Technology--22.8%
ADC Telecommunications, Inc. 29,130 (a) 571,239
AMIS Holdings, Inc. 94,220 (a) 914,876
Arris Group, Inc. 24,570 (a) 303,440
Atheros Communications, Inc. 39,350 (a,b) 1,179,320
Bankrate, Inc. 25,730 (a,b) 1,186,668
ChipMOS TECHNOLOGIES (Bermuda) Ltd. 183,680 (a,b) 1,100,243
Dice Holdings, Inc. 4,100 (a) 42,148
Diodes, Inc. 42,745 (a,b) 1,372,114
DivX, Inc. 48,260 (a) 717,626
Epicor Software Corp. 79,640 (a,b) 1,096,643
Euronet Worldwide, Inc. 15,000 (a) 443,280
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------
Technology (continued)
FLIR Systems, Inc. 25,060 (a,b) 1,388,073
Forrester Research, Inc. 41,280 (a) 972,970
Foundry Networks, Inc. 82,190 (a) 1,460,516
Informatica Corp. 130,280 (a) 2,045,396
Internap Network Services Corp. 79,900 (a,b) 1,132,183
Intervoice, Inc. 109,730 (a,b) 1,030,365
Lawson software, Inc. 95,890 (a,b) 959,859
MasTec, Inc. 75,840 (a,b) 1,067,069
Microsemi Corp. 71,560 (a,b) 1,995,093
MIPS Technologies, Inc. 122,710 (a,b) 969,409
MPS Group, Inc. 35,990 (a) 401,288
Net Gear, Inc. 63,670 (a,b) 1,936,841
Netscout Systems, Inc. 146,240 (a) 1,594,016
Online Resources Corp. 58,300 (a) 736,912
OpNext, Inc. 77,180 (a) 895,288
QAD, Inc. 60,620 (b) 524,969
RealNetworks, Inc. 235,210 (a) 1,594,724
RF Micro Devices, Inc. 216,770 (a) 1,458,862
SkillSoft PLC ADR 70,620 (a) 634,874
Solera Holdings, Inc. 100,040 (a) 1,799,720
Tech Data Corp. 26,860 (a) 1,077,623
Tessera Technologies, Inc. 61,000 (a) 2,287,500
The Ultimate Software Group, Inc. 29,470 (a,b) 1,028,503
TheStreet.com, Inc. 59,190 716,791
Trident Microsystems, Inc. 42,050 (a) 668,175
TriQuint Semiconductor, Inc. 159,130 (a) 781,328
Virtusa Corp. 41,850 (a) 627,750
Wright Express Corp. 50,580 (a,b) 1,845,664
42,559,358
Telecommunication Services--1.4%
NeuStar, Inc., Class A 80,440 (a,b) 2,758,288
Utilities--0.8%
Ormat Technologies, Inc. 31,260 1,448,588
Total Equities (Cost $166,097,456) 178,447,270
SHORT-TERM INVESTMENTS--0.3% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.3%
U.S. Treasury Bill (Cost $505,856) 3.90% 12/13/2007 510,000 (c,d) 506,227
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL--22.6%
BlackRock Cash Strategies L.L.C. (Cost $42,170,562) 42,170,562 42,170,562
TOTAL UNAFFILIATED INVESTMENTS (Cost $208,773,874) 221,124,059
AFFILIATED INVESTMENTS--10.1%
Dreyfus Institutional Preferred Plus Money Market Fund
(Cost $18,951,731) 18,951,731 (e) 18,951,731
-----------
TOTAL INVESTMENTS--128.4% (Cost $227,725,605) 240,075,790
LIABILITIES IN EXCESS OF OTHER ASSETS--(28.4%) (53,085,249)
-----------
NET ASSETS--100% 186,990,541
===========
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 September 30, 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 September 30, 2007 the fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- -----------------------------------------------------------------------------------------------------------
Russell 2000 Index (17 Contracts) Long 11/30/2007 $6,912,200 $ 9,001
=======
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Assets and Liabilities September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investments in securities (Note 1A) (including securities on loan, valued at $39,905,520 (Note 7))
Unaffiliated issuers, at value (cost $208,773,874) $221,124,059
Affiliated issuers, at value (Note 1F) (cost $18,951,731) 18,951,731
Cash collateral at broker for futures contracts 205,000
Receivable for investments sold 4,291,977
Receivable for Fund shares sold 504,089
Interest and dividends receivable 99,847
Prepaid expenses 12,693
------------
Total assets 245,189,396
Liabilities
Collateral for securities on loan (Note 7) $42,170,562
Payable for investments purchased 15,697,382
Payable for Fund shares redeemed 123,809
Payable for variation margin on open futures contracts (Note 6) 90,532
Accrued accounting, administration, custody and transfer agent fees (Note 2) 43,307
Accrued professional fees 33,509
Accrued administrator service fees (Note 2) 32,426
Accrued trustees' fees and expenses (Note 2) 4,047
Accrued chief compliance officer fee (Note 2) 367
Other accrued expenses and liabilities 2,914
- -----------
Total liabilities 58,198,855
------------
Net Assets $186,990,541
============
Net Assets consist of:
Paid-in capital $177,642,977
Accumulated net realized loss (3,011,622)
Net unrealized appreciation 12,359,186
------------
Total Net Assets $186,990,541
============
Shares of beneficial interest outstanding 3,147,367
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 59.41
============
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Operations For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments (net of foreign withholding taxes of $1,567) $ 354,920
Dividend income from affiliated investments (Note 1F) 447,500
Securities lending income (Note 7) 122,749
Interest income 13,823
-----------
Total investment Income 938,992
Expenses
Investment advisory fee (Note 2) $ 840,178
Accounting, administration, custody and transfer agent fees (Note 2) 149,404
Administrative service fees (Note 2) 70,755
Professional fees 42,517
Registration fees 18,040
Trustees' fees and expenses (Note 2) 10,641
Insurance expense 3,515
Miscellaneous expenses 18,819
----------
Total Expenses 1,153,869
-----------
Net investment loss (214,877)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 6,906,151
Financial futures transactions (608,789)
----------
Net realized gain (loss) 6,297,362
Change in unrealized appreciation (depreciation) on:
Investments 9,849,143
Financial futures contracts 15,160
----------
Change in net unrealized appreciation (depreciation) 9,864,303
-----------
Net realized and unrealized gain (loss) 16,161,665
-----------
Net Increase in Net Assets from Operations $15,946,788
===========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (214,877) $ (112,295)
Net realized gain (loss) 6,297,362 6,830,406
Change in net unrealized appreciation (depreciation) 9,864,303 (4,066,139)
------------- -------------
Net increase (decrease) in net assets from operations 15,946,788 2,651,972
------------- -------------
Capital Transactions
Net proceeds from sale of shares 146,946,424 11,509,182
Cost of shares redeemed (net of redemption fees
of $9,445 and $3,100, respectively) (18,005,464) (8,381,712)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions 128,940,960 3,127,470
------------- -------------
Total Increase (Decrease) in Net Assets 144,887,748 5,779,442
Net Assets
At beginning of year 42,102,793 36,323,351
------------- -------------
At end of year $ 186,990,541 $ 42,102,793
============= =============
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------
2007 2006 2005 2004(a) 2003(a)
-------- ------- ------- ------- -------
Net Asset Value, Beginning of Year $ 49.67 $ 46.30 $ 37.95 $ 32.41 $ 24.78
-------- ------- ------- ------- -------
From Investment Operations:
Net investment income (loss)* (b) (0.11) (0.14) (0.20) (0.33) (0.11)
Net realized and unrealized gains (loss) on investments 9.85(c) 3.51 8.55 5.87(c) 7.74(c)
-------- ------- ------- ------- -------
Total from operations 9.74 3.37 8.35 5.54 7.63
-------- ------- ------- ------- -------
Net Asset Value, End of Year $ 59.41 $ 49.67 $ 46.30 $ 37.95 $ 32.41
======== ======= ======= ======= =======
Total Return (d) 19.61% 7.28% 22.00% 17.09% 30.79%
Ratios/Supplemental data:
Expenses (to average daily net assets)* (e) 1.09% 1.10% 1.17% 1.18% 1.00%
Net Investment Income (Loss)(to average daily net assets)* (0.20)% (0.30)% (0.48)% (0.87)% (0.42)%
Portfolio Turnover (f) 175%(f) 166% 135% 153% 261%
Net Assets, End of Year (000's omitted) $186,991 $42,103 $36,323 $18,274 $21,168
- --------
* 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 N/A $(0.28) $ (0.31) $ (0.40) $ (0.30)
Ratios (to average daily net assets):
Expenses (e) N/A 1.38% 1.41% 1.37% 1.66%
Net investment income (loss) N/A (0.58)% (0.72)% (1.06)% (1.08)%
(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
year ended September 30, 2007, $0.06 for the year ended September 30, 2004
and less than $0.01 for the year ended September 30, 2003.
(d) Total return would have been lower in the absence of expense waivers.
(e) For the period October 1, 2006 to September 19, 2007 and for the fiscal
years ended September 30, 2003-2006, the ratio includes the Fund's share of
the TBC Small Cap Growth Portfolio's (the "Portfolio") allocated expenses.
(f) On September 19, 2007, the Fund, which had owned 100% of the Portfolio on
such date, withdrew entirely from the Portfolio and received the Portfolio's
securities and cash in exchange for its interests in the Portfolio.
Effective September 20, 2007, the Fund began investing directly in the
securities in which the Portfolio had invested. Portfolio turnover
represents investment activity of both the fund and the Portfolio for the
year. The amounts shown for 2003-2006 are the ratios for the Portfolio.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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. 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 2000 Growth Index. The Fund
may also invest in equity index futures contracts based primarily upon
the Russell 2000 Index.
Prior to September 20, 2007, the Fund had invested substantially all of
its investable assets in The Boston Company Small Cap Growth Portfolio
(the "Portfolio"), a subtrust of the Mellon Institutional Funds Master
Portfolio, a New York trust. The Portfolio had investment objectives,
policies and limitations substantially identical to those of the Fund. On
September 19, 2007, the Fund, which had owned 100% of the Portfolio on
such date, withdrew entirely from the Portfolio and received the
Portfolio's assets, including securities and cash, and assumed its stated
liabilities, in exchange for its interests in the Portfolio. This
redemption in kind transaction was effected based upon the net assets
value of the Fund's interest in the portfolio. Effective September 20,
2007, the Fund began investing directly in securities. Accordingly, the
financial statements of the Fund and Portfolio have been presented on a
consolidated basis, and represent all the activities of both the Fund and
the Portfolio.
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.
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 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.
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 losses
deferred due to wash sales, capital loss carryovers and the timing of
recognition of realized and unrealized gains and losses on futures
contracts.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 be distributed in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a
specific fund are allocated among the funds of the Trust taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the Fund
under these arrangements is unknown, as this would involve future claims
that may be made against the Fund that have not yet occurred. However,
based on experience, the Fund expects the risks of loss to be remote.
F. Affiliated issuers
Affiliated issuers are investment companies advised by The Boston Company
Asset Management LLC ("TBCAM"), a wholly-owned subsidiary of The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New Accounting Requirements
On September 20, 2006, the Financial Accounting Standards Board ("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.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$11,331, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of BNY Mellon 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 $138,073 for the year ended
September 30, 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, the Fund was charged $52,515 for
the year ended September 30, 2007. See Note 7 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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
at the end of each quarter. Pursuant to these agreements, the Fund was
charged $188 for the year ended September 30, 2007, which amount is
included in miscellaneous expenses on the statement of operations. See
Note 8 for further details.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,250, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing
and fulfillment services for the Fund. Pursuant to this agreement, the
Fund was charged $3,780, which amount is included in miscellaneous
expenses in the statement of operations, for the year ended September 30,
2007.
The Fund may pay 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 year ended September 30, 2007, the Fund was charged
$15,210 for fees payable to BNY Mellon Private Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
------------ ------------
Non-U.S. Government Securities $292,521,409 $171,082,941
============ ============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a par
value of one cent per share. Transactions in Fund shares were as follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 2,620,743 237,244
Shares redeemed (321,030) (174,108)
--------- ------
Net increase (decrease) 2,299,713 63,136
========= ======
At September 30, 2007, three shareholders of record held in the aggregate
63.5% 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 year ended September 30, 2007, the
Fund received $9,445 in redemption fees which are reflected in the cost
of shares redeemed.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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.
In July 2006, FASB 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 implication of FIN 48
and its impact in the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax
cost as of September 30, 2007 were as follows:
Cost for federal income tax purposes $228,047,067
============
Gross unrealized appreciation $ 15,080,325
Gross unrealized depreciation (3,051,602)
------------
Net unrealized appreciation (depreciation) $ 12,028,723
============
At September 30, 2007, the Fund, for federal income tax purposes, has
capital loss carryovers which will reduce the Fund's taxable income
arising from net realized gain on investment, if any, to the extent
permitted by the Internal Revenue Code and thus will reduce the amount of
distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income tax. Such capital
loss carryovers are as follows:
Capital Loss
Carry Over Expiration Date
---------- ---------------
$ 384,833 9/30/2010
$2,296,326 9/30/2011
It is uncertain whether the Fund will be able to realize the benefits of
the losses before they expire.
For the year ended September 30, 2007, the Fund utilized $6,562,115 in
capital loss carry forwards.
(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 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.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 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 year ended September 30, 2007 and
earned interest on the invested collateral of $1,173,473 of which
$1,050,724 was rebated to borrowers or paid in fees. At September 30,
2007, the Fund had securities valued at $39,905,520 on loan. See Schedule
of Investments for further detail on the security positions on loan and
collateral held.
(8) Line of Credit:
On behalf of the Fund and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the
aggregate, up to $35 million under a committed line of credit and up to
$15 million under an uncommitted line of credit.
For the year ended September 30, 2007, the Fund did not borrow from the
line of credit.
19
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company Small Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of The
Boston Company Small Cap Growth Fund (the "Fund") at September 30, 2007,
the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits
of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 2007 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
20
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $793
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $500
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $793
c/o Harvard University 9/13/1989 Professor of Political Portfolio: $500
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $793
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $500
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $840
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $500
P.O. Box 5600 investment trust office)
Beverly, MA 01915
11/14/43
Interested Trustees *
None *
* Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Trust, and J. David Officer was elected as
President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
22
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25
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6941AR0907
MELLON INSTITUTIONAL FUNDS
The Boston Company
Annual Report Small Cap Tax-Sensitive Equity Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Small-cap stocks rallied early in the reporting period amid moderate economic
growth, stable short-term interest rates and rising corporate earnings. At the
time, investors maintained an ample appetite for risk, which benefited shares of
smaller companies more than their larger counterparts. However, the market
environment changed dramatically in mid-June 2007, when credit concerns in the
sub-prime mortgage sector spread to other areas of the financial markets. In the
ensuing market turbulence, newly risk-averse investors engaged in a "flight to
quality," and larger, higher-quality companies returned to favor.
The Federal Reserve Board attempted to improve market liquidity by reducing key
short-term interest rates in August and September. These moves bolstered
investor confidence that a recession could be avoided, sparking a market rally
late in the reporting period.
For the 12-month period ended September 30, 2007, The Boston Company Small Cap
Tax-Sensitive Equity Fund returned 20.79% as compared to the fund's benchmark,
the Russell 2000 Growth Index, which returned 18.94% over the same period. The
portfolio enjoyed strong relative returns from exposure to the Energy,
Healthcare, Industrials, and Materials sectors. Within Energy, investments in
both the equipment and services and the consumable fuels segments were strong
contributors to performance, as strong stock selection led to significantly
higher returns relative to the benchmark. Exploration and production companies
such as Arena Resources, Cabot Oil & Gas, and Penn Virginia Corp. were among the
stronger performers, while equipment and services stocks W-H Energy Services,
T-3 Energy Services, and Oil States led this group higher. Healthcare also
proved to be a relatively strong area for the portfolio, led by pharmaceuticals,
biotechnology, and equipment and suppliers. Sirtris Pharmaceuticals, Inc., a
biopharmaceutical company, enjoyed strong returns as the company has had success
with emerging treatments for aging and effects thereof. Within equipment and
supplies, we benefited from investments in diversified diagnostic and medical
device companies Cytyc Corp. and Viasys Healthcare Inc., as well as,
biotechnology companies Sima Therapeutics, InterMune Inc., and Sangamo
BioSciences, Inc. Industrials continued to hold up well relative to the
benchmark, benefiting from strength among our portfolio selections in the
electrical equipment, commercial services, and transportation infrastructure
segments, while our Materials investments rose sharply on continued strength in
the metal commodities and agriculture chemicals due to the ethanol push which
has driven corn harvesting to an all-time high.
Conversely, the portfolio was negatively affected by exposure to the Information
Technology and Consumer Discretionary sectors. With regard to Information
Technology, the portfolio's investments in the semiconductors, computers and
peripherals, and software segments underperformed relative to the benchmark.
Rudolph Technologies, a provider of process control metrology and data analysis
systems for the semiconductor industry, fell as weakness in demand from memory
manufacturers hurt revenues. The
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
portfolio also saw declines in high performance chip and software provider
Ikanos Communications, scalable server manufacturer Rackable Systems, and
business software provider BEA Systems. Within the Consumer Discretionary
sector, exposure to the catalog/internet retail area hurt on a relative basis as
this was among the best performing segments within the sector for the Index and
our investments in US Auto Parts Network and Shutterfly Inc. declined.
As we move into the fourth quarter, we believe that the slower U.S. economy will
continue to challenge our focus on uncovering companies that can grow in spite
of this deceleration. We, as always, are sensitive to valuation and fundamentals
that belie a company's ability to achieve and sustain growth.
B. Randall Watts, Jr. CFA Todd W. Wakefield, CFA
Portfolio Manger Portfolio Manger
The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Tax-Sensitive Equity Fund and Russell 2000 Growth Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
TBC
PERIOD Small Cap Tax-Sensitive Equity Russell 2000 Growth Index *
9/30/97 100,000 100,000
12/31/97 91,734 91,804
3/31/98 103,016 102,712
6/30/98 100,242 96,813
9/30/98 79,836 75,166
12/31/98 101,505 92,933
3/31/99 114,328 91,372
6/30/99 126,627 104,845
9/30/99 125,364 99,690
12/31/99 203,698 132,980
3/31/00 250,549 145,324
6/30/00 230,809 134,611
9/30/00 233,423 129,263
12/31/00 175,622 103,153
3/31/01 133,369 87,470
6/30/01 154,719 103,193
9/30/01 117,156 74,215
12/31/01 137,523 93,634
3/31/02 136,629 91,799
6/30/02 120,863 77,391
9/30/02 100,674 60,738
12/31/02 104,515 65,299
3/31/03 100,228 62,767
6/30/03 120,371 77,923
9/30/03 132,163 86,080
12/31/03 151,905 96,997
3/31/04 163,116 102,411
6/30/04 161,910 102,506
9/30/04 155,031 96,345
12/31/04 175,622 110,874
3/31/05 168,743 103,306
6/30/05 175,934 106,900
9/30/05 189,155 113,654
12/31/05 190,246 115,478
3/31/06 212,758 132,064
6/30/06 202,801 122,489
9/30/06 203,378 120,337
12/31/06 220,445 130,890
3/31/07 224,543 134,130
6/30/07 242,017 143,101
9/30/07 245,603 143,123
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 10 Years 1/2/1996
- ------------------------------------------------------------------------------------------
Fund 20.79% 16.57% 19.54% 9.40% 12.56%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,093.80 $5.04
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.26 $4.86
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 0.96%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -----------------------------------------------------------------------------------------------
Respironics, Inc. Health Care 1.8%
Hologic, Inc. Health Care 1.7
Wright Medical Group, Inc. Health Care 1.6
NeuStar, Inc. Telecommunication Services 1.5
Bucyrus International, Inc., Class A Industrials 1.5
Penn Virginia Corp. Energy 1.5
Copart, Inc. Industrials 1.4
Pediatrix Medical Group, Inc. Health Care 1.4
Bright Horizons Family Solutions, Inc. Consumer Discretionary 1.4
Psychiatric Solutions, Inc. Health Care 1.3
-----
15.1%
*Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------------------
Consumer Discretionary 11.2%
Consumer Staples 4.8
Energy 6.9
Financials 7.6
Health Care 22.3
Industrials 12.4
Materials 5.3
Technology 22.7
Telecomunication Services 1.4
Utilities 0.8
Short-term and Other Assets 4.6
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--118.9%
EQUITIES--95.4%
Consumer Discretionary--11.2%
Bright Horizons Family Solutions, Inc. 97,103 (a,b) 4,159,893
DeVry, Inc. 41,590 1,539,246
Entravision Communications Corp., Class A 173,763 (a,b) 1,602,095
Iconix Brand Group, Inc. 119,570 (a,b) 2,844,570
Interface, Inc., Class A 215,020 (b) 3,881,111
J.Crew Group, Inc. 22,810 (a,b) 946,615
Lions Gate Entertainment Corp. 343,825 (a) 3,544,836
Pacific Sunware of California 157,200 (a) 2,326,560
Red Robin Gourmet Burgers, Inc. 56,210 (a) 2,411,409
Skechers USA, Inc. Class. A 75,530 (a) 1,669,213
Steiner Leisure Ltd. 81,723 (a) 3,546,778
Texas Roadhouse, Inc., Class A 261,630 (a,b) 3,061,071
True Religion Apparel, Inc. 104,860 (a,b) 1,845,536
WMS Industries, Inc. 61,110 (a) 2,022,741
35,401,674
Consumer Staples--4.8%
Hain Celestial Group, Inc. 80,540 (a,b) 2,587,750
Hansen Natural Corp. 45,420 (a,b) 2,574,406
Inter Parfums, Inc. 116,960 (b) 2,768,443
Longs Drug Stores Corp. 79,480 3,947,772
Nu Skin Enterprises, Inc., Class A 107,284 (b) 1,733,709
Ruddick Corp. 51,290 (b) 1,720,267
15,332,347
Energy--6.9%
Alpha Natural Resources, Inc. 92,660 (a,b) 2,152,492
Berry Petroleum Co., Class A 60,710 (b) 2,403,509
Dril-Quip, Inc. 19,310 (a,b) 952,949
Oil States International, Inc. 53,710 (a,b) 2,594,193
Overseas Shipholding Group, Inc. 24,730 1,900,006
Parallel Petroleum Corp. 120,410 (a,b) 2,045,766
Penn Virginia Corp. 100,240 (b) 4,408,555
T-3 Energy Services, Inc. 69,282 (a,b) 2,954,184
W-H Energy Services, Inc. 31,500 (a,b) 2,323,125
21,734,779
Financials--7.6%
Arch Capital Group Ltd. 38,600 (a) 2,872,226
First Cash Financial Services, Inc. 111,809 (a,b) 2,618,567
First Mercury Financial Corp. 123,512 (a) 2,656,743
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Financials (continued)
GFI Group, Inc. 21,950 (a,b) 1,890,334
Hallmark Financial Services, Inc. 60,880 (a) 855,364
Max Capital Group Ltd. 73,760 2,068,230
Montpelier Re Holdings Ltd. 107,760 1,907,352
OptionsXpress Holdings, Inc. 110,340 (b) 2,884,288
Portfolio Recovery Associates, Inc. 29,660 (b) 1,574,056
RLI Corp. 28,520 1,617,654
Waddell & Reed Financial, Inc. 114,130 3,084,934
24,029,748
Health Care--22.3%
Amedisys, Inc. 51,860 (a,b) 1,992,461
Applera Corp.- Celera Genomics Group 132,230 (a) 1,859,154
Array Biopharma, Inc. 116,100 (a,b) 1,303,803
Arrow International, Inc. 60,730 2,762,608
Covance, Inc. 36,490 (a) 2,842,571
Cytyc Corp. 41,730 (a) 1,988,434
Dexcom, Inc. 40,159 (a) 401,188
Enzon Pharmaceuticals, Inc. 236,496 (a,b) 2,083,530
Exelixis, Inc. 188,790 (a) 1,999,286
Hologic, Inc. 83,860 (a,b) 5,115,460
Integra LifeSciences Holdings Corp. 46,450 (a,b) 2,256,541
MGI Pharma, Inc. 56,890 (a) 1,580,404
Natus Medical, Inc. 227,580 (a,b) 3,627,625
NuVasive, Inc. 29,480 (a) 1,059,216
NxStage Medical, Inc. 71,778 (a) 1,040,063
Pediatrix Medical Group, Inc. 64,030 (a) 4,188,843
PerkinElmer, Inc. 110,970 3,241,434
Phase Forward, Inc. 91,690 (a,b) 1,834,717
Poniard Pharmaceuticals, Inc. 171,537 (a,b) 972,615
Psychiatric Solutions, Inc. 103,330 (a,b) 4,058,802
Respironics, Inc. 112,858 (a) 5,420,570
Sangamo Biosciences, Inc. 90,840 (a,b) 1,281,752
Sirtris Pharmaceuticals, Inc. 107,729 (a,b) 1,840,011
Thermo Fisher Scientific, Inc. 67,520 (a,b) 3,897,254
Thoratec Corp. 123,230 (a,b) 2,549,629
TomoTherapy, Inc. 54,266 (a) 1,260,599
VCA Antech, Inc. 81,162 (a) 3,388,514
Wright Medical Group, Inc. 175,461 (a) 4,705,864
70,552,948
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
Industrials--12.4%
AAR Corp. 55,110 (a,b) 1,672,037
Bucyrus International, Inc., Class A 62,310 (b) 4,544,268
Copart, Inc. 122,370 (a) 4,208,304
Endeavor Acquisition Corp. 84,890 (a,b) 1,005,947
Hub Group, Inc., Class A 74,280 (a) 2,230,628
Hurco Companies, Inc. 21,730 (a) 1,174,724
McGrath Rentcorp 84,877 (b) 2,821,311
MSC Industrial Direct Co. Inc. 73,890 3,738,095
OceanFreight, Inc. 45,520 1,057,885
Quanta Services, Inc. 51,170 (a,b) 1,353,447
Ritchie Bros. Auctioneers 56,400 3,671,640
Stanley, Inc. 113,770 (a,b) 3,134,364
Stericycle, Inc. 34,910 (a,b) 1,995,456
UAP Holding Corp. 79,530 (b) 2,494,061
URS Corp. 15,340 (a) 865,943
Washington Group International, Inc. 36,620 (a,b) 3,215,602
39,183,712
Materials--5.3%
American Vanguard Corp. 80,620 (b) 1,573,702
Century Aluminum Co. 71,220 (a,b) 3,749,733
Flotek Industries, Inc. 20,850 (a) 920,528
H.B. Fuller Co. 61,140 1,814,635
Horsehead Holding Corp. 47,850 (a,b) 1,072,797
Kinross Gold Corp. 133,580 (a) 2,001,028
Schnitzer Steel Industries, Inc. 26,170 (b) 1,917,999
Silver Wheaton Corp. 265,850 (a) 3,727,217
16,777,639
Technology--22.7%
ADC Telecommunications, Inc. 48,970 (a) 960,302
AMIS Holdings, Inc. 158,600 (a) 1,540,006
Arris Group, Inc. 41,510 (a,b) 512,648
Atheros Communications, Inc. 66,210 (a,b) 1,984,314
Bankrate, Inc 43,410 (a,b) 2,002,069
ChipMOS TECHNOLOGIES (Bermuda) LTD. 311,630 (a,b) 1,866,664
Dice Holdings, Inc. 7,038 (a) 72,351
Diodes, Inc. 72,380 (a,b) 2,323,398
DivX, Inc. 84,594 (a,b) 1,257,913
Epicor Software Corp. 133,600 (a,b) 1,839,672
Euronet Worldwide, Inc. 25,500 (a) 753,576
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
Technology (continued)
FLIR Systems, Inc. 41,890 (a,b) 2,320,287
Forrester Research, Inc. 69,048 (a,b) 1,627,461
Foundry Networks, Inc. 139,410 (a) 2,477,316
Informatica Corp. 221,740 (a,b) 3,481,318
Internap Network Services Corp. 133,750 (a) 1,895,238
Intervoice, Inc. 191,360 (a,b) 1,796,870
Lawson Software, Inc. 160,900 (a) 1,610,609
MasTec, Inc. 128,716 (a,b) 1,811,034
Microsemi Corp. 119,640 (a,b) 3,335,563
MIPS Technologies, Inc. 208,014 (a,b) 1,643,311
MPS Group, Inc. 60,360 (a) 673,014
Net Gear, Inc. 107,610 (a,b) 3,273,496
Netscout Systems, Inc. 246,290 (a) 2,684,561
Online Resources Corp. 98,100 (a,b) 1,239,984
OpNext, Inc. 134,733 (a) 1,562,903
QAD, Inc. 108,301 (b) 937,887
RealNetworks, Inc. 396,760 (a,b) 2,690,033
RF Micro Devices, Inc. 366,640 (a) 2,467,487
SkillSoft PLC ADR 121,287 (a) 1,090,370
Solera Holdings, Inc. 168,693 (a) 3,034,787
Tech Data Corp. 45,640 (a,b) 1,831,077
Tessera Technologies, Inc. 103,520 (a) 3,882,000
The Ultimate Software Group, Inc. 49,720 (a,b) 1,735,228
TheStreet.com, Inc. 99,962 (b) 1,210,540
Trident Microsystems, Inc. 71,170 (a) 1,130,891
TriQuint Semiconductor, Inc. 270,200 (a,b) 1,326,682
Virtusa Corp. 70,460 (a) 1,056,900
Wright Express Corp. 84,490 (a,b) 3,083,040
72,022,800
Telecommunication Services--1.4%
NeuStar, Inc. 132,530 (a,b) 4,544,454
Utilities--0.8%
Ormat Technologies, Inc. 51,860 (b) 2,403,192
Total Equities (Cost $262,847,785) 301,983,293
SHORT-TERM INVESTMENTS--0.3% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.3%
U.S. Treasury Bill (Cost $912,525) 3.90% 12/13/2007 920,000 (c,d) 913,195
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL--23.2%
BlackRock Cash Strategies L.L.C. (Cost $73,517,496) 73,517,496 73,517,496
TOTAL UNAFFILIATED INVESTMENTS (Cost $337,277,806) 376,413,984
AFFILIATED INVESTMENTS--10.1%
Dreyfus Institutional Preferred Plus Money Market Fund (Cost $31,845,158) 31,845,158 (e) 31,845,158
-----------
TOTAL INVESTMENTS--129.0% (Cost $369,122,964) 408,259,142
LIABILITIES IN EXCESS OF OTHER ASSETS--(29.0%) (91,780,063)
-----------
NET ASSETS--100% 316,479,079
===========
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 September 30, 2007.
(c) Denotes all or part of security segregated as collateral for futures
transactions.
(d) Rate noted is yield to maturity.
(e) Affilated institutional money market fund.
At September 30, 2007 the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value (Depreciation)
- ----------------------------------------------------------------------------------------------------------------
Russell 2000 Index (5 Contracts) Long 11/30/2007 $2,033,000 ($2,643)
=======
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A)
(including securities on loan, valued at $70,258,013 (Note 7)):
Unaffiliated investments (cost $337,277,806) $376,413,984
Affiliated investments (Note 1F) (cost $31,845,158) 31,845,158
Cash collateral at broker for futures contracts 260,000
Receivable for investments sold 7,182,786
Receivable for Fund shares sold 931,913
Interest and dividends receivable 161,944
Prepaid expenses 17,754
------------
Total assets 416,813,539
Liabilities
Collateral for securities on loan (Note 7) $ 73,517,496
Payable for investments purchased 26,601,147
Payable for variation margin on open futures contracts (Note 6) 62,515
Payable for Fund shares redeemed 40,488
Accrued accounting, custody, administration and transfer agent fees (Note 2) 53,723
Accrued professional fees 34,371
Accrued administrator service fees (Note 2) 15,193
Accrued trustees' fees and expenses (Note 2) 4,847
Accrued shareholder reporting fee (Note 2) 1,929
Accrued chief compliance officer fee (Note 2) 366
Other accrued expenses and liabilities 2,385
------------
Total liabilities 100,334,460
------------
Net Assets $316,479,079
============
Net Assets consist of:
Paid-in capital $259,763,298
Accumulated net realized gain 17,582,246
Net unrealized appreciation 39,133,535
------------
Total Net Assets $316,479,079
============
Shares of beneficial interest outstanding 7,334,321
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 43.15
============
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statement of Operations For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments
(net of foreign withholding taxes of $2,958) $ 733,479
Dividend income from affiliated investments (Note 1F) 783,700
Securities lending income (Note 7) 242,722
Interest income 24,503
-----------
Total investment income 1,784,404
Expenses
Investment advisory fee (Note 2) $ 1,801,861
Accounting, custody, administration and transfer agent fees (Note 2) 182,879
Administrative service fees (Note 2) 59,541
Professional fees 42,495
Registration fees 19,575
Trustees' fees and expenses (Note 2) 18,268
Insurance expense 6,600
Miscellaneous expenses 30,411
------------
Net Expenses 2,161,630
-----------
Net investment loss (377,226)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 18,099,950
Financial futures transactions 1,041,212
------------
Net realized gain 19,141,162
Change in unrealized appreciation (depreciation) on:
Investments 20,857,956
Financial futures contracts 63,856
------------
Change in net unrealized appreciation (depreciation) 20,921,812
-----------
Net realized and unrealized gain (loss) 40,062,974
-----------
Net Increase in Net Assets from Operations $39,685,748
===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Statements of Changes in Net Assets
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ (377,226) $ (291,040)
Net realized gain (loss) 19,141,162 28,507,556
Change in net unrealized appreciation (depreciation) 20,921,812 (15,412,552)
------------ ------------
Net increase (decrease) in net assets from investment operations 39,685,748 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 149,130,264 25,431,734
Value of shares issued to shareholders in reinvestment of distributions 25,616,045 9,807,382
Cost of shares redeemed (31,289,631) (35,872,639)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 143,456,678 (633,523)
------------ ------------
Total Increase (Decrease) in Net Assets 155,927,005 517,206
Net Assets
At beginning of year 160,552,074 160,034,868
------------ ------------
At end of year $316,479,079 $160,552,074
============ ============
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Year $ 42.27 $ 42.35 $ 34.71 $ 29.58 $ 22.53
-------- -------- -------- -------- --------
From Operations:
Net investment income (loss)* (a) (0.07) (0.08) (0.10) (0.24) (0.11)
Net realized and unrealized
gains (loss) on investments 8.07(b) 3.08 7.74 5.37(b) 7.16(b)
-------- -------- -------- -------- --------
Total from operations 8.00 3.00 7.64 5.13 7.05
-------- -------- -------- -------- --------
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 Year $ 43.15 $ 42.27 $ 42.35 $ 34.71 $ 29.58
======== ======== ======== ======== ========
Total Return 20.79% 7.49% 22.01% 17.34% 31.29%(c)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.96% 0.99% 0.99% 1.03% 1.00%
Net Investment Income (loss) (to average daily net assets)* (0.17%) (0.18%) (0.26%) (0.71%) (0.43%)
Portfolio Turnover 170% 169% 137% 150% 252%
Net Assets, End of Year (000's omitted) $316,479 $160,552 $160,035 $120,372 $106,718
<FN>
* 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 per share (a) N/A N/A N/A N/A $ (0.13)
Ratios (to average daily net assets):
Expenses N/A N/A N/A N/A 1.07%
Net investment income N/A N/A N/A N/A (0.50%)
</FN>
(a) Calculated based on average shares outstanding.
(b) Amounts includes litigation proceeds received by the Fund of $0.04 for the
year ended September 30, 2007, $0.03 for the year ended September 30, 2004
and $0.01 for the year ended September 30, 2003.
(c) Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) 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 considers small
cap companies to have total market capitalizations equal to or less than
the total market capitalization of the largest company included in the
Russell 2000 Growth Index. 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 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, or if such quotations do not accurately reflect
fair value, 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. 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 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.
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 wash sales and
the timing of recognition of realized and unrealized gains and 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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among 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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$12,680, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon Bank"),
a wholly-owned subsidiary of BNY Mellon 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 $170,199 for the year ended September 30,
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, the Fund earned $103,656 for the year
ended September 30, 2007. See Note 7 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged
$540 for the year ended September 30, 2007, which amount is included in
miscellaneous expenses on the statement of operations.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,249, which amount 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.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust has contracted Mellon Investor Services LLC, a wholly owned
subsidiary of BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $5,122, which amount is included in miscellaneous expenses in the
statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $58,850 for fees
payable to BNY Mellon Private Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
------------ ------------
Non-U.S. Government Securities $480,194,993 $365,752,741
============ ============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 3,640,582 604,209
Shares issued to shareholders in
reinvestment of distributions 659,528 244,757
Shares redeemed (764,326) (829,484)
--------- --------
Net increase (decrease) 3,535,784 19,482
========= ========
At September 30, 2007, two shareholders of record held in the aggregate
65.8% 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 year ended September 30, 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.
18
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
In July 2006, FASB 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 implication of FIN 48 and its impact on
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $369,909,291
============
Gross unrealized appreciation $ 42,150,810
Gross unrealized depreciation (3,800,959)
------------
Net unrealized appreciation (depreciation) $ 38,349,851
============
Undistributed ordinary income $ 7,443,213
Undistributed capital gains 10,922,717
------------
Total distributable earnings $ 18,365,930
============
The tax character of distributions paid during the fiscal years ended
September 30, 2007 and September 30, 2006, was as follows:
2007 2006
----------- -----------
Ordinary income $ 8,747,920 $ 2,298,653
Long-Term Capital Gains 18,467,501 9,354,582
----------- -----------
Total Distributions $27,215,421 $11,653,235
=========== ===========
(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 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 September 30, 2007, the Fund held open financial futures contracts. See
the Schedule of Investments for further details.
19
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(7) Security Lending:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the year ended September 30, 2007 and
earned interest on the invested collateral of $2,790,013 of which
$2,547,291 was rebated to borrowers or paid in fees. At September 30, 2007,
the Fund had securities valued at $70,258,013 on loan, of which $73,517,496
was collateralized with cash and $17,655 was collateralized with highly
liquid securities. See Schedule of Investments for further detail on the
security positions on loan and collateral held.
20
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Tax-Sensitive Equity Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of The Boston Company Small Cap Tax-Sensitive Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Small Cap
Tax-Sensitive Equity Fund (the "Fund") at September 30, 2007, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
21
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $2,410
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $2,410
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 25 None Fund: $2,410
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $2,493
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 *
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of
the Trust.
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
23
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MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6938AR0907
MELLON INSTITUTIONAL FUNDS
The Boston Company
Annual Report Small Cap Value Fund
- --------------------------------------------------------------------------------
Year Ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Small-cap stocks rallied early in the reporting period amid moderate economic
growth, stable short-term interest rates and rising corporate earnings. At the
time, investors maintained an ample appetite for risk, which benefited shares of
smaller companies more than their larger counterparts. However, the market
environment changed dramatically in mid-June 2007, when credit concerns in the
sub-prime mortgage sector spread to other areas of the financial markets. In the
ensuing market turbulence, newly risk-averse investors engaged in a "flight to
quality," and larger, higher-quality companies returned to favor.
The Federal Reserve Board attempted to improve market liquidity by reducing key
short-term interest rates in August and September. These moves bolstered
investor confidence that a recession could be avoided, sparking a market rally
late in the reporting period.
For the 12-month period ended September 30, 2007, The Boston Company Small Cap
Value Fund returned 11.18% as compared to the fund's benchmark, the Russell 2000
Value Index, which returned 6.09% over the same period. The fund participated to
a substantial degree in the small-cap market's advance. The fund achieved
particularly strong results among information technology companies, including
electron microscope semiconductors maker FEI Company, which gained greater
penetration of nanotechnology markets, and Microsemi Corp., which continues to
see strong growth in demand for its high performance analog chip. A number of
other semiconductor companies in the fund's portfolio also produced strong
returns during the reporting period. In the communications equipment industry
group, the fund scored successes with consumer networking equipment manufacturer
Netgear and telecommunications and military networking specialist Comtech
Telecommunications.
In the health care sector, home care services provider OptionCare was acquired
by pharmacy chain Walgreen, and medical helicopter services contractor Air
Methods captured a larger share of hospital and municipal markets. The energy
sector led the benchmark's performance during the reporting period, and the fund
participated in its strength through holdings such as oil well drilling
equipment maker Hydrill, which was acquired by energy services company Quanta
Services, and oil and gas operations specialty service provider CARBO Ceramics,
which boosted earnings after adding to manufacturing capacity. Among industrial
companies, engineering and construction firm Infrasource Services benefited from
increased investment in power transmission facilities, and Shaw Group gained
value in an improved global environment for the construction of nuclear power
plants as more nations develop alternatives to fossil fuels. Conversely, some
holdings and industry groups detracted from the fund's performance during the
reporting period. For example, regional electric utility PNM Resources was
unable to pass along higher commodity costs to its customers, and the fund's
underweighted position in the materials sector prevented it from participating
fully in the sector's strength as compared to the benchmark.
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Although our "bottom-up" investment process does not consider macroeconomic
trends directly, we are aware that the U.S. economy is in the later stages of
its cycle and some market indices recently have set new record highs. In our
judgment, our relatively cautious, value-oriented approach to security selection
is well positioned for this environment, as it places a high degree of emphasis
on characteristics of individual companies such as solid business fundamentals,
healthy balance sheets and the ability to generate cash consistently. We
recently have found fewer opportunities meeting our criteria among industrial
companies, which have reached fuller valuations, and more in the information
technology, health care and consumer discretionary areas, which have offered
better values after extended periods of underperformance.
Joseph Corrado, CFA Stephanie Brandaleone, CFA
Portfolio Manager Portfolio Manager
The Boston Company Asset Management, LLC The Boston Company Asset Management, LLC
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Value Fund and the Russell 2000 Value Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED DOCUMENT.]
TBC
PERIOD Small Cap Value Fund Russell 2000 Value Index*
2/1/00 100,000 100,000
3/31/00 117,919 106,610
6/30/00 118,912 108,690
9/30/00 126,979 116,667
12/31/00 131,836 126,124
3/31/01 128,448 127,350
6/30/01 149,446 142,170
9/30/01 130,942 123,211
12/31/01 158,998 143,811
3/31/02 175,988 157,587
6/30/02 170,003 154,246
9/30/02 137,952 121,406
12/31/02 141,694 127,381
3/31/03 132,789 120,910
6/30/03 162,696 148,385
9/30/03 178,859 159,848
12/31/03 207,037 186,010
3/31/04 223,910 198,881
6/30/04 231,020 200,567
9/30/04 232,506 200,867
12/31/04 264,849 227,389
3/31/05 253,715 218,344
6/30/05 268,978 229,427
9/30/05 282,114 236,523
12/31/05 284,121 238,094
3/31/06 317,413 270,250
6/30/06 314,082 262,943
9/30/06 317,160 269,653
12/31/06 346,674 293,997
3/31/07 355,871 298,293
6/30/07 371,194 305,156
9/30/07 352,627 286,063
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 3 Years 5 Years 2/1/2000
- --------------------------------------------------------------------------------------------------------
Fund 11.18% 14.89% 20.65% 17.88%
* Source: Lipper Inc.
Average annual total returns reflect the change in the value of an investment,
assuming reinvestment of the fund's dividends from income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 990.90 $4.84
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.21 $4.91
- ----------------
+ Expenses are equal to the Fund's annualized expense ratio of 0.97%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -----------------------------------------------------------------------------------------------------
Ralcorp Holdings, Inc. Consumer Staples 1.9%
Longs Drug Stores Corp. Consumer Staples 1.8
Scholastic Corp. Consumer Discretionary 1.3
Clean Harbors, Inc. Industrials 1.3
BJ'S Wholesale Club, Inc. Consumer Staples 1.3
Comtech Telecommunications Corp. Technology 1.2
CARBO Ceramics, Inc. Energy 1.2
Metal Management, Inc. Materials 1.2
Pacific Capital Bancorp. Financial 1.2
Pediatrix Medical Group, Inc. Health Care 1.1
----
13.5%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------
Consumer Discretionary 17.0%
Consumer Staples 7.0
Energy 5.8
Financials 18.5
Health Care 9.5
Industrials 10.5
Materials 3.5
Technology 20.6
Telecommunications Services 1.1
Utilities 3.0
Short-term and Net other Assets 3.5
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
6
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--120.1%
EQUITIES--96.5%
Consumer Discretionary--17.0%
AnnTaylor Stores Corp. 261,000 (a) 8,265,870
Big 5 Sporting Goods Corp. 275,634 (b) 5,154,356
Cache, Inc. 255,200 (a) 4,555,320
Cavco Industries, Inc. 82,832 (a,b) 2,774,872
Champion Enterprises, Inc. 262,600 (a,b) 2,883,348
Charming Shoppes, Inc. 406,970 (a,b) 3,418,548
Courier Corp. 122,690 (b) 4,319,915
Cox Radio, Inc., Class A 354,820 (a,b) 4,630,401
Drew Industries, Inc. 120,930 (a,b) 4,919,432
Entravision Communications Corp., Class A 559,806 (a,b) 5,161,411
Ethan Allen Interiors, Inc. 180,520 (b) 5,901,199
Gentex Corp. 351,780 (b) 7,542,163
Jos. A Bank Clothiers, Inc. 189,760 (a,b) 6,341,779
Kenneth Cole Productions, Inc., Class A 248,210 (b) 4,807,828
Live Nation, Inc. 394,800 (a,b) 8,389,500
M.D.C. Holdings, Inc. 203,800 (b) 8,343,572
Meredith Corp. 148,340 8,499,882
Morton's Restaurant Group, Inc. 212,435 (a,b) 3,377,716
New York & Co, Inc. 653,647 (a,b) 3,987,247
Regis Corp. 233,890 7,463,430
Scholastic Corp. 309,530 (a,b) 10,790,216
Tenneco, Inc. 241,893 (a,b) 7,501,102
Timberland Co., Class A 224,380 (a,b) 4,254,245
Zale Corp. 353,480 (a,b) 8,179,527
141,462,879
Consumer Staples--7.0%
BJ'S Wholesale Club, Inc. 302,230 (a,b) 10,021,947
Casey's General Stores, Inc. 322,560 (b) 8,934,912
Lance, Inc. 203,624 (b) 4,687,424
Longs Drug Stores Corp. 297,380 (b) 14,770,865
Performance Food Group Co. 142,700 (a) 4,299,551
Ralcorp Holdings, Inc. 270,660 (a,b) 15,108,241
57,822,940
Energy--5.8%
CARBO Ceramics, Inc. 188,970 (b) 9,586,448
Dril-Quip, Inc. 99,933 (a,b) 4,931,694
Oil States International, Inc. 142,400 (a,b) 6,877,920
Penn Virginia Corp. 202,380 8,900,672
Superior Well Services, Inc. 197,670 (a,b) 4,493,039
Tetra Technologies, Inc. 219,920 (a,b) 4,649,109
Unit Corp. 173,710 (a) 8,407,564
47,846,446
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
Financials--18.5%
Alabama National Bancorp 21,350 (b) 1,663,592
American Financial Realty Trust REIT 574,536 (b) 4,625,015
Anthracite Capital, Inc. REIT 512,020 (b) 4,659,382
Aspen Insurance Holdings Ltd. 229,910 6,416,788
Assured Guaranty Ltd. 272,770 7,411,161
BankAtlantic Bancorp, Inc., Class A 475,230 (b) 4,120,244
Care Investment Trust, Inc. REIT 294,500 (a) 3,534,000
Citizens Republic Bancorp, Inc. 205,460 (b) 3,309,961
Cowen Group, Inc. 116,046 (a) 1,603,756
Education Realty Trust, Inc. REIT 348,606 (b) 4,706,181
Financial Federal Corp. 272,950 (b) 7,645,330
First Indiana Corp. 130,510 4,087,573
First Potomac Realty Trust REIT 201,210 (b) 4,386,378
Firstmerit Corp. 299,900 (b) 5,926,024
Flushing Financial Corp. 153,660 (b) 2,581,488
Horace Mann Educators Corp. 184,750 3,641,422
Intervest Bancshares Corp. 123,338 3,052,616
Lasalle Hotel Properties REIT 111,500 (b) 4,691,920
Lexington Realty Trust REIT 312,020 (b) 6,243,520
Mission West Properties REIT 233,310 (b) 2,834,716
Old National Bancorp 290,120 (b) 4,807,288
Pacific Capital Bancorp 361,732 (b) 9,513,552
Philadelphia Consolidated Holding Corp. 151,700 (a) 6,271,278
Piper Jaffray Cos. 130,740 (a,b) 7,007,664
Provident Bankshares Corp. 100,430 (b) 3,146,472
Redwood Trust, Inc. REIT 208,070 (b) 6,912,085
Security Capital Assurance Ltd. 297,150 6,786,906
Southwest Bancorp, Inc. 147,315 (b) 2,772,468
Sterling Bancshares, Inc. 278,560 3,178,370
Strategic Hotels and Resorts, Inc. REIT 179,190 (b) 3,689,522
Texas Capital Bancshares, Inc. 143,473 (a,b) 3,119,103
Washington Federal, Inc. 302,303 7,938,477
Washington Trust Bancorp, Inc. 38,100 (b) 1,027,557
153,311,809
Health Care--9.5%
Air Methods Corp. 146,650 (a,b) 6,775,230
Amedisys, Inc. 129,000 (a) 4,956,180
Computer Programs & Systems, Inc. 135,750 (b) 3,578,370
Healthsouth Corp. 169,700 (a,b) 2,971,447
K-V Pharmaceutical Co., Class A 171,214 (a,b) 4,896,720
Kensey Nash Corp. 69,000 (a) 1,801,590
Lifepoint Hospitals, Inc. 207,022 (a,b) 6,212,730
Magellan Health Services, Inc. 143,750 (a,b) 5,833,375
Medical Action Industries, Inc. 192,385 (a) 4,551,829
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Health Care (continued)
Medicines Co. 183,900 (a,b) 3,275,259
Odyssey HealthCare, Inc. 446,300 (a) 4,288,943
Pediatrix Medical Group, Inc. 138,590 (a,b) 9,066,558
Phase Forward, Inc. 315,010 (a,b) 6,303,350
Providence Service Corp. 241,510 (a,b) 7,090,734
Res-Care, Inc. 310,354 (a,b) 7,088,485
78,690,800
Industrials--10.5%
American Ecology Corp. 223,540 (b) 4,736,813
Bowne & Co., Inc. 304,660 5,075,636
Casella Waste Systems, Inc., Class A 472,760 (a) 5,928,410
Clean Harbors, Inc. 225,140 (a,b) 10,023,233
Comfort Systems USA, Inc. 179,770 2,552,734
Curtiss-Wright Corp. 132,930 6,314,175
Esterline Technologies Corp. 124,591 (a,b) 7,107,917
II-VI, Inc. 141,650 (a,b) 4,891,174
Insituform Technologies, Inc., Class A 200,631 (a,b) 3,055,610
LECG Corp. 396,720 (a,b) 5,911,128
McGrath Rentcorp 177,390 (b) 5,896,444
Moog, Inc., Class A 176,380 (a,b) 7,750,137
School Specialty, Inc. 101,070 (a,b) 3,500,054
Tetra Tech, Inc. 178,563 (a,b) 3,771,251
United Stationers, Inc. 88,090 (a) 4,890,757
Waste Connections, Inc. 192,629 (a,b) 6,117,897
87,523,370
Materials--3.5%
AMCOL International Corp. 125,670 (b) 4,158,420
Compass Minerals International, Inc. 133,040 (b) 4,528,682
Glatfelter 252,640 (b) 3,749,178
Metal Management, Inc. 175,960 (b) 9,537,032
Neenah Paper, Inc. 132,620 (b) 4,388,396
Wausau Paper Corp. 243,680 2,717,032
29,078,740
Technology--20.6%
AspenTech, Inc. 397,400 (a) 5,690,768
Avid Technology, Inc. 182,430 (a,b) 4,940,204
Cirrus Logic, Inc. 709,160 (a,b) 4,538,624
Comtech Telecommunications Corp. 184,640 (a,b) 9,876,394
Cray, Inc. 451,200 (a) 3,248,640
CSG Systems International, Inc. 286,510 (a,b) 6,088,337
Cymer, Inc. 103,610 (a,b) 3,977,588
Electronics for Imaging, Inc. 286,990 (a,b) 7,708,551
Emulex Corp. 353,620 (a) 6,778,895
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------------
Technology (continued)
Epicor Software Corp. 348,280 (a,b) 4,795,816
EPIQ Systems, Inc. 211,750 (a,b) 3,985,135
Fair Issac Corp. 115,200 (b) 4,159,872
FEI Co. 281,330 (a,b) 8,842,202
Foundry Networks, Inc. 336,110 (a,b) 5,972,675
Harris Stratex Networks, Inc., Class A 266,800 (a) 4,660,996
Hutchinson Technology, Inc. 143,730 (a,b) 3,535,758
Mercury Computer Systems, Inc. 236,640 (a,b) 2,432,659
Micrel, Inc. 568,820 (b) 6,143,256
Microsemi Corp. 312,380 (a,b) 8,709,154
MKS Instruments, Inc. 168,400 (a,b) 3,202,968
MTS Systems Corp. 157,540 6,553,664
Net Gear, Inc. 224,650 (a,b) 6,833,853
NIC, Inc. 576,990 (b) 4,004,311
Parametric Technology Corp. 333,900 (a) 5,816,538
Perot Systems Corp., Class A 199,430 (a) 3,372,361
Powerwave Technologies, Inc. 968,332 (a,b) 5,964,925
Rogers Corp. 102,230 (a,b) 4,210,854
Rudolph Technologies, Inc. 238,920 (a) 3,304,264
Semtech Corp. 292,770 (a) 5,995,930
SI International, Inc. 24,533 (a) 700,908
SRA International, Inc. 223,100 (a,b) 6,264,648
Sybase, Inc. 240,910 (a) 5,572,248
TTM Technologies, Inc. 304,300 (a,b) 3,520,751
171,403,747
Telecommunication Services--1.1%
Cincinnati Bell, Inc. 1,622,860 (a,b) 8,016,928
EMS Technologies, Inc. 44,600 (a,b) 1,094,038
9,110,966
Utilities--3.0%
Black Hills Corp. 158,000 (b) 6,481,160
El Paso Electric Co. 218,010 (a,b) 5,042,571
PNM Resources, Inc. 372,000 (b) 8,660,160
Portland General Electric Co. 146,000 (b) 4,058,800
SJW Corp. 21,025 717,793
24,960,484
Total Equities (Cost $754,284,006) 801,212,181
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Fund
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Par Value ($)
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.2%
U.S. Government--0.2%
U.S. Treasury Bill (Cost $1,527,467) 3.90% 12/13/2007 1,540,000 (c,d) 1,528,609
INVESTMENT OF CASH COLLATERAL--23.4% Shares
-----------
BlackRock Cash Strategies L.L.C. (Cost $193,682,266) 193,682,266 193,682,266
TOTAL UNAFFILIATED INVESTMENTS (Cost $949,493,739) 996,423,056
AFFILIATED INVESTMENTS--4.6%
Dreyfus Institutional Preferred Plus Money Market Fund (Cost $38,205,138) 38,205,138 (e) 38,205,138
-------------
TOTAL INVESTMENTS--124.7% (Cost $987,698,877) 1,034,628,194
LIABILITIES IN EXCESS OF OTHER ASSETS--(24.7%) (204,671,565)
-------------
NET ASSETS--100% 829,956,629
=============
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 September 30, 2007.
c Rate noted is yield to maturity.
d Denotes all or part of security pledged as collateral.
e Affiliated institutional money market fund.
At September 30, 2007 the fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
- ---------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (55 Contracts) Long 11/30/2007 $22,363,000 $670,805
========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investment in securities (Note 1A) (including securities on loan, valued at
$182,538,423 (Note 7))
Unaffiliated issuers, at value (cost $949,493,739) $ 996,423,056
Affiliated issuers, at value (Note 1F) (cost $38,205,138) 38,205,138
Cash 5,943
Receivable for investments sold 9,176,676
Receivable for Fund shares sold 2,049,790
Interest and dividends receivable 1,024,527
Prepaid expenses 17,008
--------------
Total assets 1,046,902,138
Liabilities
Collateral for securities on loan (Note 7) $ 193,682,266
Payable for investments purchased 21,048,444
Payable for Fund shares redeemed 1,794,394
Payable for variation margin on open futures contracts (Note 6) 197,285
Accrued administrative service fees (Note 2) 93,167
Accrued accounting, administration, custody and transfer agent fees (Note 2) 59,103
Accrued professional fees 55,785
Accrued trustees' fees (Note 2) 8,611
Accrued chief compliance officer fee (Note 2) 388
Other accrued expenses and liabilities 6,066
-------------
Total liabilities 216,945,509
--------------
Net Assets $ 829,956,629
==============
Net Assets consist of:
Paid-in capital $ 738,517,494
Accumulated net realized gain 42,503,265
Undistributed net investment income 1,335,748
Net unrealized appreciation 47,600,122
--------------
Total Net Assets $ 829,956,629
==============
Shares of beneficial interest outstanding 32,850,739
==============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 25.26
==============
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Operations
For the Year Ended September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments $ 680,543
Dividend income from affiliated investments (Note 1F) 52,520
Securities lending income (Note 7) 43,829
Interest income 1,504
Allocated investment income from portfolio (Note 9) 10,513,648
Allocated expenses from portfolio (Note 9) (6,003,500)
-----------
Total Investment Income 5,288,544
Expenses
Investment advisory fee (Note 2) $ 202,225
Administrative service fees (Note 2) 251,070
Accounting, administration, custody and transfer agent fees (Note 2) 42,964
Professional fees 71,632
Registration fees 64,446
Trustees' fees (Note 2) 2,777
Insurance expense 2,150
Miscellaneous expenses 65,232
-----------
Total expenses 702,496
-----------
Net investment income 4,586,048
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (8,133,245)
Financial futures transactions 286,755
Allocation of realized gains from portfolio (Note 9) 51,927,670
-----------
Net realized gain (loss) 44,081,180
Change in unrealized appreciation (depreciation) on:
Investments (5,563,474)
Financial futures contracts (412,489)
Allocation of unrealized appreciation from portfolio (Note 9) 19,572,475
-----------
Change in net unrealized appreciation (depreciation) 13,596,512
-----------
Net realized and unrealized gain (loss) 57,677,692
-----------
Net Increase in Net Assets from Operations $62,263,740
===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 4,586,048 $ 1,320,137
Net realized gain (loss) 44,081,180 18,994,109
Change in net unrealized appreciation (depreciation) 13,596,512 14,188,217
------------- ------------
Net increase (decrease) in net assets from investment operations 62,263,740 34,502,463
------------- ------------
Distributions to Shareholders (Note 1C)
From net investment income (2,720,774) (446,329)
From net realized gains on investments (25,544,571) (13,455,548)
------------- ------------
Total distributions to shareholders (28,265,345) (13,901,877)
------------- ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 389,073,666 374,463,760
Value of shares issued in reinvestment of distributions 21,086,392 10,108,779
Cost of shares redeemed (net of redemption
fees of $28,716 and $31,354, respectively) (153,762,234) (55,259,897)
------------- ------------
Net increase (decrease) in net assets from Fund share transactions 256,397,824 329,312,642
------------- ------------
Total Increase (Decrease) in Net Assets 290,396,219 349,913,228
Net Assets
At beginning of year 539,560,410 189,647,182
------------- ------------
At end of year (including undistributed net
investment income of $1,335,748 and $820,716, respectively) $ 829,956,629 $539,560,410
============= ============
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Financial Highlights
- --------------------------------------------------------------------------------
Year Ended September 30,
--------------------------------------------------------------
2007 2006 2005 2004 2003
--------- --------- -------- -------- --------
Net Asset Value, Beginning of Year $ 23.70 $ 22.55 $ 21.91 $ 18.49 $ 14.30
--------- --------- -------- -------- --------
From Investment Operations:
Net investment income (loss)*(a) 0.16 0.09 0.02 (0.05) (0.01)
Net realized and unrealized gains (loss) on investments 2.48 2.58 4.29 5.27 4.24
--------- --------- -------- -------- --------
Total from operations 2.64 2.67 4.31 5.22 4.23
--------- --------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.09) (0.03) -- -- (0.02)
From net realized gains on investments (0.99) (1.49) (3.67) (1.80) (0.02)
--------- --------- -------- -------- --------
Total distributions to shareholders (1.08) (1.52) (3.67) (1.80) (0.04)
--------- --------- -------- -------- --------
Net Asset Value, End of Year $ 25.26 $ 23.70 $ 22.55 $ 21.91 $ 18.49
========= ========= ======== ======== ========
Ratios/Supplemental data:
Total Return 11.18% 12.42% 21.34% 29.92% 29.64%(b)
Expenses (to average daily net assets)*(c) 0.90% 0.94% 1.05% 1.18% 1.15%
Net Investment Income (Loss) (to average daily net assets)* 0.61% 0.40% 0.08% (0.24%) (0.05%)
Portfolio Turnover(d) 67% 60% 70% 123% 51%(e)
Net Assets, End of Year (000's omitted) $ 829,957 $ 539,560 $189,647 $ 61,182 $ 45,305
- -------------
* 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 $(0.03)
Ratios (to average daily net assets):
Expenses (c) N/A N/A N/A N/A 1.28%
Net investment income (loss) N/A N/A N/A N/A (0.18%)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) For the period October 1, 2006 to September 19, 2007 and for the fiscal
years ended September 30, 2003-2006, the ratio includes the Fund's share of
the TBC Small Cap Value Portfolio's allocated expenses.
(d) On September 19, 2007, the Fund, which had owned approximately 100% of the
Portfolio on such date, withdrew entirely from the Portfolio and received
the Portfolio's securities and cash in exchange for its interests in the
Portfolio. Effective September 20, 2007, the Fund began investing directly
in the securities in which the Portfolio had invested. Portfolio turnover
represents investment activity of both the Fund and the Portfolio for the
year. The amounts shown for 2003-2006 are the ratios for the Portfolio.
(e) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 23, 2003. The Portfolio turnover for
the period January 24, 2003 to September 30, 2003 was 51%.
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of small cap
U.S. companies. 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 2000 Index.
Prior to September 20, 2007, the Fund had invested substantially all of its
investable assets in The Boston Company Small Cap Value Portfolio (the
"Portfolio"), a subtrust of the Mellon Institutional Funds Master
Portfolio, the "Portfolio Trust", a New York trust. The Portfolio had
investment objectives, policies, limitations and accounting policies
substantially identical to those of the Fund. While investing in the
Portfolio, the Fund earned its proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on its
percentage ownership of the Portfolio's shares of beneficial interest. The
Portfolio's Statement of Operations for the period October 1, 2006 through
September 19, 2007 is included in Note 9. On September 19, 2007, the Fund,
which owned 100% of the Portfolio on that date, withdrew entirely from the
Portfolio and received the Portfolio's assets, including securities and
cash, and assumed the Portfolio's stated liabilities in exchange for its
interest in the Portfolio. Effective September 20, 2007, the Fund began
investing directly in the securities in which the Portfolio had invested.
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 price 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, or if such quotations do not accurately reflect
fair value, 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") is 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 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. Dividends representing
a return of capital are reflected as a reduction of cost. Realized gains
and losses from securities sold are recorded on the identified cost basis.
Income, expenses and realized and unrealized gains and losses allocated
from the Portfolio represent the Fund's proportionate share of those items
earned by the Portfolio during the period October 1, 2006 through September
19, 2007.
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.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 wash sales, real
estate investment trusts and the timing of recognition of realized and
unrealized gains and 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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
On July 31, 2007, the Dreyfus Premier Small Cap Equity Fund ("Dreyfus
Feeder") withdrew from the master feeder structure via a redemption-in-kind
and received currency and securities with unrealized appreciation of
$651,693 for the value of their interest in the Portfolio. The Fund
realized no gain on this transaction. $1,301,484 of unrealized appreciation
had been allocated to that feeder fund. The Fund decreased paid in capital
and increased unrealized appreciation on investments by $649,791 to
recognize this difference. When realized, this amount will be recognized by
the Fund. This reclassification had no impact on the net assets or results
of operations of the Fund.
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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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:
Prior to September 20, 2007 the Fund did not directly incur any investment
advisory, custody, administration and commitment fees, which were incurred
by the Portfolio and allocated to the Fund based on its proportionate
interest in the Portfolio. The following disclosures relating to these fees
represent fees incurred by the Portfolio for the period prior to September
20, 2007, and by the Fund thereafter.
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Fund's, and previously the Portfolio's
average daily net assets.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$37,087, for the year ended September 30, 2007.
The Trust and previously the Portfolio Trust, entered into an agreement
with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY
Mellon and an affiliate of TBCAM, to provide custody, administration and
accounting services for the Portfolio/Fund. For these services the
Portfolio/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 $188,462 for the period October 1, 2006 to September
19, 2007 and $5,877 for the period September 20, 2007 to September 30,
2007.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust and previously the Portfolio Trust, also entered into an
agreement with Mellon Bank to perform certain securities lending activities
and to act as the Portfolio/Fund's lending agent. Mellon Bank receives an
agreed upon percentage of the net lending revenues. Pursuant to this
agreement, Mellon Bank earned $276,543 for the period October 1, 2006 to
September 19, 2007 and $43,829 for the period September 20, 2007 to
September 30, 2007. See Note 7 for further details.
The Trust and previously the Portfolio Trust, entered into two separate
agreements with The Bank of New York that enable the Fund, and other funds
in the Trust, to borrow, in the aggregate, (i) up to $35 million from a
committed line of credit and (ii) up to $15 million from an uncommitted
line of credit. Interest is charged to each participating fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. The participating funds also pay an annual fee, computed at a rate of
0.020 of 1% of the committed and uncommitted amounts and allocated ratably
to the participating funds. 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 at the end of each quarter. Pursuant to these
agreements, the Fund was charged $3,669 for the period October 1, 2006 to
September 19, 2007 and $104 for the period September 20, 2007 to September
30, 2007, which is included in miscellaneous expenses on the statement of
operations. See Note 8 for further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,241, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $13,019, which amount is included in miscellaneous expenses in the
statement of operations, for the year ended September 30, 2007.
The Fund may pay 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
year ended September 30, 2007, the Fund was charged $97,276 for fees
payable to BNY Mellon Wealth Management.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The Bank
of New York Company, Inc. ("BNY") each merged into BNY Mellon, with BNY
Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
------------- -------------
Non-U.S. Government Securities $ 645,421,314 $ 505,994,923
============= =============
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Year Ended Year Ended
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 15,293,689 16,310,078
Shares issued to shareholders in reinvestment of 841,925 464,397
distributions
Shares redeemed (6,052,936) (2,415,192)
---------- ----------
Net increase (decrease) 10,082,678 14,359,283
========== ==========
18
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 2007, two shareholders of record held in the aggregate
31.1% 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 year ended September 30, 2007, the Fund received
$28,716 in redemption fees.
(5) Federal Taxes:
Each year, the Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code ("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.
In July 2006, FASB 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 on
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $988,260,273
============
Gross unrealized appreciation $ 88,814,397
Gross unrealized depreciation (42,446,476)
------------
Net unrealized appreciation (depreciation) 46,367,921
============
Undistributed ordinary income $ 11,755,487
Undistributed capital gains 33,315,728
------------
Total distributable earnings $ 45,071,215
============
The tax character of distributions paid during the fiscal years ended
September 30, 2007 and September 30, 2006, was as follows:
2007 2006
----------- -----------
Ordinary income $16,984,433 $5,056,028
Capital Gains 11,280,912 8,845,849
----------- -----------
Total Distributions $28,265,345 $13,901,877
=========== ===========
(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, and previously 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 Fund deposits either cash or securities in an amount
equal to a certain percentage of the contract amount. Subsequent payments
are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security, and are recorded for
financial statement purposes as unrealized 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
19
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 September 30, 2007, the Fund held open financial futures contracts. See
the Schedule of Investments for further details.
(7) Security Lending:
The Fund, and previously the Portfolio, 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, and previously the Portfolio, loaned securities during the year
ended September 30, 2007 and earned interest on the invested collateral of
$8,706,327 of which $8,385,955 was rebated to borrowers or paid in fees. At
September 30, 2007, the Fund had securities valued at $182,538,423 on loan.
See Schedule of Investments for further detail on the security positions on
loan and collateral held.
(8) Line of Credit:
On behalf of the Fund and other funds in the Trust, and previously
portfolios in the portfolio trust, the Trust has access to a credit
facility, which enables each fund to borrow, in the aggregate, up to $35
million under a committed line of credit and up to $15 million under an
uncommitted line of credit. During the year ended September 30, 2007, the
Fund did not have any loans outstanding.
20
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(9) Reorganization:
Prior to September 19, 2007, the Fund had utilized a Master Feeder Fund
structure where the Fund sought to achieve its investment objectives by
investing all of its investable assets in the Boston Company Small Cap
Value Portfolio. Effective after the close of business on September 19,
2007, the Fund withdrew its assets from the Portfolio by means of a
redemption-in-kind and now the Fund invests directly in portfolio
securities.
Below is the Statement of Operations for The Boston Company Small Cap Value
Portfolio for the period October 1, 2006 to September 19, 2007:
Investment Income (Note 1B)
Dividend income from unaffiliated investments $8,958,792
Dividend income from affiliated investments (Note 1F) 2,193,488
Securities lending income (Note 6) 276,543
Interest income 55,893
------------
Total Investment Income 11,484,716
Expenses
Investment advisory fee (Note 2) $ 6,285,687
Accounting, administration and custody (Note 2) 188,462
Trustees' fees (Note 2) 38,332
Insurance expense 13,103
Professional fees 741
Miscellaneous expenses 7,070
-----------
Total expenses 6,533,395
------------
Net investment income 4,951,321
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 58,918,237
Financial futures transactions (131,760)
-----------
Net realized gain (loss) 58,786,477
Change in unrealized appreciation (depreciation) on:
Investments 16,990,957
Financial futures contracts 961,908
-----------
Change in net unrealized appreciation (depreciation) 17,952,865
------------
Net realized and unrealized gain (loss) 76,739,342
------------
Net Increase in Net Assets from Operations $ 81,690,663
============
21
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and Shareholders
of The Boston Company Small Cap Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Boston Company Small Cap Value
Fund (the "Fund") at September 30, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
22
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $500
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc. Portfolio: $4,524
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 25 None Fund: $500
(63) 9/13/1989 Professor of Political Portfolio: $4,524
c/o Harvard University Economy, Harvard
Littauer Center 127 University
Cambridge, MA 02138
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $500
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $4,524
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $500
c/o Essex Street 11/3/1986 Associates (family Portfolio: $5,123
Associates investment trust office)
P.O. Box 5600
Beverly, MA 01915
11/14/43
Interested Trustees*
None*
* Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
23
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)* President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56)** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Trust, and J. David Officer was elected as
President and Chief Executive Officer of the Trust.
**Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
24
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MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6944AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
Small Cap Value Fund II
- --------------------------------------------------------------------------------
July 23, 2007 (commencement of
operations) to September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Management Discussion and Analysis
- --------------------------------------------------------------------------------
Small-cap stocks rallied early in the reporting period amid moderate economic
growth, stable short-term interest rates and rising corporate earnings. At the
time, investors maintained an ample appetite for risk, which benefited shares of
smaller companies more than their larger counterparts. However, the market
environment changed dramatically in mid-June 2007, when credit concerns in the
sub-prime mortgage sector spread to other areas of the financial markets. In the
ensuing market turbulence, newly risk-averse investors engaged in a "flight to
quality," and larger, higher-quality companies returned to favor.
The Federal Reserve Board attempted to improve market liquidity by reducing key
short-term interest rates in August and September. These moves bolstered
investor confidence that a recession could be avoided, sparking a market rally
late in the reporting period.
For the period July 20, 2007 to September 30, 2007, The Boston Company Small Cap
Value Fund II returned -4.40% as compared to the fund's benchmark, the Russell
2500 Value Index, which returned 1.04% over the same period. The fund
participated to a substantial degree in the small-cap market's advance. The fund
achieved particularly strong results among information technology companies,
including electron microscope semiconductors maker FEI Company, which gained
greater penetration of nanotechnology markets, and Microsemi Corp., which
continues to see strong growth in demand for its high performance analog chip. A
number of other semiconductor companies in the fund's portfolio also produced
strong returns during the reporting period. In the communications equipment
industry group, the fund scored successes with consumer networking equipment
manufacturer Netgear and telecommunications and military networking specialist
Comtech Telecommunications.
In the health care sector, home care services provider OptionCare was acquired
by pharmacy chain Walgreen, and medical helicopter services contractor Air
Methods captured a larger share of hospital and municipal markets. The energy
sector led the benchmark's performance during the reporting period, and the fund
participated in its strength through holdings such as oil well drilling
equipment maker Hydrill, which was acquired by energy services company Quanta
Services, and oil and gas operations specialty service provider CARBO Ceramics,
which boosted earnings after adding to manufacturing capacity. Among industrial
companies, engineering and construction firm Infrasource Services benefited from
increased investment in power transmission facilities, and Shaw Group gained
value in an improved global environment for the construction of nuclear power
plants as more nations develop alternatives to fossil fuels. Conversely, some
holdings and industry groups detracted from the fund's performance during the
reporting period. For example, regional electric utility PNM Resources was
unable to pass along higher commodity costs to its customers, and the fund's
underweighted position in the materials sector prevented it from participating
fully in the sector's strength as compared to the benchmark.
Although our "bottom-up" investment process does not consider macroeconomic
trends directly, we are aware that the U.S. economy is in the later stages of
its cycle and some market indices recently have set new record highs. In our
judgment, our relatively cautious, value-oriented approach to security selection
is well positioned for this environment, as it places a high degree of emphasis
on characteristics of individual companies such as solid business fundamentals,
healthy balance sheets and the ability to generate cash consistently. We
recently have found fewer opportunities meeting our criteria among industrial
companies, which have reached fuller valuations, and more in the information
technology, health care and consumer discretionary areas, which have offered
better values after extended periods of underperformance.
Joseph M. Corrado, CFA Edward R. Walter, CFA
Portfolio Manager Portfolio Manager
The Boston Company Asset Management LLC The Boston Company Asset Management LLC
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Comparison of Change in Value of $100,000 Investment in The Boston Company
Small Cap Value Fund II and the Russell 2500 Value Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
TBC Russell 2500
PERIOD Small Cap Value Fund II Value Index *
7/20/07 100,000 100,000
7/31/07 93,100 92,640
8/31/07 94,100 93,112
9/30/07 95,600 94,080
Aggregate Total Return
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
7/20/2007
- --------------------------------------------------------------------------------
Fund (4.40%)
* Source: Lipper Inc.
Aggregate total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
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 July 23, 2007 (commencement of operations)
to September 30, 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
During Period+
July 23, 2007
Beginning Ending (commencement of
Account Value Account Value operations)
July 23, 2007 September 30, 2007 to September 30, 2007
- --------------------------------------------------------------------------------------------
Actual $1,000.00 $ 991.66 $1.91
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.05 $5.06
- --------
+ The Actual expense calculation is equal to the Fund's annualized expense
ratio of 1.00%, multiplied by the average account value over the period,
multiplied by 70/365 (to reflect the number of days from commencement of
operations to September 30, 2007). The Hypothetical expense calculation is equal
to the Fund's annualized expense ratio of 1.00%, multiplied by the average
account value over the period, multiplied by 183/365.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Portfolio Information as of September 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Investments
- -----------------------------------------------------------------------------------------------
Invitrogen Corp. Health Care 2.3%
Shaw Group, Inc. Industrials 2.0
Ralcorp Holdings, Inc. Consumer Staples 1.9
Longs Drug Stores Corp. Consumer Staples 1.8
Pediatrix Medical Group, Inc. Health Care 1.7
FMC Corp. Materials 1.7
Charles River Laboratories International, Inc. Health Care 1.7
BJ'S Wholesale Club, Inc. Consumer Staples 1.4
Universal Health Services, Inc., Class B Health Care 1.4
Penn Virginia Corp. Energy 1.3
----
17.2%
*Excludes short-term securities and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------
Consumer Discretionary 15.0%
Consumer Staples 6.0
Energy 5.1
Financials 20.4
Health Care 12.1
Industrials 12.9
Materials 4.2
Technology 17.5
Telecomunication Services 1.0
Utilities 5.5
Short-term and Other Assets 0.3
-----
100.0%
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--104.6%
Equities--99.7%
Consumer Discretionary--15.0%
AnnTaylor Stores Corp. 1,700(a) 53,839
Foot Locker, Inc. 3,270 50,129
Gentex Corp. 3,030 64,963
Jones Apparel Group, Inc. 600 12,678
Jos. A. Bank Clothiers, Inc. 1,310(a) 43,780
Live Nation, Inc. 2,570(a) 54,613
M.D.C. Holdings, Inc. 1,390 56,907
Meredith Corp. 1,100 63,030
New York Times Co., Class A 2,820(b) 55,723
OfficeMax, Inc. 1,770 60,658
Regis Corp. 1,550 49,461
Scholastic Corp. 1,740(a) 60,656
Tenneco, Inc. 1,750(a) 54,268
Timberland Co., Class A 1,480(a) 28,061
Williams-Sonoma, Inc. 2,130(b) 69,481
Zale Corp. 2,320(a,b) 53,685
831,932
Consumer Staples--6.0%
BJ'S Wholesale Club, Inc. 2,330(a) 77,263
J.M. Smucker Co. 1,000 53,420
Longs Drug Stores Corp. 1,990 98,843
Ralcorp Holdings, Inc. 1,870(a) 104,383
333,909
Energy--5.1%
Cabot Oil and Gas Corp. 970 34,105
CARBO Ceramics, Inc. 1,280 64,934
Oil States International, Inc. 950(a) 45,885
Penn Virginia Corp. 1,700 74,766
Unit Corp. 1,320(a) 63,888
283,578
Financials--20.4%
Alexandria Real Estate Equities, Inc.--REIT 480 46,205
American Financial Realty Trust--REIT 3,850 30,992
Aspen Insurance Holdings Ltd. 1,450 40,469
Assured Guaranty Ltd. 1,700 46,189
City National Corp. 940 65,339
Conseco, Inc. 4,150(a) 66,400
Cullen/Frost Bankers, Inc. 1,330 66,660
First Horizon National Corp. 1,000 26,660
Firstmerit Corp. 1,950 38,532
Fulton Financial Corp. 4,720 67,874
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
Financials (continued)
Hanover Insurance Group, Inc. 940 41,539
Health Care, Inc.--REIT 1,290 57,070
Jones Lang Lasalle, Inc. 290(b) 29,800
Lasalle Hotel Properties--REIT 700 29,456
Lexington Realty Trust--REIT 1,940 38,819
Philadelphia Consolidated Holding Corp. 1,400(a) 57,876
Piper Jaffray Cos. 920(a) 49,312
Protective Life Corp. 1,170 49,655
Raymond James Financial, Inc. 1,500 49,275
Redwood Trust, Inc.--REIT 1,380(b) 45,844
Security Capital Assurance Ltd. 2,010 45,908
Strategic Hotels and Resorts, Inc.--REIT 1,610 33,150
Washington Federal, Inc. 2,010 52,783
Wilmington Trust Corp. 1,340 52,126
1,127,933
Health Care--12.1%
Charles River Laboratories International, Inc. 1,660(a) 93,209
Endo Pharmaceuticals Holdings, Inc. 850(a) 26,358
Healthsouth Corp. 1,230(a) 21,537
Invitrogen Corp. 1,580(a) 129,133
Lifepoint Hospitals, Inc. 1,600(a) 48,016
Magellan Health Services, Inc. 1,080(a) 43,826
MDS, Inc. 2,250 48,488
Medicines Co. 1,400(a) 24,934
Pediatrix Medical Group, Inc. 1,470(a) 96,167
PerkinElmer, Inc. 2,240 65,430
Universal Health Services, Inc., Class B 1,380 75,100
672,198
Industrials--12.9%
Alliant Techsystems, Inc. 500(a) 54,650
Brink's Co. 1,000 55,880
Clean Harbors, Inc. 960(a) 42,739
Corrections Corp. of America 2,160(a) 56,527
Curtiss-Wright Corp. 900 42,750
Esterline Technologies Corp. 810(a) 46,211
Granite Construction, Inc. 690 36,584
IKON Office Solutions, Inc. 4,100 52,685
MSC Industrial Direct Co. Inc., Class A 1,030 52,108
Shaw Group, Inc. 1,900(a) 110,390
Steelcase, Inc., Class A 3,460 62,211
Thomas & Betts Corp. 640(a) 37,530
Waste Connections, Inc. 2,160(a) 68,602
718,867
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
Materials--4.2%
Cytec Industries, Inc. 760 51,976
FMC Corp. 1,800 93,636
International Flavors and Fragrances, Inc. 520(b) 27,487
Reliance Steel & Aluminum Co. 1,100 62,194
235,293
Technology--17.5%
Aspen Technology, Inc. 1,000(a) 14,320
Avid Technology, Inc. 1,310(a) 35,475
Brocade Communications Systems, Inc. 5,600(a) 47,936
Comtech Telecommunications Corp. 670(a) 35,838
CSG Systems International, Inc. 1,900(a) 40,375
Cymer, Inc. 590(a) 22,650
Electronics for Imaging, Inc. 2,080(a) 55,869
Emulex Corp. 2,720(a) 52,142
Fair Issac Corp. 1,240 44,776
FEI Co. 500(a) 15,715
Foundry Networks, Inc. 2,180(a) 38,739
Hewitt Associates, Inc., Class A 1,260(a) 44,163
Ingram Micro, Inc., Class A 2,950(a) 57,850
Integrated Device Technology, Inc. 3,190(a) 49,381
Microsemi Corp. 2,260(a) 63,009
MKS Instruments, Inc. 1,100(a) 20,922
Net Gear, Inc. 1,500(a) 45,630
Parametric Technology Corp. 2,220(a) 38,672
Perot Systems Corp., Class A 1,390(a) 23,505
Powerwave Technologies, Inc. 6,350(a) 39,116
Semtech Corp. 1,950(a) 39,936
SRA International, Inc., Class A 1,770(a) 49,702
Sybase, Inc. 2,330(a) 53,893
Teradyne, Inc. 3,340(a) 46,092
975,706
Telecommunication Services--1.0%
Cincinnati Bell, Inc. 10,700(a) 52,858
Utilities--5.5%
AGL Resources, Inc. 1,590 62,996
Atmos Energy Corp. 1,840 52,109
Black Hills Corp. 1,030 42,251
Hawaiian Electric Industries, Inc. 1,740 37,775
The accompanying notes are an integral part of the financial statements.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------
Utilities (continued)
PNM Resources, Inc. 2,430 56,570
Portland General Electric Co. 990 27,522
UGI Corp. 1,130 29,357
308,580
Total Equities (Cost $5,731,841) 5,540,854
INVESTMENT OF CASH COLLATERAL--4.9%
BlackRock Cash Strategies L.L.C. (Cost $274,750) 274,750 274,750
TOTAL UNAFFILIATED INVESTMENTS (Cost $6,006,591) 5,815,604
AFFILIATED INVESTMENTS--2.8%
Dreyfus Institutional Preferred Plus Money Market Fund
(Cost $153,621) 153,621(c) 153,621
---------
TOTAL INVESTMENTS--107.4% (Cost $6,160,212) 5,969,225
LIABILITIES IN EXCESS OF OTHER ASSETS--(7.4%) (409,014)
---------
NET ASSETS--100% 5,560,211
=========
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 September 30, 2007.
(c) Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Statement of Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $263,508 (Note 6)):
Unaffiliated investments (cost $6,006,591) $5,815,604
Affiliated investments (Note 1F) (cost $153,621) 153,621
Cash 40
Receivable for investments sold 62,212
Interest and dividends receivable 6,186
Prepaid expenses 10,915
----------
Total assets 6,048,578
Liabilities
Collateral for securities on loan (Note 6) $ 274,750
Payable for investments purchased 162,106
Accrued professional fees 32,787
Accrued accounting, custody, administration and transfer agent fees (Note 2) 12,267
Accrued investment advisory fee 1,951
Accrued trustees' fees (Note 2) 1,100
Accrued chief compliance officer fee (Note 2) 364
Accrued shareholder reporting fee (Note 2) 97
Other accrued expenses and liabilities 2,945
---------
Total liabilities 488,367
----------
Net Assets $5,560,211
==========
Net Assets consist of:
Paid-in capital $5,816,968
Accumulated net realized loss (70,697)
Undistributed net investment income 4,927
Net unrealized depreciation (190,987)
----------
Total Net Assets $5,560,211
==========
Shares of beneficial interest outstanding 290,848
==========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 19.12
==========
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Statement of Operations
For the Period July 23, 2007 (commencement of operations) to September 30, 2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments $ 13,613
Dividend income from affiliated investments (Note 1F) 2,262
Securities lending income (Note 6) 709
---------
Total investment income 16,584
Expenses
Investment advisory fee (Note 2) $ 7,841
Professional fees 35,945
Accounting, custody, administration and transfer agent fees (Note 2) 12,267
Registration fees 8,076
Trustees' fees and expenses (Note 2) 1,125
Miscellaneous expenses 6,330
--------
Total expenses 71,584
Deduct:
Waiver of investment advisory fee (Note 2) (7,841)
Reimbursement of Fund operating expenses (Note 2) (53,288)
--------
Total expense deduction (61,129)
--------
Net Expenses 10,455
---------
Net investment income 6,129
---------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (71,899)
Change in unrealized appreciation (depreciation) on:
Investments (190,987)
---------
Net realized and unrealized gain (loss) on investments (262,886)
---------
Net Decrease in Net Assets from Operations $(256,757)
=========
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
July 23, 2007
(commencement of
operations) to
September 30, 2007
------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 6,129
Net realized gain (loss) (71,899)
Change in net unrealized appreciation (depreciation) (190,987)
----------
Net increase (decrease) in net assets from investment operations (256,757)
----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 5,816,968
----------
Total Increase in Net Assets 5,560,211
Net Assets
At beginning of period --
----------
At end of period (including undistributed net investment income of $4,927) $5,560,211
==========
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Financial Highlights
- --------------------------------------------------------------------------------
For the period
July 23, 2007
(commencement of
operations) to
September 30, 2007
------------------
Net Asset Value, Beginning of Period $ 20.00
From Operations:
Net investment income * (a) 0.02
Net realized and unrealized gains (loss) on investments (0.90)
---------
Total from operations (0.88)
---------
Net Asset Value, End of Period $ 19.12
=========
Total Return (b) (4.40)%(d)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.00%(c)
Net Investment Income (to average daily net assets)* 0.59%(c)
Portfolio Turnover 18%(d)
Net Assets, End of Period (000's omitted) $ 5,560
- --------
* For the period indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
excluding waivers and reimbursements would have been:
Net investment (loss) per share (a) $ (0.19)
Ratios (to average daily net assets):
Expenses 6.85%(c)
Net investment income loss (5.27)%(c)
(a) Calculated based on average shares outstanding.
(b) Total return would have been lower in the absence of expense waivers.
(c) Computed on an annualized basis.
(d) Not annualized. Returns for periods of less than one year have not been annualized.
13
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 Value Fund II (the "Fund"), which commenced operation
on July 23, 2007, 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
U.S. companies. The Fu-nd focuses on companies with total market
capitalizations within the range of companies included in the Russell 2500
Value Index. The Fund intends to maintain an average weighted market
capitalization that approximates that of the Russell 2500 Value 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 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, or if such quotations do not accurately reflect
fair value, 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. 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 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.
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 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 be distributed in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
14
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Notes to Financial Statements
- -------------------------------------------------------------------------------
D. Expenses
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated among 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 The Bank of
New York Mellon Corporation ("BNY Mellon"), or its affiliates.
G. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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
1.00% of the Fund's average daily net assets for the period July 23, 2007
(commencement of operations) to September 30, 2007. For the period July 23,
2007 (commencement of operations) to September 30, 2007, TBCAM voluntarily
waived its investment advisory fee in the amount of $7,841 and reimbursed
the Fund for $53,288 of its operating expenses. This arrangement is
voluntary and temporary and may be discontinued or revised by TBCAM at any
time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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
$1,355, for the period July 23, 2007 (commencement of operations) to
September 30, 2007. The Trust entered into an agreement with Mellon Bank,
N.A. ("Mellon Bank"), a wholly-owned subsidiary of BNY Mellon 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 $10,912 for the
period July 23, 2007 (commencement of operations) to September 30, 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, the Fund was charged $303 for the
period July 23, 2007 (commencement of operations) to September 30, 2007.
See Note 6 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and (ii)
up to $15 million from an uncommitted line of credit. Interest is charged
to each participating fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. The participating funds also
pay an annual fee, computed at a rate of 0.020 of 1% of the committed and
uncommitted amounts and allocated ratably to the participating funds. 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 at the
end of each quarter. Pursuant to these agreements, the Fund was charged $20
for the period July 23, 2007 (commencement of operations) to September 30,
2007, which amount is included in miscellaneous expenses on the statement
of operations. See Note 7 for further details.
15
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the period July 23,
2007 (commencement of operations) to September 30, 2007, the Fund was
charged $1,091, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing and
fulfillment services for the Fund. Pursuant to this agreement, the Fund was
charged $97, which amount is included in miscellaneous expenses in the
statement of operations, for the period July 23, 2007 (commencement of
operations) to September 30, 2007.
The Fund may pay 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
period July 23, 2007 (commencement of operations) to September 30, 2007,
the Fund was not charged an administrative service fee by an affiliate of
BNY Mellon.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor. Effective July
1, 2007, Mellon Financial Corporation ("MFC") and The Bank of New York
Company, Inc. ("BNY") each merged into BNY Mellon, with BNY Mellon being
the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period July 23, 2007 (commencement of operations) to
September 30, 2007 were as follows:
Purchases Sales
----------- ----------
Non-U.S. Government Securities $ 6,797,232 $ 993,492
----------- ----------
(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 23, 2007
(commencement of
operations) to
September 30, 2007
------------------
Shares sold 290,848
-------
Net increase (decrease) 290,848
=======
At September 30, 2007, three shareholders of record held in the aggregate
94% of the total outstanding shares of the Fund. Investment activities of
these shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
30 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading in the Fund. The
fee does not apply to shares that were acquired through reinvestment of
distributions. For the period July 23, 2007 (commencement of operations) to
September 30, 2007, the Fund did not assess any redemption fees.
16
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Notes to Financial Statements
- -------------------------------------------------------------------------------
(5) Federal Taxes:
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.
In July 2006, FASB 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 implication of FIN 48 and its impact on
the financial statements has not yet been determined.
The tax basis components of distributable earnings and the federal tax cost
as of September 30, 2007 were as follows:
Cost for federal income tax purposes $ 6,160,390
==============
Gross unrealized appreciation $ 167,556
Gross unrealized depreciation (358,721)
-------------
Net unrealized appreciation (depreciation) $ (191,165)
==============
Undistributed ordinary income $ 4,581
Undistributed capital gains --
--------------
Total distributable earnings $ 4,581
==============
The Fund elected to defer to its fiscal year ending September 30, 2008,
$70,173 of capital losses recognized during the period July 23, 2007 to
September 30, 2007.
(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 for the period July 23, 2007
(commencement of operations) to September 30, 2007 and earned interest on
the invested collateral of $1,729 of which $1,020 was rebated to borrowers
or paid in fees. At September 30, 2007, the Fund had securities valued at
$263,508 on loan. See Schedule of Investments for further detail on the
security positions on loan and collateral held.
(7) Line of Credit:
On behalf of the Fund, and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the aggregate,
up to $35 million under a committed line of credit and up to $15 million
under an uncommitted line of credit.For the period July 23, 2007
(commencement of operations) to September 30, 2007, the Fund had average
borrowings outstanding of $4,000 for a total of one day and incurred $0 of
interest expense. At September 30, 2007, the Fund did not have a loan
balance outstanding.
17
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund II
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company Small Cap Value Fund II:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of The
Boston Company Small Cap Value Fund II (the "Fund") at September 30, 2007,
and the results of its operations, the changes in its net assets and the
financial highlights for the period from July 23, 2007 (commencement of
operations) through September 30, 2007, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these financial statements in
accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
18
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $0
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $0
c/o Harvard University 9/13/1989 Professor of Political
Littauer Center 127 Economy, Harvard
Cambridge, MA 02138 University
8/5/44
John H. Hewitt (72) Trustee Trustee since Trustee, Mertens 25 None Fund: $0
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $0
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 *
None*
*Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief
Executive Officer and Secretary of the Trust, and J. David Officer was
elected as President and Chief Executive Officer of the Trust.
** Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
20
THIS PAGE INTENTIONALLY LEFT BLANK
MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6943AR0907
MELLON INSTITUTIONAL FUNDS
Annual Report The Boston Company
Emerging Markets Core Equity Fund
- --------------------------------------------------------------------------------
Year ended September 30, 2007
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
September 2007
Dear Mellon Institutional Fund Shareholder:
Enclosed you will find your Fund's annual report for the fiscal year ended
September 30, 2007.
The financial markets experienced a major bout of volatility in the summer
stemming from two principal sources: troubles in the credit markets related to
the difficulties experienced by mortgage securities backed by sub-prime loans,
and the high degree of leverage employed by many hedge funds, whose impact on
the markets has swollen significantly over the past decade. From its peak of
over 1550 in mid-July, the S&P 500 dropped by about 6.5%, before rebounding to
close the quarter at just under its peak for the 12-month period, resulting in
an 11.8% return over that period. Part of the rebound was due to the September
18 decision by the U.S. Federal Reserve Board to cut the Federal Funds rate by
50 basis points to 4.75%. This ended a string of nine consecutive meetings in
which the Fed left rates unchanged. The reduction was 25 basis points greater
than anticipated, driven by the Fed's concerns over the housing recession and
tighter credit availability.
Credit markets responded to the sub-prime troubles with a broad-based flight to
quality as investors fled to short-term Treasury securities. One result was a
significant steepening of the yield curve, as the yield on the 2-year Treasury
note fell 86 basis points to 3.98%, while the 30-year Treasury bond yield
dropped just 25 basis points to 4.84%. In a dramatic re-pricing of risk, spreads
widened in the corporate bond sector compared to Treasury issues, which has the
effect of making corporate borrowing more expensive. In another indication of
just how disruptive this period was in the credit markets, even some issuers of
commercial paper - typically viewed as the safest segment of the corporate
market - had trouble issuing or rolling over their issues.
While liquidity has slowly returned to the bond markets in general, the mortgage
sector clearly has been shaken, and this will likely exacerbate the housing
recession as financing becomes more expensive. In the view of some, the
likelihood of a broader U.S. recession has become greater. Our view is that a
period of diminished growth - around 2% GDP growth in 2008 vs. the 2.5%
long-term trend - is more likely. We see U.S. exports boosted by the weaker
dollar, multi-year global economic expansion and monetary growth, and high
corporate profitability - especially for multinational franchises - as being
positives that partially offset the drag of the housing sector and lower
consumption.
We wish to thank you for your business and confidence in Mellon Institutional
Funds. Please feel free to contact us with questions or comments.
Sincerely,
Barbara McCann
President
1
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Management Discussion and Analysis
- --------------------------------------------------------------------------------
For the year ended September 30, 2007, The Boston Company Emerging Markets Core
Equity Fund had a total return of 63.3% and outperformed its benchmark, the MSCI
Emerging Market Index, which returned 58.6%. During this period, emerging stocks
continued to post strong returns, outperforming their developed market peers.
Returns for the Index have been, in part, driven by China which surged over 130%
during the period. Peru (+132.3%), Brazil (+98.1%), Turkey (+86.3%), and Hungary
(+64.3%) rounded out the top five. Jordan was the only negatively performing
country in the Index and fell -8.8%. South Korea, the second largest weighted
country in the Index after China, (15.5%), returned a robust 45.7%.
The portfolio's positive return relative to its benchmark index was driven by
strong stock selection in South Korea, Russia and Malaysia. South Korean Hyundai
Heavy (+240.6%), Norilsk Nickel Mining of Russia (+118.5%), and Malaysian RHB
Capital (+133.6%) were the biggest contributors within those countries.
Conversely, we had weak stock selection in India as we trailed the benchmark's
return by 25.8%.
The Fund experienced positive stock selection in 9 of the 10 sectors. Materials
was the top performing sector as the Fund outpaced the Index return by 25.0% as
CVRD (+130.6) and Asia Cement (+168.7%) drove returns in this sector. Strong
stock selection in the Telecommunication Services and Consumer Staples sectors
also added 202 and 137 basis points respectively. On the other hand, we had weak
stock selection in the Health Care sector as the Fund's return of 21.6% trailed
the Index's return of 25.5%.
Emerging markets have had a remarkable run and given the projected growth of the
region, the outlook for the asset class is still positive. Financial volatility
ignited by the U.S. sub- prime mortgage fallout could extend further into the
end of this year. The extent to which tighter credit, rising loan delinquencies
and a chronically weak housing market hit overall U.S. consumption remains to be
seen. Although emerging markets remain financially sound and less dependant on
global demand than in previous economic cycles, a major decline in U.S. GDP
growth could hamper the robust expansion taking place in developing countries.
As always, we remain disciplined in our investment philosophy as we believe the
best opportunity is through stock selection. We will continue to use both
quantitative and fundamental techniques to buy stocks that we consider to
combine improving business momentum and attractive valuations.
William S. Patzer, CFA
Portfolio Manager
The Boston Company Asset Management, LLC
2
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Comparison of Change in Value of $100,000 Investment in
The Boston Company Emerging Markets Core Equity Fund and
the Morgan Stanley Capital International Emerging Markets Index (Unaudited)
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS A REPRESENTATION OF A LINE CHART IN THE PRINTED MATERIAL]
TBC Morgan Stanley
Emerging Markets Capital International
PERIOD Core Equity Fund Emerging Markets Index *
7/10/06 100,000 100,000
9/30/06 102,750 103,719
12/31/06 122,054 122,010
3/31/07 126,027 124,873
6/30/07 147,150 143,667
9/30/07 167,739 164,528
Average Annual Total Returns
(for period ended 9/30/2007)
- --------------------------------------------------------------------------------
Since
Inception
1 Year 7/10/06
- --------------------------------------------------------------------------------
Fund 63.25% 52.84%
* Source: Lipper Inc.
Average annual total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains. The
$100,000 line graph and the fund's returns do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. During periods of reimbursement by the fund's investment adviser (if
applicable), the fund's total return will be greater than it would be had the
reimbursement not occurred. Past performance is not predictive of future
performance.
3
Mellon Institutional Funds Investment Trust
The Boston Company 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 (April 1, 2007 to September 30, 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 April 1, 2007
April 1, 2007 September 30, 2007 to September 30, 2007
- -------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,331.00 $8.47
Hypothetical (5% return
per year before expenses) $1,000.00 $1,017.80 $7.33
- ----------
+ Expenses are equal to the Fund's annualized expense ratio of 1.45%,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
4
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Portfolio Information as of September 30, 2007 (Unaudited)
- -------------------------------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -------------------------------------------------------------------------------------------------------
Companhia Vale do Rio Doce Preferred A Brazil Materials 3.5%
Ishares MSCI Emerging Markets Index N/A N/A 2.8
JSC MMC Norilsk Nickel ADR Russia Materials 2.6
Asia Cement Corp. Taiwan Materials 2.6
China Mobile Ltd. Hong Kong Telecommunication 2.6
Oao Gazprom ADR Russia Energy 2.4
Ping An Insurance Group Co. China Financials 2.2
China Petroleum & Chemical Corp. China Energy 2.1
Usinas Siderurgicas de
Minas Gerais SA Preferred Brazil Materials 2.0
Hyundai Heavy Industries South Korea Industrials 2.0
----
24.8%
* Excludes short-term securities and investment of cash collateral.
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------------------------
Europe ex U.K. 12.0%
Asia ex Japan 59.0
Americas ex U.S. 18.0
Middle East/Africa 11.0
-----
100.0%
* Excludes short-term securities and cash collateral investments.
The Fund is actively managed. Current holdings may be different than those
presented above.
5
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--September 30, 2007
- ------------------------------------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS-- 100.0%
Equities--95.3%
Brazil--12.7%
Banco DO Brasil SA 14,300 $241,117
Brasil Telecom SA Preferred 18,400 173,755
Companhia de Bebidas das Americas ADR 1,600 117,008
Companhia Paranaense de Energia-Copel Preferred 10,300 164,733
Companhia Vale do Rio Doce Preferred A 16,600 472,991
Perdigao SA 3,900 85,132
Petroleo Brasileiro SA Preferred 2,200 71,092
Sadia SA Preferred 12,400 68,904
Uniao de Bancos Brasileiros SA 5,200 68,945
Usinas Siderurgicas de Minas Gerais SA Preferred 3,800 265,502
1,729,179
Chile--0.5%
Lan Airlines SA ADR 4,500 72,225
China--7.4%
Bank of China Ltd. 211,000 112,947
China Petroleum & Chemical Corp. 228,000 284,875
Huaneng Power International, Inc. 54,000 74,627
Ping An Insurance Group Co. 21,000 290,758
Shanda Interactive Entertainment Ltd, ADR 2,800 (a,b) 104,188
Yanzhou Coal Mining Co., Ltd. 69,000 142,059
1,009,454
Czech Republic--0.5%
CEZ 1,073 66,053
Egypt--0.9%
Commercial International Bank 4,808 65,942
Telecom Egypt 19,147 58,299
124,241
Hong Kong--7.8%
China Mobile Ltd. 21,000 343,992
China Shipping Container Lines Co., Ltd. 159,650 123,876
Datang International Power Generation Co., Ltd. 82,000 94,225
Harbin Power Equipment Co., Ltd. 36,000 90,239
Industrial and Commercial Bank of China 259,000 181,634
Shenzhen Investment Ltd. 161,000 143,776
Weiqiao Textile Co., Ltd. 48,000 90,177
1,067,919
Hungary--0.8%
MOL Hungarian Oil and Gas Nyrt 646 104,745
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Schedule of Investments--September 30, 2007
- ------------------------------------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------
India--5.1%
Bharat Petroleum Corp., Ltd. 10,488 93,208
Bharti Airtel Ltd. 2,722 (a) 62,534
Grasim Industries Ltd. 2,616 223,097
Hindustan Petroleum Corp., Ltd. 11,460 76,798
Larsen & Toubro Ltd. 1,400 97,745
Oil and Natural Gas Corp., Ltd. 3,443 81,856
Rolta India Ltd. 4,700 (a) 67,094
702,332
Indonesia--1.5%
PT Astra Agro Lestari Tbk 51,000 93,742
PT Bank Pan Indonesia Tbk 728,000 (a) 55,755
PT Gudang Garam Tbk 59,000 60,678
210,175
Israel--2.6%
Bank of Hapoalim BM 23,120 118,077
Check Point Software Technologies Ltd. 2,500 (a) 62,950
Teva Pharmaceutical ADR 4,000 177,880
358,907
Malaysia--2.7%
Bumiputra-Commerce Holdings BHD 30,000 94,273
Digi.com BHD 23,700 149,648
RHB Capital BHD 69,100 121,762
365,683
Mexico--3.9%
Alfa SA de CV 21,100 142,815
America Movil SA ADR 2,630 168,320
Fomento Economico Mexicano ADR 3,900 145,860
Grupo Aeroportuario del Sureste 16,200 80,430
537,425
Poland--1.9%
BRE Bank SA 895 (a) 173,073
Polskie Gornictwo Naftowe I Gazownictwo SA 43,200 82,231
255,304
Russia--8.3%
JSC MMC Norilsk Nickel ADR 1,300 353,600
Lukoil ADR 2,600 216,060
Mechel ADR 1,800 91,800
Mobile TeleSystems ADR 2,150 149,017
Oao Gazprom ADR 7,300 321,930
1,132,407
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--September 30, 2007
- ------------------------------------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------
South Africa--7.0%
ABSA Group Ltd. 3,728 67,930
Investec Ltd. 7,671 82,737
Metropolitan Holdings Ltd. 35,218 78,034
Mittal Steel South Africa Ltd. 9,406 187,914
Murray & Roberts Holdings Ltd. 9,500 (b) 124,442
Remgro Ltd. 3,992 101,837
Telkom SA Ltd. 5,968 150,940
Tiger Brands Ltd. 2,700 71,574
Truworths International Ltd. 20,297 93,526
958,934
South Korea--15.9%
GS Engineering and Construction Corp. 435 75,598
Honam Petrochemical Corp. 764 126,095
Hyundai Department Store Co., Ltd. 813 97,748
Hyundai Heavy Industries 570 263,537
Industrial Bank of Korea 4,880 105,345
Jusung Engineering Co., Ltd. 3,680 (a) 108,200
Korea Electric Power Corp. 1,130 52,986
KT&G Corp. 964 75,337
LG Chem Ltd. 700 73,451
LG Electronics, Inc. 1,645 153,730
LG Philips LCD Co., Ltd. 2,430 (a) 116,334
POSCO 275 202,290
Samsung Electronics Co., Ltd. 317 199,229
Shinhan Financial Group Co., Ltd. 2,628 171,772
SK Energy Co., Ltd. 1,003 (a) 175,407
SK Holdings Co., Ltd. 410 87,387
Woori Finance Holdings Co., Ltd. 3,750 85,665
2,170,111
Taiwan--11.4%
Asia Cement Corp. 199,411 347,732
Asustek Computer, Inc. 32,000 97,383
Chi Mei Optoelectronics Corp. 98,400 114,292
Compal Electronics, Inc. 82,410 93,194
D-Link Corp. 24,760 61,464
First Financial Holding Co., Ltd. 97,920 70,071
Hung Poo Real Estate Development Corp. 76,760 75,984
MediaTek, Inc. 11,550 208,134
Powertech Technology, Inc. 14,400 58,033
Siliconware Precision Industries Co. 53,000 119,384
Taiwan Semiconductor Manufacturing Co., Ltd. ADR 6,833 69,150
Tong Yang Industry Co., Ltd. 55,770 64,435
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
Schedule of Investments--September 30, 2007
- ------------------------------------------------------------------------------------------------------------
Value ($)
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------
Taiwan (continued)
Wistron Corp. 62,757 113,474
Yuanta Financial Holding Co., Ltd. 114,200 (a) 69,997
1,562,727
Thailand--1.5%
Electricity Generating Public Co., Ltd. 12,200 43,426
Thai Airways International Public Company Ltd. 62,700 81,769
Thai Oil Public Co., Ltd. 28,200 76,264
201,459
Turkey--2.9%
Anadolu Efes Biracilik ve Malt Sanayii AS 6,040 63,131
Selcuk Ecza Deposu Ticaret ve Sanayi AS 30,300 (a) 67,361
Tupras-Turkiye Petrol Rafine AS 3,993 105,994
Turkcell Iletisim Hizmetleri AS 18,960 160,425
396,911
TOTAL EQUITIES (Cost $9,371,524) 13,026,191
EXCHANGE TRADED FUNDS--2.7%
Ishares MSCI Emerging Markets Index 2,520 (a,c) 376,614
Total Exchange Traded Funds (Cost $324,152)
INVESTMENT OF CASH COLLATERAL--2.0%
BlackRock Cash Strategies L.L.C. (Cost $271,348) 271,348 271,348
TOTAL UNAFFILIATED INVESTMENTS (Cost $9,967,024) 13,674,153
AFFILIATED INVESTMENTS --1.5%
Dreyfus Institutional Preferred Plus Money Market Fund (Cost $206,450) 206,450 (d) 206,450
----------
TOTAL INVESTMENTS--101.5% (Cost $10,173,474) 13,880,603
LIABILITIES IN EXCESS OF OTHER ASSETS--(1.5%) (209,649)
----------
NET ASSETS--100% 13,670,954
==========
Notes to Schedule of Investments:
ADR--American Depository Receipts
(a) Non-income producing security.
(b) Purchased on a delayed delivery basis.
(c) Security, or a portion of thereof, was on loan at
September 30, 2007.
(d) Affiliated institutional money market fund.
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
Schedule of Investments--September 30, 2007
- --------------------------------------------------------------------------------
At September 30, 2007 the Fund held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Value Date September 30, 2007 to Deliver Appreciation
- -------------------------------------------------------------------------------------------------------------------------------
South African Rand 201,411 10/2/2007 $29,360 $29,236 $ 124
-----
Percentage of
Economic Sector Allocation Net Assets
- -----------------------------------------------------------
Consumer Discretionary 3.7%
Consumer Staples 5.7
Energy 14.0
Financials 18.9
Health Care 1.8
Industrials 8.4
Information Technology 11.6
Materials 17.2
Telecommunication Services 10.4
Utilities 3.6
Exchange Traded Funds 2.7
Short-term and Other Assets 2.0
-----
100.0%
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 Assets and Liabilities
September 30, 2007
- --------------------------------------------------------------------------------
Assets
Investments in securities, at value (Note 1A) (including securities on loan,
valued at $277,977 (Note 7)):
Unaffiliated investments (cost $9,967,024) $13,674,153
Affiliated investments (Note 1H) (cost $206,450) 206,450
Cash 906
Foreign currency, at value (cost $104,157) 106,263
Receivable for investments sold 58,413
Interest and dividends receivable 18,946
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 124
Prepaid expenses 7,542
-----------
Total assets 14,072,797
Liabilities
Collateral for securities on loan (Note 7) $ 271,348
Payable for investments purchased 62,759
Accrued professional fees 39,330
Accrued accounting, custody, administration and transfer agent fees (Note 2) 23,865
Accrued trustees' fees (Note 2) 1,218
Accrued chief compliance officer fee (Note 2) 367
Accrued shareholder reporting fee (Note 2) 146
Other accrued expenses and liabilities 2,810
---------
Total liabilities 401,843
-----------
Net Assets $13,670,954
===========
Net Assets consist of:
Paid-in capital $9,033,732
Accumulated net realized gain 859,175
Undistributed net investment income 67,966
Net unrealized appreciation 3,710,081
-----------
Total Net Assets $13,670,954
===========
Shares of beneficial interest outstanding 411,253
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 33.24
===========
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
Statement of Operations
For the Year Ended September 30,2007
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income from unaffiliated investments
(net of foreign withholding taxes $29,269) $ 224,023
Dividend income from affiliated investments (Note 1H) 7,416
Securities lending income (Note 7) 5,334
----------
Total investment income 236,773
Expenses
Investment advisory fee (Note 2) $ 99,997
Accounting, custody, administration and transfer agent fees (Note 2) 102,558
Professional fees 37,578
Registration fees 25,414
Trustees' fees and expenses (Note 2) 2,875
Miscellaneous expenses 21,765
----------
Total expenses 290,187
Deduct:
Waiver of investment advisory fee (Note 2) (99,997)
Reimbursement of Fund operating expenses (Note 2) (58,342)
----------
Total expense deduction (158,339)
----------
Net Expenses 131,848
----------
Net investment income 104,925
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 914,516
Foreign currency transactions and forward foreign currency exchange transactions 6,174
----------
Net realized gain (loss) 920,690
Change in unrealized appreciation (depreciation) on:
Investments 3,538,096
Foreign currency translations 2,995
----------
Change in net unrealized appreciation (depreciation) 3,541,091
----------
Net realized and unrealized gain (loss) on investments 4,461,781
----------
Net Increase in Net Assets from Operations $4,566,706
==========
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
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
July 10, 2006
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------ ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 104,925 $ 15,955
Net realized gain (loss) 920,690 (35,973)
Change in net unrealized appreciation (depreciation) 3,541,091 168,990
----------- ----------
Net increase (decrease) in net assets from investment operations 4,566,706 148,972
----------- ----------
Distributions to Shareholders (Note 1C)
From net investment income (78,456) --
----------- ----------
Total distributions to shareholders (78,456) --
----------- ----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 3,722,363 5,544,154
Value of shares issued to shareholders in reinvestment of distributions 73,536 --
Cost of shares redeemed (306,321) --
----------- ----------
Net increase (decrease) in net assets from Fund share transactions 3,489,578 5,544,154
----------- ----------
Total Increase (Decrease) in Net Assets 7,977,828 5,693,126
Net Assets
At beginning of year 5,693,126 --
----------- ----------
At end of year (including net investment income of $67,966 and $35,323, $13,670,954 $5,693,126
respectively) =========== ==========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the period
July 10, 2006
For the (commencement of
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------ ------------------
Net Asset Value, Beginning of Year $20.55 $20.00
------ ------
From Operations:
Net investment income (loss) (a) 0.31 0.06
Net realized and unrealized gains (loss) on investments 12.62 0.49
------ ------
Total from operations 12.93 0.55
------ ------
Less Distributions to Shareholders:
From net investment income (0.24) --
------ ------
Total distributions to shareholders (0.24) --
------ ------
Net Asset Value, End of Year $33.24 $20.55
====== ======
Total Return (b) 63.25% 2.75%(d)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.45% 1.45%(c)
Net Investment Income (to average daily net assets)* 1.15% 1.31%(c)
Portfolio Turnover 76% 31%(d)
Net Assets, End of Year (000's omitted) $13,671 $5,693
- ----------
* 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 (loss) per share and the ratios,
without waivers and reimbursement, would have been:
Net investment income (loss) per share (a) $(0.16) $(0.27)
Ratios (to average daily net assets):
Expenses 3.18% 8.64%(c)
Net investment income (loss) (0.59%) (5.88%)(c)
(a) Calculated based on 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. Returns for periods of less than one year have not been
annualized.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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, or if such quotations do not accurately reflect fair value,
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. 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.
15
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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 be distributed 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 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. 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 The
Bank of New York Mellon Corporation ("BNY Mellon"), or its affiliates.
16
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
I. New accounting requirements
On September 20, 2006, the Financial Accounting Standards Board ("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 year ended September 30, 2007. Pursuant to this agreement, for
the year ended September 30, 2007, TBCAM voluntarily waived a portion of
its investment advisory fee in the amount of $99,997 and reimbursed the
Fund for $58,342 of its operating expenses. This arrangement is
voluntary and temporary and may be discontinued or revised by TBCAM at
any time.
The Trust entered into an agreement with Dreyfus Transfer, Inc., a
wholly-owned subsidiary of The Dreyfus Corporation, a wholly-owned
subsidiary of BNY Mellon 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 $6,033, for the year ended September 30, 2007.
The Trust entered into an agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of BNY Mellon 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 $96,525 for the year
ended September 30, 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 $2,254 for the
year ended September 30, 2007. See Note 7 for further details.
The Trust entered into two separate agreements with The Bank of New York
that enables the Fund, and other funds in the Trust, to borrow, in the
aggregate, (i) up to $35 million from a committed line of credit and
(ii) up to $15 million from an uncommitted line of credit. Interest is
charged to each participating fund based on its borrowings at a rate
equal to the Federal Funds effective rate plus 1/2 of 1%. The
participating funds also pay an annual fee, computed at a rate of 0.020
of 1% of the committed and uncommitted amounts and allocated ratably to
the participating funds. 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 at the end of each quarter. Pursuant to
these agreements, the Fund was charged $142 for the year ended September
30, 2007, which amount is included in miscellaneous expenses on the
statement of operations. See Note 8 for further details.
The Trust reimburses BNY Mellon Asset Management for a portion of the
salary of the Trust's Chief Compliance Officer. For the year ended
September 30, 2007, the Fund was charged $4,235, which amount 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 BNY Mellon and an affiliate of TBCAM, to provide printing
and fulfillment services for the Fund. Pursuant to this agreement, the
Fund was charged $1,275, which amount is included in miscellaneous
expenses in the statement of operations, for the year ended September
30, 2007.
17
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Fund may pay 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 year ended September
30, 2007, the Fund was not charged an administrative service fee by an
affiliate of BNY Mellon.
Effective June 30, 2007, MBSC Securities Corporation ("MBSC"), a wholly
owned subsidiary of BNY Mellon and affiliate of TBCAM, replaced Mellon
Funds Distributor, L.P. as the Fund's principal distributor.
Effective July 1, 2007, Mellon Financial Corporation ("MFC") and The
Bank of New York Company, Inc. ("BNY") each merged into BNY Mellon, with
BNY Mellon being the surviving entity of each merger.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2007 were as follows:
Purchases Sales
------------ ------------
Non-U.S. Government Securities $ 10,288,333 $ 6,912,414
============ ============
(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
Year Ended operations) to
September 30, 2007 September 30, 2006
------------------ ------------------
Shares sold 144,213 277,002
Shares issued to shareholders in reinvestment of distributions 2,828 --
Shares redeemed (12,790) --
--------- ---------
Net increase (decrease) 134,251 277,002
========= =========
At September 30, 2007, two shareholders of record, in the aggregate held
approximately 72.5% 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 year ended September 30, 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.
18
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
In July 2006, FASB 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
implication of FIN 48 and its impact in the financial statements has not
yet been determined.
The tax basis components of distributable earnings and the federal tax
cost as of September 30, 2007 were as follows:
Cost for federal income tax purposes $10,179,210
===========
Gross unrealized appreciation $ 3,768,799
Gross unrealized depreciation (64,578)
-----------
Net unrealized appreciation (depreciation) $ 3,704,221
===========
Undistributed ordinary income $ 783,636
Undistributed capital gains 149,365
-----------
Total distributable earnings $ 933,001
===========
The tax character of distributions paid during the fiscal year ended
September 30, 2007 was as follows:
2007
-----------
Ordinary income $ 78,456
===========
(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 Foreign 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 foreign 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 foreign currency exchange contracts is included in the Statement
of Assets and Liabilities.
At September 30, 2007, the Fund held forward foreign currency exchange
contracts. See 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
19
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 year ended September 30, 2007 and
earned interest on the invested collateral of $12,348 of which $7,014
was rebated to borrowers or paid in fees. At September 30, 2007, the
Fund had securities valued at $277,977 on loan, of which $271,348 was
collateralized with cash and $15,092 was collateralized with highly
liquid securities. See Schedule of Investments for further detail on the
security positions on loan and collateral held.
(8) Line of Credit:
On behalf of the Fund and other funds in the Trust, the Trust has access
to a credit facility, which enables each fund to borrow, in the
aggregate, up to $35 million under a committed line of credit and up to
$15 million under an uncommitted line of credit.For the year ended
September 30, 2007, the Fund had average borrowings outstanding of
$47,750 for a total of four days and incurred $31 of interest expense.
At September 30, 2007, the Fund did not have a loan balance outstanding.
20
Mellon Institutional Funds Investment Trust
The Boston Company Emerging Markets Core Equity Fund
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees of Mellon Institutional Funds Investment Trust and
Shareholders of The Boston Company Emerging Markets Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of The
Boston Company Emerging Markets Core Equity Fund (the "Fund") at
September 30, 2007, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights
for the year then ended and for the period from July 10, 2006
(commencement of operations) to September 30, 2006, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with
the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 21, 2007
21
Trustees and Officers (Unaudited)
The following table lists the Trust's trustees and officers; their age, 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 year ended September 30, 2007. The Fund'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 September 30,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming (67) Trustee Trustee since Chairman Emeritus, 25 None Fund: $391
61 Meadowbrook Road 11/3/1986 Decision Resources, Inc.
Weston, MA 02493 ("DRI") (biotechnology
9/30/40 research and consulting
firm); formerly Chairman
of the Board and Chief
Executive Officer, DRI
Benjamin M. Friedman (63) Trustee Trustee since William Joseph Maier, 25 None Fund: $391
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 25 None Fund: $391
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
Caleb Loring III (64) Trustee Trustee since Trustee, Essex Street 25 None Fund: $395
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 *
None*
*Effective October 30, 2007, J. David Officer was elected as a Trustee of the
Trust.
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) * President, Chief President and CEO Senior Vice President and Head of Operations,
BNY Mellon Asset Management Executive Officer since 2007; Secretary BNY Mellon Asset Management ("MAM"); formerly First
One Boston Place and Secretary since 2003 Vice President, MAM and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson (42) Vice President, Vice President Vice President and Mutual Funds Controller,
BNY Mellon Asset Management Treasurer and since 1999; BNY Mellon Asset Management; formerly Assistant
One Boston Place Chief Financial Treasurer Vice President and Mutual Funds Controller, Standish
Boston, MA 02108 Officer since 2002 Mellon Asset Management Company, LLC
7/14/65
Denise B. Kneeland (56) ** Assistant Vice Since 1996 First Vice President and Manager, Mutual Funds
BNY Mellon Asset Management President Operations, BNY Mellon Asset Management; formerly
One Boston Place Vice 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, BNY Mellon Asset Management and
BNY Mellon Asset Management Compliance Chief Compliance Officer, Mellon Optima L/S Strategy
One Boston Place Officer Fund, LLC; formerly Director, Blackrock, Inc., Senior
Boston, MA 02108 Vice President, State Street Research & Management
4/8/57 Company ("SSRM"), and Vice President, SSRM
* Effective October 30, 2007, Ms. McCann resigned as President, Chief Executive
Officer and Secretary of the Trust, and J. David Officer was elected as
President and Chief Executive Officer of the Trust.
**Effective October 30, 2007, Ms. Kneeland was elected as Secretary of the
Trust.
23
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MELLON INSTITUTIONAL FUNDS
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
6914AR0907
Item 2. Code of Ethics.
The Registrant has adopted a Code of Ethics, as defined in Item 2(b) of
Form N-CSR, that applies to the Principal Executive Officer and Principal
Financial Officer. For the fiscal year ended September 30, 2007, there were
no amendments to a provision of the Code of Ethics nor were there any
waivers granted from a provision of the Code of Ethics. A copy of the
Registrant's Code of Ethics that applies to the Principal Executive Officer
and Principal Financial Officer is filed as an exhibit to this Form N-CSR
under item 12(a)(1).
Item 3. Audit Committee Financial Expert.
(a) AUDIT FEES: The aggregate fees billed for professional services
rendered by the Registrant's principal accountant,
PricewaterhouseCoopers LLP, for the audit of the Registrant's annual
financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for the fiscal years ended September 30, 2007 and 2006
were $375,000 and $741,015, respectively.
(b) AUDIT-RELATED FEES: The aggregate fees billed for the fiscal years
ended September 30, 2007 and 2006 for assurance and related services
by PricewaterhouseCoopers LLP that are reasonably related to the
performance of the audit of the Registrant's financial statements and
are not reported under paragraph (a) of this Item were $19,000 and
$61,000, respectively. The nature of the services comprising the fees
disclosed under this Item for both years consist of the examination of
securities and similar investments of the Registrant's investment
series pursuant to the requirements of Rule 17f-2 under the Investment
Company Act of 1940.
(c) TAX FEES: The aggregate fees billed for the fiscal years ended
September 30, 2007 and 2006 for professional services rendered by
PricewaterhouseCoopers LLP for tax compliance, tax advice, and tax
planning were $0 and $260,010, respectively.
(d) ALL OTHER FEES: Other than the services reported in paragraphs (a)
through (c) of this Item, PricewaterhouseCoopers LLP billed no other
fees for products or services provided for the fiscal years ended
September 30, 2007 and 2006.
(e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY: The Registrant's audit
committee pre-approves all audit and non-audit services to be
performed by the Registrant's accountant before the accountant is
engaged by the Registrant to perform such services.
(e) (2) 100% of the services described in each of paragraphs (b) through
(d) of this Item 4 were pre-approved by the Registrant's audit
committee before the accountant was engaged by the Registrant to
perform such services.
(f) Not applicable.
(g) The aggregate non-audit fees billed by PricewaterhouseCoopers LLP for
services rendered to the Registrant and the Registrant's investment
advisers, and any entity controlling, controlled by or under common
control with the advisers that provides ongoing services to the
Registrant for the fiscal years ended September 30, 2007 and 2006 were
$0 and $0, respectively. The aggregate non-audit fees billed by the
Registrant's accountant for services rendered to the Registrant's
transfer agent by PricewaterhouseCoopers LLP for the fiscal years
ended September 30, 2007 and 2006 were $98,628 and $105,570,
respectively. Services provided in both years included a review of the
transfer agency function and to issue a report under Rule
17Ad-13(a)(3) of the Securities and Exchange Act of 1934.
(h) The Registrant's Audit Committee of the Board of Trustees had
pre-approved all of the non-audit services that were rendered to the
Registrant's investment advisers and any entity controlling,
controlled by, or under common control with the investment advisers
that provides ongoing services to the Registrant, and no such
non-audit services were not pre-approved.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the Registrant.
Item 6. Schedule of Investments
Included as part of the report to shareholders filed under Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to the Registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to the Registrant.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to the Registrant.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes.
Item 11. Controls and Procedures.
(a) The Registrant's Principal Executive Officer and Principal
Financial Officer concluded that the Registrant's disclosure
controls and procedures are effective based on their evaluation
of the Registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this report (the
"Evaluation Date" as defined in Rule 30a-3(c) under the
Investment Company Act of 1940).
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940 that occurred during the
Registrant's second fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of Ethics required by Item 2 is attached hereto as an exhibit.
(a)(2) Certifications of the Principal Executive Officer and Principal
Financial Officer of the Registrant as required by Rule 30a-2(a)
under the Investment Company Act of 1940 are attached hereto as
Exhibit 99CERT.302
(b) Certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940 and pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto as Exhibit 99CERT.906.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Mellon Institutional Funds Investment Trust
By (Signature and Title): /s/ DENISE B. KNEELAND
--------------------------------------------
Denise B. Kneeland, Assistant Vice President
and Secretary
Date: December 7, 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/ J. DAVID OFFICER
--------------------------------------------
J. David Officer, President and Chief
Executive Officer
Date: December 7, 2007
By (Signature and Title): /s/ STEVEN M. ANDERSON
--------------------------------------------
Steven M. Anderson, Vice President, Treasurer
and Chief Financial Officer
Date: December 7, 2007