Interim Report
BNY Mellon Investment Funds All sub-funds report
31 December 2010 (Unaudited)
BNY Mellon Investment Funds Interim Report & Accounts
Table of Contents
Report of the Authorised Corporate Director 3
Economic & Market Overview 5
Aggregated Financial Statements 8
BNY Mellon Global Strategic Bond Fund 11
BNY Mellon Long-Term Global Equity Fund 26
Newton 50/50 Global Equity Fund 36
Newton American Fund 50
Newton Asian Income Fund 61
Newton Balanced Fund 74
Newton Cautious Managed Fund 89
Newton Continental European Fund 101
Newton Corporate Bond Fund 111
Newton European Higher Income Fund 125
Newton Global Balanced Fund 139
Newton Global Dynamic Bond Fund 154
Newton Global High Yield Bond Fund 171
Newton Global Higher Income Fund 186
Newton Global Opportunities Fund 202
Newton Growth Fund 213
Newton Higher Income Fund 226
Newton Income Fund 243
Newton Index Linked Gilt Fund 258
Newton International Bond Fund 268
Newton International Growth Fund 284
Newton Japan Fund 297
Newton Long Corporate Bond 307
Newton Long Gilt Fund 319
Newton Managed Fund 330
Newton Oriental Fund 344
Newton Overseas Equity Fund 355
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Newton Pan-European Fund 369
Newton Phoenix Multi-Asset Fund 380
Newton Real Return Fund 394
Newton UK Equity Fund 412
Newton UK Opportunities Fund 425
Additional Information Directors’ Statement 436 Investor Information 437 Significant Events 437 Investment Funds Information 443 Management and Professional Services 443
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Report of the Authorised Corporate Director
This is the interim report for BNY Mellon Investment Funds ICVC (‘BNYMIF’) for the six-months ended 31 December 2010. The six-months ended 31 December 2010 was characterised by continued economic uncertainty, although there were tentative signs of a sustained recovery. The period also witnessed a growing gulf between those developing countries achieving relatively higher rates of economic growth, and the developed world, whose economies are faced with austerity measures and policies aimed at consolidating economic recovery amid lower levels of growth.
In the face of persistent economic uncertainty, and market volatility over the period, investors remained wary, engaging in ‘consensus’ behaviour. However, some comfort was drawn from reassuring economic data and supportive fiscal and monetary policies from Western governments and central bankers, including the US Federal Reserve’s launch of a second wave of quantitative easing – effectively the printing of more money – in early November. Against this backdrop, equity markets rose strongly, with a preference for risk assets seeing strong inflows into emerging market assets. Meanwhile, with the Eurozone sovereign debt crisis as yet unresolved, ‘safe haven’ assets also proved popular among investors, who sought refuge in currencies such as the Swiss franc, and strongly performing commodities such as gold.
Fixed income assets made steady gains over the period, with UK Gilts performing well relative to most other Western government bonds as the UK maintained its fiscal credibility on the back of the coalition government’s comprehensive spending review. Improved investor risk appetite also saw emerging market government bonds and high yield bonds perform strongly. Meanwhile, European corporate bonds struggled towards the end of the period, giving back some of the gains they had made over the previous 18 months. This owed much to weakness in the high yielding bank sector which suffered as a result of renewed concerns about exposure to peripheral Eurozone debt.
Indeed, the Eurozone saw an unprecedented degree of turmoil amid renewed concerns about Europe’s weaker economies and their ability to continue servicing their sovereign debt. In November, the Irish government reticently accepted a €85 billion aid package from the EU and the International Monetary Fund. Investors’ attention rapidly shifted elsewhere, to the likes of Spain and Portugal, as contagion threatened the very survival of the euro. In the UK, Chancellor of the Exchequer George Osborne unveiled the coalition government’s comprehensive spending review in October, paving the way for a drastic deficit reduction plan. Similar fiscal austerity drives were initiated on the Continent, sparking Europe-wide popular discontent.
Historically, both Newton and Walter Scott have maintained a preference for high quality assets (such as shares in more resilient companies that are less dependent for their financial performance on the health of the economy), a tack that served them well during the height of the credit crisis, and this preference will continue. However, this means that during periods of heightened investor appetite for riskier investments, when high quality assets generally underperformed, these funds tend to lag the market somewhat.
In terms of fund performance, a number of the fixed income funds on the range performed well, with the Standish- managed BNY Mellon Global Strategic Bond Fund outperforming the market despite the challenging fixed income environment. Meanwhile, the Newton Higher Income Fund continued to grow its income stream, although its strict yield criteria – the Fund will only invest in stocks paying a higher dividend than the market average – meant that its total return over the period was somewhat below that of the market, as it was unable to invest in much of the low- yielding but strongly performing mining sector.
Our asset management model continues to command the respect of industry commentators. The fund range received excellent ratings from the independent ratings agency Standard & Poor’s; there are two funds in the range – the Newton Balanced Fund and the Newton Real Return Fund – with the much sought after ‘AAA’ rating, while 60% of the funds in the range are now rated ‘AA’ and above. Newly rated funds over the period included the Newton Global Dynamic Bond Fund, which gained an ‘A’ rating.
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Report of the Authorised Corporate Director (continued)
Looking forward, although there are tentative signs of economic improvement, it seems inevitable that there will be further bumps along the road to sustained economic recovery. However, we remain confident that our asset managers are particularly well suited to navigating through such uncertain market conditions. ‘Cautious optimism’ would best sum up the views of our asset managers, although the emphasis remains on ‘cautious’.
We hope that you will find this report informative, and thank you for investing with us.
Alan Mearns Director For and on behalf of BNY Mellon Fund Managers Limited Authorised Corporate Director 4 February 2011
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Market Background
Economic & Market Overview
Introduction The six months to 31 December 2010 saw tentative signs of a sustained global economic recovery. As it stands, this recovery is patchy at best, with a growing gulf between those developing countries achieving relatively higher rates of economic growth, and those of the developed world, whose economies have been the target of unprecedented government intervention aimed at consolidating recovery amid lower levels of growth. In the face of enduring economic and market volatility, investors remained wary over the period, engaging in ‘consensus’ behaviour; a preference for risk assets saw strong inflows into emerging market bonds and equities, stoking inflation across Asia, where authorities employed various measures to curb inflationary pressures. With the Eurozone sovereign debt crisis as yet unresolved, safe haven assets also proved popular among investors, who sought refuge in currencies such as the Swiss franc, strongly performing commodities such as gold, and the safety of German Bunds.
Currency and trade disputes provided the broad framework for international economic discourse, as continuing US calls for a rapid appreciation of the Chinese yuan went unheeded, while the Japanese government intervened to curb the rise of the yen. Meanwhile, China overtook Japan as the world’s second largest economy, hinting at the prospect of a redistribution of global economic power to the East. The six-month period to the end of December 2010 served to highlight the extent to which economic power is becoming more widely dispersed on an international scale.
Against this backdrop, the FTSE World Index rose by 19.3% in sterling terms. In stark contrast, the JP Morgan Global Government Bond Index returned 1.3%, amid falling yields across the core sovereign debt markets.
North America The US Federal Open Market Committee announced a second round of quantitative easing (QE2) in November, with a further US$600 billion to be pumped into the US economy by the end of June 2011. The US Federal Reserve’s (Fed) decision sparked a global backlash, with China, Russia and Eurozone countries airing their concerns over the prospect of a weaker US dollar.
The announcement of QE2 came amid stubbornly high levels of unemployment in the US, peaking at 9.8% in November, although some respite was offered as the rate fell to 9.4% in December, its lowest level since May 2009. Elsewhere, the beleaguered US housing market showed little sign of recovery; the S&P/Case-Shiller Home Price indices, having traced the monotonous downward trend of house prices over the year, showed a broad slowdown in house price growth in October.
There was little change in the Fed’s interest rate policy, with the US federal funds rate maintained at between zero and 0.25%. Surprisingly, however, the Fed recognised publicly for the first time in recent years that inflation was below the level ‘consistent with its mandate to promote maximum employment and price stability’, as inflation fell to an annualised rate of 1.1% in August, from 1.2% in July.
There was some positive news on the economic front, as third quarter annualised US GDP growth surpassed the previous quarter’s 1.7%. Nevertheless, US consumer confidence continued to hover at historically low levels.
The S&P 500 Index rose by 23.3% over the period in US dollar terms (matching its performance over the previous six month period) and 17.8% in sterling terms. In lieu of strong Chinese demand, food- and commodity-related companies performed strongly, as did industrials. The healthcare sector, shaken by the reforms initiated by US president Barack Obama, performed less strongly.
Europe The Eurozone saw an unprecedented degree of turmoil amid renewed concerns about Europe’s periphery and its unsustainable levels of sovereign debt. In November, the Irish government reticently accepted a €85 billion aid package from the EU and the IMF. Investors’ attention rapidly shifted to the next likely victim (with problems in Spain most feared), as contagion threatened the very survival of the single currency.
The strength of the German economy, which, in November, saw the lowest level of unemployment for 18 years, as well as an upward revision in its GDP growth forecast for 2010, illustrates the extent to which Europe has become a continent of extremes. Eurozone unemployment exceeded 10% in October to reach the highest level since mid-1998; in stark contrast, the number of unemployed in Germany dropped below the symbolic three million mark in October.
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Market Background (continued)
In the UK, Chancellor of the Exchequer George Osborne unveiled the coalition government’s comprehensive spending review in October, paving the way for a drastic deficit reduction plan. Similar fiscal austerity drives were initiated on the Continent, sparking Europe-wide popular discontent. In accordance with US and Eurozone authorities, the Bank of England’s Monetary Policy Committee maintained its “lower for longer” monetary policy stance (holding interest rates at a record low of 0.5%), as consumer prices remained well above the Bank’s 2.0% target. Eurozone inflation, at 1.9% in November, continued to hover around a two-year high.
The Eurozone economy grew by 0.4% in the three months to the end of September, with the services sector a strong contributor. This nevertheless represented a slowdown in growth relative to the previous quarter’s 1.0%. Greece, Ireland and Spain remained in the economic doldrums, while the economies of Germany, France, Italy and Portugal all grew.
European stock markets advanced, with those of Germany and France respectively rising by 22.0% and 17.8% in sterling terms, according to the FTSE Germany and FTSE France indices. The UK market, as measured by the FTSE All-Share Index, rose by 22.0%.
Asia Strong inflationary pressures continued to steer interest rate policy in Asia. The People’s Bank of China raised interest rates for the first time since December 2007, with a view to curbing asset price inflation, especially in the property sector. An initial 0.25% increase in benchmark lending and deposit rates (to 5.56% and 2.5% respectively) in October was followed by a second (again, 0.25%) increase in December. Strong growth continued to characterise the Chinese economy.
With consumer prices in India increasing 9.7% on an annualised basis in October, the Reserve Bank of India adjusted its benchmark lending and deposit rates upwards in November for the sixth time this year. India’s economy grew by 8.9% over the third quarter, propelled by a booming services sector and strong domestic demand.
China surprised markets in July by ending the renminbi exchange rate’s peg against the US dollar, while continuing to resists US calls for a more rapid appreciation of the yuan. Meanwhile, the Japanese government intervened to curb the rise of the yen after the currency hit a 15-month high against the US dollar, which had been threatening Japan’s already weak economy. Additionally, the Bank of Japan, like its US and UK counterparts, initiated a programme of ‘comprehensive monetary easing’, seeking to expand its balance sheet by announcing a fund to buy government bonds. Annualised economic growth exceeded expectations, with the Japanese economy growing by 3.9% in the three months to September.
The FTSE All-World Asia Pacific ex Japan Index rose by 19.5%; the Chinese market returned 11.5% in sterling terms and India 11.7%, with both regional markets losing ground relative to performance over the previous six-month period. The FTSE Japan Index performed strongly, gaining 13.0%.
Fixed income Government bonds made steady gains over the period, with UK Gilts outperforming most other Western government bonds as the UK maintained its fiscal credibility on the back of the coalition government’s comprehensive spending review. Government bond and investment-grade bond markets had weakened mid-way through the period, a consequence of slightly stronger economic data. However, over the period as a whole riskier emerging market and high yield bond markets performed well.
Meanwhile, after 18 months of strong returns, corporate bonds struggled towards the end of the period. This owed much to weakness in the high yielding bank sector which suffered as a result of renewed concerns about its exposure to peripheral Eurozone debt.
Currencies and commodities ‘Currency wars’ provided the backdrop for the period, with countries such as China and Brazil (to a lesser extent) resisting currency appreciation in order to keep their export machines churning. Successive rounds of quantitative easing – effectively the printing of more money – initiated by the US Fed contributed to a weaker US dollar, encouraging developing world central banks to build up reserves in other major currencies. The Australian dollar, benefiting from strong commodity demand, soared, increasing by 21.1% against the US dollar over the period, and by 10.8% against the euro. The Swiss franc served as a safe-haven currency amid the ongoing debt crisis in Ireland and peripheral Eurozone countries, increasing by 5.2% against the euro over the six months.
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Market Background (continued)
In the context of quantitative easing programmes, entailing successive rounds of injections in the US, both the US dollar and sterling lost ground against the euro, despite the sovereign debt crisis and fears of contagion putting downward pressure on the single currency itself.
Continuing US dollar weakness proved beneficial for commodities (excluding natural gas), with gold rallying to end the period at the US$1413 per ounce level. The price of a barrel of crude oil rose from just over US$75 per barrel to finish the period at around US$90 per barrel, having hit a high of just under $92 in late December. Among soft commodities, cotton and sugar in particular performed strongly.
BNY Mellon Asset Management International Limited January 2011
All performance data are from 30 June 2010 to 31 December 2010, total returns are in sterling terms unless otherwise indicated, sourced from Lipper Hindsight and Bloomberg.
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BNY MELLON INVESTMENT FUNDS AGGREGATED FINANCIAL STATEMENTS
Interim Report For the six months ended 31 December 2010
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Aggregated Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 2,402,917,682 2,430,325,830
Revenue 318,223,650 270,330,204
Expenses (107,022,839) (84,681,016)
Finance costs: Interest (48,694) (3,531)
Net revenue before taxation 211,152,117 185,645,657
Taxation (11,390,693) (6,945,646)
Net revenue after taxation for the period 199,761,424 178,700,011
Total return for the period 2,602,679,106 2,609,025,841
Finance costs: Distributions (241,894,108) (206,259,605)
Change in net assets attributable to Shareholders from investment activities 2,360,784,998 2,402,766,236
Aggregated Statement of Change in Net Assets Attributable to Shareholders for the six month period ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 16,543,463,640 12,464,421,148
Amounts receivable on issue of shares 3,324,314,856 1,853,289,820 Amounts payable on cancellation of shares (1,282,155,606) (942,151,741) 2,042,159,250 911,138,079
Dilution adjustment 5,485,993 1,749,134
Stamp Duty Reserve Tax (2,846,177) (2,056,768)
Change in net assets attributable to Shareholders from investment activities (see above) 2,360,784,998 2,402,766,236
Retained distributions on accumulation shares 88,360,095 69,588,187
Unclaimed distributions 53,366 28,576
Closing net assets attributable to Shareholders 21,037,461,165 15,847,634,592
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Aggregated Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS
Investment assets* 20,145,258,399 16,002,987,738
Debtors 216,062,471 431,255,020
Cash and bank balances 925,976,256 653,269,769
Total other assets 1,142,038,727 1,084,524,789
Total assets 21,287,297,126 17,087,512,527
LIABILITIES
Investment liabilities (56,569,824) (72,036,742)
Bank overdraft (129,715) (149,932)
Creditors (98,162,954) (300,366,811)
Distributions payable on income shares (94,973,468) (171,495,402)
Total other liabilities (193,266,137) (472,012,145)
Total liabilities (249,835,961) (544,048,887)
Net assets attributable to Shareholders 21,037,461,165 16,543,463,640
* Gross of investment liabilities.
- 10 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
BNY MELLON INVESTMENT FUNDS – BNY MELLON GLOBAL STRATEGIC BOND FUND
Interim Report for the six months ended 31 December 2010
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Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team (Standish Mellon Asset Management): David Leduc Brendan Murphy
Fund Size: £77.97m
Sector: £ Strategic Bond
Distribution Yield as at 31/12/10:
Sterling Income Shares 3.99% Institutional Shares (Income) 4.06% Institutional Shares (Accumulation) 4.06%
Key Dates: Fund Launch 8 April 2009
Aim
To maximise the total return from income and capital growth from a globally diversified multi-sector fixed income portfolio of bonds and other debt instruments issued by corporations, agencies and governments in developed and emerging market economies.
The Sub-Fund may also invest in certain permitted deposits, approved money market instruments, permitted derivative instruments and forward transactions and units in collective investment schemes.
At least 80% of the Sub-Fund’s assets shall be invested in Sterling denominated assets or assets that are hedged back to Sterling.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/2009 31/12/2008 31/12/2007 31/12/2006 31/12/2005 To 31/12/2010 31/12/2009 31/12/2008 31/12/2007 31/12/2006
Sterling Income Shares* 5.46% N/A N/A N/A N/A Institutional Shares (Income)* 6.04% N/A N/A N/A N/A Institutional Shares (Accumulation)* 6.05% N/A N/A N/A N/A
Barclays Capital Global 4.82% 5.31% 7.59% 5.76% 3.30% Aggregate Bond Index (Hedged to Sterling)
Source: Lipper as at 31 December 2010 – Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
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Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 0.81% against 0.68% for the Barclays Capital Global Aggregate Bond Index (hedged to GBP).
Over the second half of 2010, the Fund delivered a positive absolute return, outperforming its index. The relative outperformance can primarily be attributed to effective security selection and asset allocation. The Fund began the second half of 2010 significantly overweight corporate debt, particularly high yield credit, investment grade credit and structured products. Another source of performance was the Fund's country positioning in Europe as the Fund tactically took advantage of the sharp up and down movements of sovereign bonds. However, the Fund’s duration (a measure of a Fund’s sensitivity to interest rate changes) and yield curve positioning detracted from relative performance. Having rallied throughout the first three quarters of the year, global government bond rates sold off in the last three months of the year on expectations of further quantitative easing by the US Federal Reserve.
During the period, the manager reduced the Fund’s duration as global bond yields fell, moving from an overweight position at the beginning of the period to a more neutral position by year-end. The Fund was underweight peripheral European sovereign debt exposure throughout most of the second half of 2010, although the manager initiated an overweight to Italian government debt at the beginning of December. Currency exposure was tactical throughout the second half of 2010, with a bias towards emerging market currencies, and limited exposure to the US dollar.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
US Treasury Bill 0.00% September 2010 FNCL 5.50% Bonds September 2040 US Treasury Bill 0.00% October 2010 FNCL 5.50% Bonds August 2040 FNCL 5.50% Bonds September 2040 Germany 4.25% Bonds 2014 Germany 5.00% Bonds 2011 Deutschland 3.25% Bonds 2020 Deutschland 3.25% Bonds 2020 Japan 1.70% bonds 2017 Spain 5.40% Government Bonds 2011 Spain 5.40% Government Bonds 2011 FNCL 5.50% Bonds October 2010 Germany 3.75% Bonds 2019 US Treasury Bill 0.00% January 2011 FNCL 5.50% Bonds October 2040 US Treasury Bill 0.00% December 2010 Deutschland 4.75% Bonds 2040 Bonos Y Oblig Del Estado 4.00% Bonds 2020 UK Treasury Stock 4.50% 2019
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Statistics
Price & Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2009 (from 8 April) 112.09 99.51 3.1823
2010 115.85 109.29 4.0146
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2009 (from 8 April) 112.58 99.53 3.1855
2010 116.83 109.77 4.0992
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2009 (from 8 April) 113.11 99.53 3.2685
2010 122.73 112.97 4.2540
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 1,721,167 101.86 1,689,703
30/06/10 11,112,813 111.70 9,948,884
31/12/10 13,867,841 110.87 12,508,484
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 10,104,365 102.04 9,902,310
30/06/10 16,340,585 112.46 14,529,600
31/12/10 19,383,445 111.91 17,320,838
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 44,791,062 102.52 43,688,983
30/06/10 49,043,170 118.15 41,508,939
31/12/10 44,714,918 119.43 37,439,511 - 14 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.41 1.41
Institutional Shares (Income) 0.84 0.84
Institutional Shares (Accumulation) 0.84 0.84
.
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Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 5.23% (3.70%) Treasury 4.25% Stock 2036 £1,190,000 1,197,352 1.54 Treasury 4.25% Stock 2039 £2,845,000 2,873,258 3.69
Australia Government Bonds 0.94% (0.84%) Queensland Treasury MTN 6.00% 2013 AUD1,100,000 731,259 0.94
Brazil Government Bonds 0.99% (1.85%) Nota Do Tesouro Nacional 10.00% Bonds 2012 BRL2,150,000 775,257 0.99
Canada Government Bonds 2.81% (0.56%) Government of Canada 4.00% Bonds 2016 CAD2,535,000 1,752,765 2.25 Government of Canada 8.00% Bonds 2027 CAD430,000 433,864 0.56
Chile Government Bonds 0.55% (0.00%) Chile Government 5.50% Bonds 2020 CLP310,000,000 427,720 0.55
Colombian Government Bonds 2.01% (0.00%) Colombian TES CLN 11.00% Bonds 2011 COP4,550,184,111 1,566,564 2.01
German Government Bonds 8.60% (18.69%) Deutschland 3.50% Bonds 2019 EUR240,000 217,522 0.28 Germany 3.50% Bonds 2016 EUR835,000 772,081 0.99 Germany 5.00% Bonds 2011 EUR5,375,000 4,734,556 6.07 Germany 5.00% Bonds 2012 EUR1,070,000 980,963 1.26
Italy Government Bonds 8.31% (4.27%) Buoni Poliennali del Tes 4.00% Bonds 2020 EUR1,545,000 1,263,208 1.62 Buoni Poliennali del Tes 4.25% Bonds 2020 EUR270,000 225,688 0.29 Buoni Poliennali del Tes 5.00% Bonds 2040 EUR680,000 551,908 0.71 Italy 3.75% Bonds 2015 EUR4,155,000 3,587,367 4.60 Italy 5.25% Bonds 2011 EUR965,000 846,857 1.09
Japan Government Bonds 2.90% (4.84%) Japan 1.70% Bonds 2017 JPY51,650,000 436,841 0.56 Japan 1.70% Bonds 2033 JPY241,000,000 1,821,478 2.34
Mexico Government Bonds 1.04% (1.96%) Mexico Bonds 9.00% 2012 MXN14,500,000 809,295 1.04
Netherlands Government Bonds 0.86% (0.00%) Dutch 4.00% Bonds 2037 EUR725,000 673,657 0.86
Peru Government Bonds 2.48% (0.00%) Republic of Peru 7.84% Bonds 2020 PEN7,435,000 1,934,382 2.48
Philippine Government Bonds 0.18% (0.00%) Philippine Government International 4.95% Bonds 2021 PHP9,000,000 138,909 0.18
Poland Government Bonds 1.74% (1.62%) Poland 5.25% Bonds 2013 PLN6,200,000 1,359,013 1.74
Sweden Government Bonds 0.66% (0.63%) Sweden 4.25% Bonds 2019 SEK4,945,000 510,894 0.66
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Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
USA Government Bonds 6.03% (11.00%) US Treasury Bill 0.00% January 2011 USD6,700,000 4,314,742 5.53 US Treasury Bill 0.00% June 2011 USD600,000 386,090 0.50
Sterling Denominated Corporate Bonds 0.62% (2.13%) Fosse Master Issuer Variable Rate Bonds 2054 £250,000 244,550 0.31 Gracechurch Mortgage Finance Reg S Variable Rate Bonds 2056 £196,044 192,535 0.25 Holmes Master Issuer Variable Rate Bonds 2021 £50,000 49,590 0.06
Non-Sterling Denominated Corporate Bonds 56.14% (59.54%) AES Senior Notes 7.75% 2015 USD460,000 312,553 0.40 Ally Auto Receivables A3 1.45% 2014 USD370,000 239,561 0.31 American International Petroleum 5.00% Bonds 2017 EUR400,000 322,931 0.41 Anadarko Petroleum 6.20% Bonds 2040 USD170,000 105,360 0.14 Anadarko Petroleum 6.375% Bonds 2017 USD500,000 347,947 0.45 Anheuser-Busch Worldwide 8.20% Bonds 2039 USD400,000 345,413 0.44 Aramark 8.50% Bonds 2015 USD830,000 551,901 0.71 Arcelormittal 3.75% Bonds 2015 USD300,000 194,032 0.25 Arcelormittal 4.625% Bonds 2017 EUR400,000 345,464 0.44 Arkle 2010-1X 2A Variable Rate 2060 USD180,000 114,704 0.15 Arkle Master 2006-2A 3A1 Variable Rate Bonds 2052 USD450,000 289,267 0.37 Arkle Master Issue 2A 1A1 Variable Rate 2060 USD700,000 450,631 0.58 Arran Residential Cl A2B Variable Rate 2056 USD289,731 185,710 0.24 Autozone 5.75% Bonds 2015 USD505,000 356,321 0.46 BAT International Finance 3.625% EMTN 2012 EUR300,000 265,847 0.34 Bank of America 5.625% Bonds 2020 USD750,000 489,357 0.63 Bank of America 7.00% Bonds 2016 EUR350,000 327,229 0.42 Barclays Bank 5.14% Bonds 2020 USD660,000 382,031 0.49 BBVA Senior Finance 3.875% Bonds 2015 EUR450,000 369,922 0.47 Bear Stearns Commercial T26 A4 Variable Rate 2045 USD240,000 164,723 0.21 Bear Stearns Commercial T28 A4 5.742% 2042 USD605,000 419,839 0.54 BMW US Capital 5.00% Bonds 2015 EUR340,000 319,391 0.41 Bombardier 7.25% Bonds 2016 EUR700,000 635,748 0.82 Caterpillar Financial Services 1.55% Bonds 2013 USD425,000 273,261 0.35 CFLT 2010-AC 144A 4.49% 2013 USD250,000 161,115 0.21 Chesapeake Energy 6.25% Bonds 2017 EUR685,000 595,063 0.76 Chrysler Financial Auto 3.04% Bonds 2016 USD500,000 324,586 0.42 Citigroup Commercial C6 A4 Variable Rate 2049 USD420,000 287,149 0.37 Citigroup 5.375% Bonds 2020 USD1,000,000 663,215 0.85 Commercial Mortgage 10-C1 Variable Rate Bonds 2020 USD525,000 336,877 0.43 Commercial Mortgage 10-C1 B 5.24% Bonds 2020 USD690,000 442,266 0.57 Consol Energy 144A 8.00% Bonds 2017 USD85,000 58,302 0.07 Consumers Energy Bonds 6.70% 2019 USD230,000 175,816 0.23 Crown Euro 7.125% Bonds 2018 EUR170,000 153,141 0.20 CVS Pass-Through Trust 5.773% Bonds 2033 USD355,000 225,536 0.29 CVS Pass-Through Trust 6.036% Bonds 2028 USD396,373 260,753 0.33 Denbury Resources 7.50% Bonds 2015 USD80,000 53,435 0.07 Dexia Municipal Agency 4.25% Bonds 2013 EUR550,000 495,449 0.64 Diageo Capital 5.50% Bonds 2013 EUR200,000 186,469 0.24 Digicel 144A 8.25% Bonds 2017 USD300,000 198,042 0.25 DNB Nor Boligkredit 144A 2.10% Bonds 2015 USD860,000 533,669 0.68 Dow Chemical 8.55% Bonds 2019 USD525,000 421,974 0.54 E.On International Finance 5.50% Bonds 2017 EUR160,000 154,444 0.20 E-Carat 2010-1A Variable Rate Bonds 2018 EUR954,867 820,353 1.05
- 17 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Egypt Treasury Bill CLN 2011 REG S EGP7,000,000 744,696 0.96 El Paso Senior Notes 7.00% 2017 USD785,000 526,490 0.68 Elsevier Finance 6.50% Bonds 2013 EUR150,000 141,037 0.18 Enel Finance International 144A 5.125% Bonds 2019 USD300,000 191,844 0.25 Energy Transfer Partners 8.50% Bonds 2014 USD170,000 126,087 0.16 Enterprise Products Operations 6.125% Bonds 2039 USD270,000 178,769 0.23 EQT 8.125% Bonds 2019 USD405,000 302,225 0.39 FCE Bank 9.375% Bonds 2014 EUR400,000 382,712 0.49 FNCL 5.00% Bonds 2041 USD5,670,000 3,826,302 4.81 FNCL 5.50% Bonds 2041 USD610,000 419,628 0.54 Freeport McMoran Copper & Gold 8.375% Bonds 2017 USD288,000 205,858 0.26 Frontier Communications 8.25% Bonds 2017 USD550,000 389,356 0.50 Georgia Pacific Senior Notes 144A 7.00% Bonds 2015 USD103,000 68,824 0.09 Georgia Pacific 144A 7.125% Bonds 2017 USD345,000 235,427 0.30 Goldman Sachs 6.00% Bonds 2020 USD950,000 657,632 0.84 Goodyear Tyre & Rubber 10.50% Bonds 2016 USD570,000 416,933 0.53 Gracechurch Mortgage Finance 1A 3A Variable Rate Bonds 2056 USD271,788 171,856 0.22 Heidelbergcement 8.50% Bonds 2019 EUR660,000 625,024 0.80 Holcim Capital 6.875% Bonds 2039 USD165,000 104,758 0.13 Holcim US Finance 6.00% Bonds 2019 USD405,000 268,681 0.34 Holmes Master Issuer 2A 3A1Variable Rate Bonds 2021 USD100,000 63,863 0.08 Holmes Master Issuer 1X A2 Variable Rate Bonds 2054 USD625,000 400,472 0.51 Holmes Master Issuer Reg S Variable Rate Bonds 2040 EUR345,000 296,042 0.38 Iron Mountain 8.375% Bonds 2021 USD240,000 164,327 0.21 JP Morgan Chase CB14 Variable Rate Bonds 2044 USD341,137 228,908 0.29 JPMCC 2009-IWST A2 5.633% Bonds 2027 USD1,130,000 776,286 1.00 JP Morgan Chase 4.25% 2020 USD1,100,000 683,490 0.88 JP Morgan Chase Notes 6.30% 2019 USD225,000 164,019 0.21 Kazakhstan Temir Zholy Finance 6.375% Bonds 2020 USD280,000 187,636 0.24 Kinder Morgan Energy 6.85% Bonds 2020 USD395,000 291,623 0.37 Kraft Foods 6.25% Bonds 2015 EUR380,000 368,764 0.47 Lamar Media Senior Notes 6.625% 2015 USD753,000 496,008 0.64 Lear 8.125% Bonds 2020 USD445,000 312,779 0.40 Levi Strauss 7.75% Bonds 2018 EUR475,000 412,466 0.53 Lloyds TSB Bank 6.375% Bonds 2016 EUR420,000 388,117 0.50 LOTHM 2006-1X A4 Variable Rate Bonds 2050 USD218,292 139,534 0.18 Masco 7.125% Bonds 2020 USD590,000 389,934 0.50 Meccanica 7.375% Bonds 2039 USD205,000 135,797 0.17 Merrill Lynch / Countrywide Variable Rate Bonds 2046 USD500,000 351,097 0.45 Morgan Stanley 5.50% Bonds 2020 USD950,000 614,226 0.79 Morgan Stanley 5.50% Bonds 2017 EUR250,000 218,725 0.28 Morgan Stanley Capital T27 A4 Variable Rate Bonds 2042 USD75,000 52,225 0.07 National Grid 6.30% Bonds 2016 USD223,000 163,663 0.21 Nationwide Building Society 2.875% Bonds 2015 EUR405,000 342,707 0.44 NBC Universal 5.15% Bonds 2020 USD565,000 375,017 0.48 Newfield Exploration 6.875% Bonds 2020 USD465,000 313,773 0.40 News America 6.15% Bonds 2037 USD250,000 165,890 0.21 Nexen 7.50% Bonds 2039 USD300,000 207,256 0.27 Pemex Project Funding Master Trust 6.625% Bonds 2035 USD680,000 442,032 0.57 Penn National Gaming 8.75% Bonds 2019 USD540,000 382,059 0.49 Petrobras International Finance 5.75% Bonds 2020 USD590,000 394,876 0.51
- 18 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Philip Morris International 4.50% Bonds 2020 USD195,000 129,499 0.17 Philip Morris International Notes 6.875% 2014 USD300,000 221,386 0.28 Plains All America Pipeline 8.75% Bonds 2019 USD355,000 286,571 0.37 PNC Funding 3.625% Bonds 2015 USD120,000 78,722 0.10 Prudential Financial 4.50% Bonds 2020 USD650,000 412,133 0.53 Range Resources Notes 7.50% Bonds 2017 USD165,000 111,978 0.14 Range Resources 6.75% 2020 USD200,000 132,672 0.17 Regency Center 4.80% Bonds 2021 USD385,000 235,157 0.30 Roche 5.625% Bonds 2016 EUR175,000 169,415 0.22 Royal Bank of Scotland 5.625% Bonds 2020 USD950,000 598,934 0.77 Royal Bank of Scotland 3.00% Bonds 2015 EUR315,000 267,340 0.34 Royal Bank of Scotland 5.75% Bonds 2014 EUR240,000 215,211 0.28 RWE Finance 6.625% Bonds 2019 EUR150,000 153,885 0.20 Santander International Debt 3.50% Bonds 2014 EUR450,000 378,311 0.49 Schering-Plough 5.375% Bonds 2014 EUR180,000 171,303 0.22 Simon Property 4.375% Bonds 2021 USD650,000 413,197 0.53 Storm 2004-II Variable Rate Bonds 2046 EUR316,759 270,116 0.35 Storm 2005 Variable Rate Bonds 2047 EUR323,954 274,046 0.35 Storm 2007-I Variable Rate Bonds 2049 EUR467,029 395,482 0.51 Storm BV 3 A1 Variable Rate Bonds 2052 EUR421,506 361,110 0.46 Teck Resources 10.75% Bonds 2019 USD740,000 617,183 0.79 Telecom Italia Capital 7.175% Bonds 2019 USD400,000 277,576 0.36 Telefonica Emisiones 5.431% Bonds 2014 EUR300,000 274,064 0.35 Transcanada Pipelines 7.625% Bonds 2039 USD200,000 162,192 0.21 Vale Overseas 4.625% Bonds 2020 USD600,000 382,099 0.49 Veolia Environment 6.75% Bonds 2019 EUR260,000 266,340 0.34 Verizon Communications Notes 6.10% 2018 USD250,000 181,807 0.23 VNO 2010 A2FX 4.004% Bonds 2020 USD1,000,000 620,342 0.80 VNO 2010 B 4.741% Bonds 2020 USD155,000 96,502 0.12 VNO 2010 C 5.28% Bonds 2020 USD260,000 163,216 0.21 Wachovia 5.50% Bonds 2013 USD225,000 157,007 0.20 WEA Finance 6.75% Bonds 2019 USD300,000 215,320 0.28 Wells Fargo 4.375% Bonds 2013 USD300,000 203,437 0.26 WM Covered Bond Program 4.00% Bonds 2016 EUR385,000 335,367 0.43 Wrigley 144A 3.70% Bonds 2014 EUR505,000 334,440 0.43
Derivatives -0.34% (0.86%)
Futures 0.30% (0.10%) Australian 10 Year Bond Future (SFE) Expires March 2011 AUD35 5,286 0.01 Australian 3 Year Bond Future (SFE) Expires March 2011 AUD(97) 6,157 0.01 Euro-BOBL Future (EUX) Expires March 2011 EUR8 (1,396) 0.00 Euro-Bund Future (EUX) Expires March 2011 EUR12 (8,584 ) (0.01) Japan 10 Year Bond Future (TSE) Expires March 2011 JPY6 21,853 0.03 US 10 Year Treasury Notes Future (CBT) Expires March 2011 USD(157) 280,897 0.36 US 2 Year Treasury Notes Future (CBT) Expires March 2011 USD34 (1,040) 0.00 US 5 Year Treasury Notes Future (CBT) Expires March 2011 USD83 (78,123) (0.10) US Treasury Bond Future (CBT) Expires March 2011 USD(1) (181 ) 0.00
Interest Rate Swaps -0.06% (-0.11%) IRS Pay Fixed 3.6825% 2020 USD(2,300,000) (1,481,291) (1.90) IRS Receive Floating 3M LIBOR 2020 USD2,300,000 1,432,234 1.84
- 19 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
OTC Options 0.13% (-0.34%) IRS Receive 3.625% Call 11/02/2011 USD4,740,000 63,298 0.08 IRS Pay 5.36% Put 11/02/2011 USD(4,740,000) (30) 0.00 JPY-Put USD-Call 90.0 09/08/2011 USD25,180 13,865 0.02 JPY-Put USD-Call 90.0 19/08/2011 USD13,000 7,789 0.01 JPY-Put USD-Call 90.0 08/03/2011 USD37,300 13,055 0.02
AUD Forward Foreign Currency Contracts -0.03% (0.02%) Forward Currency Contracts 27/01/11 AUD(1,140,000) (743,674) (0.95) Forward Currency Contracts 27/01/11 £719,724 719,724 0.92
BRL Forward Foreign Currency Contracts -0.03% (0.00%) Forward Currency Contracts 27/01/11 BRL(2,220,000) (856,315) (1.10) Forward Currency Contracts 27/01/11 USD1,294,612 833,962 1.07
CAD Forward Foreign Currency Contracts -0.02% (0.00%) Forward Currency Contracts 27/01/11 CAD(3,580,000) (2,309,474 ) (2.96) Forward Currency Contracts 27/01/11 £2,291,200 2,291,200 2.94
CLP Forward Foreign Currency Contracts 0.00% (0.00%) Forward Currency Contracts 27/01/11 CLP(314,630,000) (432,388) (0.55) Forward Currency Contracts 27/01/11 USD662,100 426,511 0.55
COP Forward Foreign Currency Contracts 0.04% (0.00%) Forward Currency Contracts 14/01/11 COP(4,600,000,000) (1,539,247) (1.97) Forward Currency Contracts 14/01/11 USD2,434,024 1,567,778 2.01
EUR Forward Foreign Currency Contracts -0.32% (0.44%) Forward Currency Contracts 27/01/11 EUR(36,035,000) (31,063,581) (39.84) Forward Currency Contracts 27/01/11 £30,799,554 30,799,554 39.50 Forward Currency Contracts 27/01/11 EUR1,110,000 956,863 1.23 Forward Currency Contracts 27/01/11 £(939,857) (939,857) (1.21)
JPY Forward Foreign Currency Contracts -0.10% (-0.02%) Forward Currency Contracts 27/01/11 JPY(287,493,000) (2,277,499) (2.92) Forward Currency Contracts 27/01/11 £2,196,045 2,196,045 2.82
MXN Forward Foreign Currency Contracts -0.01% (0.03%) Forward Currency Contracts 27/01/11 MXN(15,885,000) (824,033) (1.06) Forward Currency Contracts 27/01/11 £817,929 817,929 1.05
MYR Forward Foreign Currency Contracts 0.01% (0.00%) Forward Currency Contracts 27/01/11 MYR7,500,000 1,563,698 2.01 Forward Currency Contracts 27/01/11 USD(2,419,172) (1,558,380) (2.00)
NZD Forward Foreign Currency Contracts -0.05% (0.00%) Forward Currency Contracts 27/01/11 NZD(1,640,000) (819,035) (1.05) Forward Currency Contracts 27/01/11 £781,443 781,443 1.00
PEN Forward Foreign Currency Contracts -0.01% (0.00%) Forward Currency Contracts 27/01/11 PEN(8,470,000) (1,941,824) (2.49) Forward Currency Contracts 27/01/11 USD3,006,425 1,936,676 2.48
- 20 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
PLN Forward Foreign Currency Contracts -0.03% (0.03%) Forward Currency Contracts 27/01/11 PLN(6,580,000) (1,429,788) (1.83) Forward Currency Contracts 27/01/11 £1,402,327 1,402,327 1.80
RUB Forward Foreign Currency Contracts 0.00% (0.00%) Forward Currency Contracts 27/01/11 RUB73,830,000 1,555,041 1.99 Forward Currency Contracts 27/01/11 USD(2,414,216) (1,555,188) (1.99)
SEK Forward Foreign Currency Contracts -0.01% (0.01%) Forward Currency Contracts 27/01/11 SEK(5,380,000) (516,310) (0.66) Forward Currency Contracts 27/01/11 £505,326 505,326 0.65
SGD Forward Foreign Currency Contracts 0.05% (0.00%) Forward Currency Contracts 27/01/11 SGD3,160,000 1,587,515 2.04 Forward Currency Contracts 27/01/11 USD(2,408,540) (1,551,532) (1.99)
USD Forward Foreign Currency Contracts -0.20% (0.18%) Forward Currency Contracts 27/01/11 USD3,625,000 2,335,150 3.00 Forward Currency Contracts 27/01/11 £(2,329,589) (2,329,589) (2.99) Forward Currency Contracts 27/01/11 USD(58,923,000) (37,956,976) (48.68) Forward Currency Contracts 27/01/11 £37,787,399 37,787,399 48.47
Portfolio of investments 79,331,312 101.75
Net current liabilities (1,365,108) (1.75)
Total Net Assets 77,966,204 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Credit Default Swaps and IDR Forward Foreign Currency Contracts portfolio categories, which, at 30 June 2010, represented, 0.53% and - 0.02% respectively of the Total Net Assets of the Fund.
- 21 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Portfolio Statement by Credit Rating as at 31 December 2010
Total Net Total Net Market Value Assets at Assets at at 31/12/10 31/12/10 30/06/10 Standard & Poor’s Ratings: (£’000’s) (%) (%)
AAA 27,344 35.07 44.54 AA 4,427 5.68 6.54 A 23,630 30.31 27.95 BBB 12,123 15.55 10.31 BB 5,124 6.57 12.90 B 2,042 2.62 5.26 Not rated (by S&P) 4,948 6.34 2.32 Derivatives (307) (0.39) 0.88
Portfolio of investments 79,331 101.75 110.70
Net current liabilities (1,365) (1.75) (10.70)
Total Net Assets 77,966 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows:
Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In default D
- 22 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital (losses)/gains (175,502) 4,415,575
Revenue 1,582,611 2,069,081
Expenses (371,547) (290,236)
Finance costs: Interest (2,388) - Net revenue before taxation 1,208,676 1,778,845
Taxation (308,668) (408,029) Net revenue after taxation 900,008 1,370,816
Total return before distributions 724,506 5,786,391
Finance costs: Distributions (1,234,650) (1,631,117) Change in net assets attributable to Shareholders from investment activities (510,144) 4,155,274
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 76,496,568 56,616,594
Amounts receivable on issue of shares 21,245,434 10,785,878 Amounts payable on cancellation of shares (20,008,993) (3,061,047)
1,236,441 7,724,831
Dilution adjustment 44,718 7,400
Change in net assets attributable to Shareholders from investment activities (see above) (510,144) 4,155,274
Retained distributions on accumulation shares 698,621 1,183,008
Closing net assets attributable to Shareholders 77,966,204 69,687,107
- 23 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 80,142,671 85,261,270
Debtors 1,752,889 15,549,738
Cash and bank balances 2,188,996 2,831,328
Total other assets 3,941,885 18,381,066
Total assets 84,084,556 103,642,336
LIABILITIES
Investment liabilities (811,359) (583,208)
Creditors (4,782,849) (25,997,824)
Distribution payable on income shares (524,144) (564,736)
Total other liabilities (5,306,993) (26,562,560)
Total liabilities (6,118,352) (27,145,768)
Net assets attributable to Shareholders 77,966,204 76,496,568
*Gross of investment liabilities
- 24 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Global Strategic Bond Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 2.1628 0.4326 1.7302 0.0000 1.7302 Group 1: Shares purchased prior to 1 July 2010
Group 2 0.9804 0.1961 0.7843 0.9459 1.7302 Group 2: Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.6483 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 2.2208 0.4442 1.7766 0.0000 1.7766 Group 1: Shares purchased prior to 1 July 2010
Group 2 1.2393 0.2479 0.9914 0.7852 1.7766 Group 2: Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.6875 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 2.3325 0.4665 1.8660 0.0000 1.8660 Group 1: Shares purchased prior to 1 July 2010
Group 2 1.6150 0.3230 1.2920 0.5740 1.8660 Group 2: Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.7001 pence per share.
- 25 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
BNY MELLON INVESTMENT FUNDS – BNY MELLON LONG-TERM GLOBAL EQUITY FUND
Interim Report for the six months ended 31 December 2010
- 26 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team (Walter Scott and Partners Ltd): Roy Leckie Charles Macquaker
Fund Size £80.85m
Sector Global
Yield as at 31/12/10:
Sterling Income Shares 0.23% Institutional Shares (Accumulation) 0.67% Exempt Shares 2 (Net Accumulation) 0.88% X Shares (Net Accumulation) 1.75%
Key Dates: Fund Launch 24 August 2007
Aim
To achieve long-term capital appreciation through investments in predominantly equity securities of companies located throughout the world. The Sub-Fund may also invest in collective investment schemes and warrants.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income* 14.09% 22.13% -8.42% N/A N/A Institutional (Accumulation)* 14.76% 22.68% -7.99% N/A N/A Exempt 2 (Net Accumulation)* 14.92% 22.78% -7.89% N/A N/A X Shares (Net Accumulation)* N/A N/A N/A N/A N/A
FTSE All World TR GBP 16.74% 21.24% -19.36% 10.85% 7.18%
Source: Lipper as at 31 December 2010 – Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 7%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested
- 27 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 15.43% against 18.96% for the FTSE All World Index.
The Fund delivered an attractive return in absolute terms over a period characterised by strong market gains; however, it lost some ground relative to the market. Returns from all regions were positive over the period, with Asian stocks leading the way. US and UK stocks, while on average still posting double-digit returns, lagged and this was the primary reason for the Fund’s underperformance relative to the market. From a sector perspective, industrial stocks performed best with the Hong Kong conglomerate Hutchison Whampoa standing out. Meanwhile, in the energy and technology sectors, returns were mixed; Schlumberger and Oracle’s share prices both gained around 40%, while Cisco Systems and EOG Resources both lost around 10%. Limited exposure to the strongly performing basic materials sector and overweight exposure to healthcare also detracted from relative returns, but these losses were partially offset by the strength of the industrial holdings and the Fund’s limited exposure to the financial sector.
Four new holdings were added to the Fund over the period; these included Overseas-Chinese Banking Corporation Limited (OCBC), one of the largest banks in Singapore and South-East Asia; US company, TJX, the world’s largest retailer of off-price apparel and home fashions, Colgate Palmolive, one of the world’s largest manufacturers of consumer non-durable products, and Tenaris, the leading global supplier of steel pipes to the energy sector. There were no outright sales from the Fund. The Fund’s current position can be best characterised as cautiously optimistic. The managers remain wholly committed to investment on the basis of fundamental research and analysis of individual companies.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Colgate Palmolive Hutchison Whampoa TJX Industria de Diseno Textil Suncor Energy Google Amphenol Oracle Tenaris ADR Precision Castparts EOG Hennes & Mauritz CISCO Mitsubishi Nintendo CNOOC Google Honda Motor Overseas-Chinese Banking
- 28 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2007 (from 28 September) 102.21 95.85 N/A
2008 105.91 77.66 0.1956
2009 114.79 82.39 0.5915
2010 129.61 109.15 0.2998
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2007 (from 24 August) 108.85 99.92 N/A
2008 112.99 83.17 0.7168
2009 124.44 88.39 1.0447
2010 141.68 119.00 0.9304
Highest Lowest Net Revenue Exempt 2 Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 24 August) 108.92 99.92 N/A
2008 113.14 83.36 0.8991
2009 125.01 88.68 1.2155
2010 142.69 119.70 1.2403
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2010 (from 17 December) 102.21 99.99 N/A
*Distributions are shown in the year declared rather than paid.
- 29 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 106,327 96.66 110,000
30/06/09 102,575 93.25 110,000
30/06/10 615,130 111.28 552,778
31/12/10 812,288 128.45 632,386
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 3,643,195 103.68 3,513,821
30/06/09 9,830,997 100.79 9,753,996
30/06/10 21,784,994 121.30 17,959,931
31/12/10 25,979,433 140.42 18,501,139
Exempt 2 Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 1,464,260 104.03 1,407,560
30/06/09 16,532,252 101.00 16,369,179
30/06/10 28,118,767 122.01 23,046,814
31/12/10 31,774,303 141.42 22,467,703
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
31/12/10 22,283,139 101.30 21,996,523
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.66 1.68
Institutional Shares (Accumulation) 1.09 1.10
Exempt 2 Shares (Net Accumulation) 0.84 0.85
X Shares (Net Accumulation) 0.08 -
- 30 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 9.87% (10.78%) BG 113,683 1,477,311 1.83 HSBC 236,791 1,553,586 1.93 Morrison (WM) Supermarket 222,400 594,253 0.73 Reckitt Benckiser 39,762 1,417,515 1.75 Standard Chartered 89,445 1,563,051 1.93 Tesco 320,154 1,375,702 1.70
Overseas Equities 87.49% (86.77%)
Australia 3.56% (3.88%) CSL 63,900 1,514,211 1.87 Woodside Petroleum 49,138 1,368,977 1.69
Brazil 2.03% (1.84%) Petroleo Brasileiro ADR 75,700 1,643,978 2.03
Canada 2.04% (0.86%) Suncor Energy 67,132 1,651,013 2.04
Denmark 2.05% (1.93%) Novo-Nordisk 22,826 1,660,128 2.05
France 3.22% (3.83%) Essilor International 30,353 1,275,209 1.58 L'Oreal 18,468 1,327,822 1.64
Hong Kong 6.26% (8.57%) China Mobile 237,500 1,516,290 1.88 CLP 216,000 1,128,457 1.40 CNOOC 1,083,000 1,647,583 2.04 Hong Kong & China Gas 364,100 555,117 0.69 Hutchison Whampoa 30,000 199,113 0.25
Japan 18.42% (20.55%) Canon 45,500 1,516,707 1.88 Chugai Pharmaceutical 83,400 983,922 1.22 Daikin Industries 47,900 1,092,286 1.35 Denso 69,400 1,539,699 1.90 Fanuc 15,900 1,569,899 1.94 Honda Motor 62,400 1,588,451 1.96 Hoya Pentax 37,100 579,281 0.72 Keyence 6,180 1,150,891 1.42 Mitsubishi Estate 131,000 1,562,085 1.93 Nintendo 8,700 1,641,540 2.03 Shin-Etsu Chemicals 48,000 1,672,254 2.07
Luxembourg 1.01% (0.00%) Tenaris ADR 25,900 818,018 1.01
Spain 1.97% (2.00%) Industria De Diseno Textil 33,018 1,594,487 1.97
Sweden 1.91% (1.94%) Hennes & Mauritz 71,916 1,547,057 1.91 - 31 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Switzerland 3.30% (3.87%) Nestle 39,223 1,478,564 1.83 SGS 1,100 1,188,313 1.47
Singapore 0.84% (0.00%) Oversea-Chinese Banking 137,000 679,830 0.84
United States of America 40.88% (37.50%) Abbott Laboratories 49,561 1,518,079 1.88 Adobe Systems 80,398 1,582,899 1.96 Amphenol 46,379 1,580,118 1.95 Automatic Data Processing 47,140 1,409,616 1.74 Bard C R 16,800 1,000,945 1.24 Cisco Systems 119,823 1,561,164 1.93 Colgate-Palmolive 30,412 1,572,798 1.95 EOG 26,224 1,549,592 1.92 Fastenal 22,400 867,176 1.07 Flir Systems 43,300 835,213 1.03 Gilead Sciences 63,201 1,475,925 1.83 Google 4,143 1,596,977 1.98 Intel 104,987 1,419,931 1.76 Johnson & Johnson 36,860 1,470,412 1.82 Mastercard 8,766 1,262,988 1.56 Medtronic 39,900 955,164 1.18 Microsoft 88,772 1,592,259 1.97 Nike 26,005 1,436,329 1.78 Oracle 72,926 1,468,665 1.82 Precision Castparts 17,581 1,579,199 1.95 Schlumberger 29,938 1,607,284 1.98 TJX 51,666 1,488,388 1.84 Wal Mart 38,021 1,323,524 1.64 Walgreen 35,200 889,578 1.10
Portfolio of investments 78,716,823 97.36
Net current assets 2,132,340 2.64
Total Net Assets 80,849,163 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt
- 32 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 8,175,480 5,906,546
Revenue 428,647 254,527
Expenses (259,105) (147,078)
Finance cost: Interest (65) - Net revenue before taxation 169,477 107,449
Taxation (38,141) (21,992) Net revenue after taxation 131,336 85,457
Total return before distributions 8,306,816 5,992,003
Finance costs: Distributions (1,159) 8,211 Change in net assets attributable to Shareholders from investment activities 8,305,657 6,000,214
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 50,518,891 26,465,824
Amounts receivable on issue of shares 24,387,571 9,355,320 Amounts payable on cancellation of shares (2,409,344) (7,471,485) 21,978,227 1,883,835
Dilution adjustment 46,480 24,877
Stamp Duty Reserve Tax (92) (4)
Change in net assets attributable to Shareholders from investment activities (see above) 8,305,657 6,000,214
Closing net assets attributable to Shareholders 80,849,163 34,374,746
- 33 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 78,716,823 49,281,816
Debtors 133,897 562,367
Cash and bank balances 2,045,589 1,748,382
Total other assets 2,179,486 2,310,749
Total assets 80,896,309 51,592,565
LIABILITIES
Creditors (47,146) (1,072,017)
Distribution payable on income shares - (1,657)
Total liabilities (47,146) (1,073,674)
Net assets attributable to Shareholders 80,849,163 50,518,891
- 34 - BNY Mellon Investment Funds Interim Report & Accounts – BNY Mellon Long-Term Global Equity Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 23,739,769 19,847,069 Commissions 6,089 25,814 Taxes 9,578 17,798
Total purchase costs 15,667 43,612
Gross purchases total 23,755,436 19,890,681
Analysis of total sales proceeds:
Sales before transaction costs 2,518,700 9,968,011 Commissions (2,505) (7,970) Taxes (1,548) (9,961)
Total sales costs (4,053) (17,931)
Total sales net of transaction cost 2,514,647 9,950,080
- 35 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
BNY MELLON INVESTMENT FUNDS - NEWTON 50/50 GLOBAL EQUITY FUND
Interim Report for the six months ended 31 December 2010
- 36 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Matthew Brown Rob Stewart
Fund Size £743.43m
Yield as at 31/12/10:
Exempt Shares 1 (Net Accumulation) 2.30% X Shares (Net Accumulation) 2.71% Exempt Shares 2 (Net Accumulation) 2.22%
Key Dates: Fund Launch 15 February 1999 Converted to ICVC 02 August 2004
Aim
To invest in a broad spread of UK and international securities to achieve income and capital growth over the longer term. The Sub-Fund will be managed to a benchmark of approximately 50% UK equities and 50% international equities. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 1 (Net Accumulation) 13.28% 24.84% -23.08% 15.69% 10.64% X Shares (Net Accumulation) 13.84% 25.40% -22.77% 16.16% 11.10% Exempt Shares 2 (Net Accumulation)* 13.16% 24.73% -23.14% 15.58% N/A
Benchmark** 14.81% 26.23% -25.98% 8.00% 13.21%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 7%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
** 50% FTSE All-Share / 16.67% FTSE AW North America / 16.67% FTSE AW Europe ex UK / 16.67% FTSE AW Asia Pacific. Prior to 31 March 2010 the Benchmark was 60% FTSE All-Share / 13.33% FTSE AW North America / 13.33% FTSE AW Europe ex UK / 13.33% FTSE AW Asia Pacific. Prior to 31 March 2010, reference index returns represent those of the old benchmark. From 31 March 2010 reference index returns represent those of the new benchmark.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 37 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Exempt 1 Net Sterling Acc Share Class of the Fund returned 17.77% against 20.30% for the composite benchmark.
Over the period, the Fund delivered a positive return in absolute terms, but nevertheless underperformed its benchmark; this was largely a consequence of its relatively defensive positioning. This was most evident in industrials, where the portfolio was biased towards sub-sectors such as support services and defence, which did not participate in the dramatic gains registered in engineering and electrical equipment. Stock specific issues in healthcare reduced returns. For example, Roche sold off after the US Food and Drug Administration (FDA) announced the withdrawal of its cancer drug Avastin for use in breast cancer treatment. On a more positive note, at the stock level, Carphone Warehouse generated an impressive positive contribution, driven by the success of its joint venture with Best Buy in the US.
The mobile telecoms sector, which remains a key overweight position for the portfolio, was a focus of activity. The overweight holding in Vodafone Group was pared back as the prospect of corporate activity increased its share price. The proceeds from the sale were reinvested in Turkcell Iletisim Hizmetleri, the leading mobile operator in Turkey. Meanwhile, the German stock exchange operator Deutsche Boerse was negatively affected by the low interest rate environment. This concern, together with the increase in competition facing its cash equity trading franchise, prompted the manager to sell the holding. A position was established in Toyota Motor, while Medco Health Solutions, a leading US specialty pharmacy business and mail order pharmacy was also added. The company has a good near- term growth outlook due to a wave of drug patent expiries which benefit its generic drug business and continued conversion to mail distribution. Finally, the position in the Singapore-listed Parkway Holdings was sold.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Toyota Vodafone Medco Health Solutions Parkway Turkcell Iletisim Hizmetleri ADR Deutsche Boerse Makita Royal Dutch Shell B Suncor Energy Procter & Gamble Adaro Energy Alstom Thomas Cook Beckman Coulter Lazard BP Yamana Gold Tele Norte Leste Participacoes ADR Vale ADR Denbury Resources
- 38 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 157.40 136.41 3.0736
2007 182.64 153.81 3.3899
2008 185.40 112.90 4.1836
2009 175.88 118.79 4.3068
2010 198.13 164.56 4.1837
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2006 158.36 136.94 3.7111
2007 184.41 154.90 4.1441
2008 187.62 114.45 4.9920
2009 179.22 120.59 5.0573
2010 202.91 168.11 5.1902
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 117.37 101.78 2.1935
2007 136.09 114.68 2.4113
2008 138.08 84.06 3.0554
2009 130.80 88.41 3.1040
2010 147.20 122.32 2.9765
*Distributions are shown in the year declared rather than paid.
- 39 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Statistics (continued)
Net Asset Value History by Share Class
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 413,488,564 166.38 248,517,958
30/06/09 352,766,575 139.58 252,725,342
30/06/10 406,577,529 167.40 242,878,647
31/12/10 465,574,641 197.09 236,226,727
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 205,724,471 168.45 122,129,338
30/06/09 164,301,464 141.88 115,800,514
30/06/10 188,715,941 171.01 110,355,984
31/12/10 221,172,761 201.84 109,576,825
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 27,543,012 123.90 22,230,195
30/06/09 40,270,283 103.86 38,773,438
30/06/10 48,500,951 124.43 38,977,948
31/12/10 56,681,471 146.43 38,709,986
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Exempt Shares 1 (Net Accumulation) 0.55 0.55
X Shares (Net Accumulation) 0.05 0.05
Exempt Shares 2 (Net Accumulation) 0.65 0.65
- 40 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 44.69% (44.03%)
Oil & Gas Producers 6.08% (6.07%) BG 1,044,209 13,569,496 1.83 BP 4,156,552 19,485,916 2.62 Royal Dutch Shell B 570,369 12,131,749 1.63
Mining 4.90% (3.82%) Anglo American 331,066 11,067,536 1.49 BHP Billiton 824,697 21,153,478 2.85 Xstrata 273,862 4,155,856 0.56
Aerospace & Defence 1.94% (2.31%) BAE Systems 1,897,785 6,285,464 0.85 Cobham 2,224,227 4,539,647 0.61 Ultra Electronics 211,608 3,601,568 0.48
General Industrials 0.47% (0.47%) Smiths 279,598 3,508,955 0.47
Support Services 2.48% (2.67%) Atkins (WS) 430,354 3,018,933 0.41 Bunzl 622,335 4,490,147 0.60 Capita 466,859 3,275,016 0.44 Experian 412,257 3,277,443 0.44 Intertek 187,898 3,357,737 0.45 Mouchel 976,252 1,034,827 0.14
Beverages 1.03% (1.23%) Diageo 321,365 3,824,244 0.51 SABMiller 170,392 3,869,602 0.52
Food Producers 1.52% (1.09%) Associated British Foods 326,849 3,866,624 0.52 Premier Foods 10,147,603 1,948,340 0.26 Unilever 280,452 5,527,709 0.74
Household Goods & Home Construction 0.50% (0.49%) Berkeley 416,214 3,712,629 0.50
Tobacco 1.92% (1.88%) British American Tobacco 577,963 14,295,915 1.92
Health Care Equipment & Services 1.20% (1.42%) Smith & Nephew 1,307,156 8,947,483 1.20
Pharmaceuticals & Biotechnology 3.88% (3.89%) GlaxoSmithKline 1,947,727 24,336,849 3.27 Hikma Pharmaceuticals 558,410 4,517,537 0.61
Food & Drug Retailers 2.18% (1.82%) Morrison (WM) Supermarkets 2,004,527 5,356,096 0.72 Tesco 2,532,350 10,881,508 1.46
- 41 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
General Retailers 1.03% (0.60%) Carphone Warehouse 1,935,256 7,644,261 1.03
Media 1.63% (1.60%) British Sky Broadcasting 410,366 3,020,294 0.41 Informa 1,450,274 5,909,867 0.79 ITV 4,472,267 3,166,365 0.43
Travel & Leisure 1.10% (0.00%) Carnival 144,028 4,287,714 0.58 Thomas Cook 2,032,054 3,885,287 0.52
Fixed Line Telecommunications 1.05% (1.43%) Cable & Wireless Communications 9,988,152 4,844,254 0.65 Cable & Wireless Worldwide 4,481,404 2,993,578 0.40
Mobile Telecommunications 3.11% (4.48%) Vodafone 13,898,811 23,113,723 3.11
Electricity 1.19% (1.25%) Scottish & Southern Energy 715,750 8,818,040 1.19
Gas, Water & MultiUtilities 1.11% (1.14%) Centrica 2,477,657 8,235,732 1.11
Banks 4.76% (4.97%) HSBC 2,141,521 14,050,519 1.89 Standard Chartered 1,221,314 21,342,462 2.87
Nonlife Insurance 0.40% (0.52%) RSA Insurance 2,341,522 2,945,635 0.40
Life Insurance 0.64% (0.38%) Prudential 710,091 4,743,408 0.64
Financial Services 0.57% (0.50%) ICAP 801,543 4,268,216 0.57
Collective Investment Schemes 1.78% (1.66%) BNY MFM Newton UK Smaller Companies Class ‘X’ Acc 763,771 10,021,132 1.35 Capita Financial Managers Morant Wright Japan Class B 1,490,055 3,165,920 0.43
Overseas Equities 52.64% (49.59%)
Canada 2.30% (0.96%) Potash Corp of Saskatchewan 55,457 5,472,710 0.74 Suncor Energy 161,290 3,966,689 0.53 Yamana Gold 938,641 7,692,811 1.03
United States of America 16.12% (17.08%) Abbott Laboratories 117,160 3,588,671 0.48 Accenture 155,158 4,838,507 0.65 Altria 480,590 7,614,165 1.02 Applied Materials 365,703 3,327,999 0.45 Bank of America 451,607 3,862,524 0.52 - 42 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
United States of America (continued) Cisco Systems 674,798 8,791,887 1.18 Consol Energy 128,312 4,032,734 0.54 Denbury Resources 6,596 80,671 0.01 Devon Energy 114,995 5,790,854 0.78 eBay 210,201 3,808,176 0.51 ESCO Technologies 85,884 2,147,791 0.29 Genzyme 61,958 2,849,102 0.38 Halliburton 110,660 2,922,758 0.39 Interpublic 828,181 5,669,842 0.76 Lazard 157,000 3,987,944 0.54 Medco Health Solutions 128,764 5,120,871 0.69 Medtronic 270,840 6,483,624 0.87 Microsoft 360,673 6,469,210 0.87 Millicom International Cellular 182,709 11,200,002 1.51 Mosaic 70,995 3,467,219 0.47 Principal Financial 184,166 3,859,575 0.52 Sprint Nextel 3,635,049 9,739,038 1.31 Transocean 69,354 3,087,810 0.42 Verisign 137,794 2,921,478 0.39 Wal-Mart Stores 120,775 4,204,218 0.57
Brazil 3.67% (3.26%) Hypermarcas 796,207 6,958,514 0.94 Marisa Lojas 257,155 2,458,996 0.33 Petroleo Brasileiro ADR 394,373 8,564,602 1.15 Rossi Residential 413,925 2,362,961 0.32 Tele Norte Leste Participacoe ADR 378,558 3,581,514 0.48 Vale ADR 152,050 3,352,014 0.45
Australia 1.48% (1.27%) AMP 965,851 3,344,589 0.45 Newcrest Mining 135,684 3,591,838 0.48 Santos 473,632 4,070,828 0.55
China 2.70% (1.97%) China Mobile (Hong Kong) 465,500 2,971,929 0.40 GOME 19,552,000 4,536,233 0.61 Mindray Medical 134,632 2,319,447 0.31 Shenguan 6,422,000 5,417,067 0.73 Yingde Gases 8,363,500 4,816,361 0.65
Hong Kong 2.07% (1.77%) AIA 1,287,400 2,330,833 0.31 Belle International 1,593,000 1,737,072 0.23 Harbin Power Equipment 2,670,000 2,685,815 0.36 Huabao International 6,065,000 6,311,994 0.85 New World Development 1,969,000 2,378,753 0.32
India 0.84% (0.43%) Bharat Electronics 107,809 2,780,125 0.37 Housing Development Finance 331,195 3,468,524 0.47
Indonesia 0.55% (0.00%) Adaro Energy 23,013,000 4,112,453 0.55 - 43 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Japan 3.94% (2.29%) Capcom 331,800 3,431,056 0.46 INPEX 868 3,267,973 0.44 Makita 206,000 5,415,189 0.73 Mitsubishi 184,000 3,202,239 0.43 Nomura 962,000 3,922,750 0.53 Toshiba 918,000 3,212,723 0.43 Toyota Motors 268,400 6,843,002 0.92
Philippines 2.56% (0.00%) DBS 1,001,000 7,199,460 0.97 Energy Development 34,572,900 2,968,164 0.40 Keppel 779,000 4,429,011 0.60 Straits Asia Resources 3,484,000 4,357,128 0.59
Thailand 0.67% (0.63%) Bangkok Bank 1,561,700 4,971,427 0.67
South Africa 1.07% (0.74%) MTN 611,589 7,932,844 1.07
France 2.54% (3.23%) Air Liquide 80,717 6,610,425 0.89 L’Oreal 30,744 2,210,446 0.30 Thales 181,870 4,116,282 0.55 Total 173,049 5,939,087 0.80
Germany 1.68% (2.68%) Bayer 113,623 5,382,231 0.72 Deutsche Telekom 640,329 5,309,181 0.71 Infineon Technologies 312,904 1,888,350 0.25
Norway 1.82% (1.66%) DNB 801,480 7,245,225 0.97 Statoil 411,578 6,296,376 0.85
Spain 0.44% (0.70%) Amadeus IT 243,429 3,284,541 0.44
Poland 0.55% (0.61%) Telekomunikacja Polska 1,130,480 4,071,711 0.55
Sweden 0.52% (0.60%) Ericsson 516,131 3,873,661 0.52
Switzerland 6.51% (6.22%) ABB 236,500 3,391,840 0.46 Actelion 131,561 4,637,801 0.62 Bank Sarasin & Cie 149,997 4,368,556 0.59 Nestle 142,068 5,355,442 0.72 Novartis 83,721 3,167,503 0.43 Roche 121,786 11,487,695 1.55 Syngenta 44,437 8,364,851 1.13 Zurich Financial Services 44,976 7,500,150 1.01
- 44 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Turkey 0.61% (0.00%) Turkcell Iletisim Hizmetleri 403,855 4,504,907 0.61
Derivatives -0.20% (0.00%)
CHF Forward Foreign Currency Contract -0.20% (0.00%) Forward Foreign Currency Contracts 15/06/2011 CHF(32,371,000) (22,380,207) (3.01) Forward Foreign Currency Contracts 15/06/2011 £20,868,521 20,868,521 2.81
Portfolio of investments 735,293,594 98.91
Net current assets 8,135,279 1.09
Total Net Assets 743,428,873 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Investment Trusts, Singapore and South Korea portfolio categories, which, at 30 June 2010, represented 0.28%, 2.81% and 0.68% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt
- 45 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 109,139,868 133,276,286
Revenue 6,713,468 8,264,038
Expenses (1,440,004) (1,296,657)
Finance costs: Interest (5) -
Net revenue before taxation 5,273,459 6,967,381
Taxation (192,319) (214,119)
Net revenue after taxation 5,081,140 6,753,262
Total return before distributions 114,221,008 140,029,548
Finance costs: Distributions (5,080,988) (6,753,052) Change in net assets attributable to Shareholders from investment activities 109,140,020 133,276,496
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 643,794,421 557,338,322
Amounts receivable on issue of shares 18,214,453 25,675,269 Amounts payable on cancellation of shares (32,729,970) (26,413,740) (14,515,517) (738,471)
Dilution adjustment 35,879 20,964
Stamp Duty Reserve Tax (25,986) (22,025)
Change in net assets attributable to Shareholders from investment activities (see above) 109,140,020 133,276,496
Retained distributions on accumulation shares 5,000,056 6,679,799
Closing net assets attributable to Shareholders 743,428,873 696,555,085
- 46 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ ££ £
ASSETS Investment assets* 736,805,280 615,186,040
Debtors 3,741,636 12,603,873
Cash and bank balances 16,324,887 25,961,695
Total other assets 20,066,523 38,565,568
Total assets 756,871,803 653,751,608
LIABILITIES
Investment liabilities (1,511,686) -
Creditors (11,931,244) (9,957,187)
Total other liabilities (11,931,244) (9,957,187)
Total liabilities (13,442,930) (9,957,187)
Net assets attributable to Shareholders 743,428,873 643,794,421
*Gross of investment liabilities.
- 47 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 1 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.3297 0.1330 1.1967 0.0000 1.1967 Group 1: Shares purchased prior 1 July 2010
Group 2 0.5227 0.0523 0.4704 0.7263 1.1967 Group 2: Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.5476 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.8812 0.1881 1.6931 0.0000 1.6931 Group 1: Shares purchased prior 1 July 2010
Group 2 0.6268 0.1627 1.4641 0.2290 1.6931 Group 2: Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.9823 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.9124 0.0912 0.8212 0.0000 0.8212 Group 1: Shares purchased prior 1 July 2010
Group 2 0.2893 0.0289 0.2604 0.5608 0.8212 Group 2: Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.0915 pence per share.
- 48 - BNY Mellon Investment Funds Interim Report & Accounts – Newton 50/50 Global Equity Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 104,997,434 82,585,750 Commissions 157,688 100,059 Taxes 135,011 117,570
Total purchase costs 292,699 217,629
Gross purchases total 105,290,133 82,803,379
Analysis of total sales proceeds:
Sales before transaction costs 95,783,592 76,171,645 Commissions (98,358) (84,911) Taxes (18,007) (6,671)
Total sales costs (116,365) (91,582)
Total sales net of transaction costs 95,667,227 76,080,063
- 49 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
BNY MELLON INVESTMENT FUNDS - NEWTON AMERICAN FUND
Interim Report for the six months ended 31 December 2010
- 50 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Simon Laing Charlotte Ryland
Fund Size £70.18m
Sector North American
Yield as at 31/12/10:
Sterling Income Shares 0.00% Euro Accumulation Shares 0.00% Exempt Shares 1 (Net Accumulation) 0.49%
Key Dates: Fund Launch 31 October 1986† †Managed by Newton since November 1994
Aim
To achieve capital growth from a portfolio of predominantly US and Canadian securities. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 21.10% 26.74% -22.27% 12.46% -0.19% Euro Accumulation Shares 19.93% 24.99% -21.98% 11.68% -0.21% Exempt Shares 1 (Net Accumulation) 22.40% 28.09% -21.47% 13.57% 0.86%
FTSE North America TR GBP 19.07% 14.84% -13.34% 5.63% 1.71%
Source: Lipper as at 31 December 2010 - total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 51 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 18.33% against 18.08% for the FTSE North America Index.
The Fund generated a strong positive return, marginally outperforming the market. During the review period, the Fund’s holdings in technology stocks boosted returns. In particular, the position in the technology business Qualcomm performed well. The company is benefiting from the shift towards 3G smartphones, while its share price rebounded after a period of weaker performance. Elsewhere, the casino operator Las Vegas Sands was a notable contributor to performance – the company has assets in Las Vegas, Macau and Singapore. The position was later sold, and profits taken, following strong share price performance. Some performance was lost as a result of the Fund’s positioning in the telecoms sector; in particular, the US mobile telecoms provider Sprint Nextel struggled. Meanwhile, Bank of America was a poor performer as the regulatory backdrop for banks worsened. The manager took advantage of its share price weakness to add to the Fund’s position.
During the review period, the manager established a position in the US homebuilder Toll Brothers. The company has the strongest balance sheet of all the large-cap US homebuilders, and is focused on the niche mid-to-high end of the market. The manager also added to the Fund’s position in Mosaic. Disposals over the period included the technology business, Analog Devices, which was sold following a profit warning from its rival Intel and fears that that overall macroeconomic weakness has yet to take its toll on the sector. Finally, the Fund’s position in the US biotech company Genzyme was sold following a bid approach from Sanofi-Aventis.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Mosaic Beckman Coulter Toll Brothers Potash Corp of Saskatchewan Bank of America Ingersoll-Rand Microsoft Las Vegas Sands JPMorgan Chase Genzyme Kroger Analog Devices Sotheby’s Lilly (Eli) Petrohawk Energy Molson Coors Brewing Vale ADR Denbury Resources Parexel International Waters
- 52 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 87.51 76.05 N/A
2007 95.67 82.14 N/A
2008 94.84 60.22 N/A
2009 94.08 66.43 0.3547
2010 112.25 89.16 N/A
Highest Lowest Net Revenue Euro Accumulation Shares Price (cents) Price (cents) per share (cents)*
2006 65.79 58.02 N/A
2007 70.56 61.08 N/A
2008 65.70 37.03 N/A
2009 53.65 37.80 0.0617
2010 67.67 52.71 N/A
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 78.50 68.39 0.5586
2007 87.33 74.39 0.4641
2008 87.19 55.46 0.4786
2009 88.09 61.37 1.0584
2010 106.21 83.55 0.5113
*Distributions are shown in the year declared rather than paid.
- 53 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 22,138,654 86.00 25,743,729
30/06/09 29,660,131 77.23 38,407,138
30/06/10 45,457,544 93.91 48,406,863
31/12/10 59,442,659 111.31 53,402,863
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 595,143 55.86 1,344,014
30/06/09 3,672,079 46.77 9,212,571
30/06/10 5,304,571 59.07 10,983,785
31/12/10 4,769,530 66.25* 8,353,057
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 3,861,325 78.61 4,911,767
30/06/09 5,163,615 71.81 7,190,232
30/06/10 5,732,659 88.40 6,485,199
31/12/10 5,967,685 105.34 5,664,914
* Euro/Sterling exchange rate at midday 31 December 2010: 1.160248
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.65 1.65
Euro Accumulation Shares 2.14 2.15
Exempt Shares 1 (Net Accumulation) 0.58 0.58
- 54 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Canada 3.65% (3.04%) Suncor Energy 73,625 1,810,698 2.58 Yamana Gold 91,799 752,356 1.07
United States of America 93.23% (96.58%)
Oil & Gas Producers 3.06% (4.18%) ConocoPhillips 29,724 1,301,562 1.85 Denbury Resources 1,510 18,468 0.03 Petrohawk Energy 70,590 824,694 1.18
Equipment, Services & Distribution 2.58% (2.83%) Halliburton 26,723 705,809 1.01 Transocean 24,758 1,102,287 1.57
Chemicals 4.39% (1.25%) Air Products & Chemicals 23,353 1,367,911 1.95 Mosaic 35,028 1,710,680 2.44
Mining 3.91% (3.92%) Barrick Gold 25,000 846,912 1.21 Consol Energy 60,311 1,895,522 2.70
Construction & Materials 1.28% (1.00%) Shaw 40,405 896,732 1.28
Aerospace & Defence 0.96% (1.33%) Flir Systems 35,077 676,600 0.96
Electronic & Electrical Equipment 2.48% (2.83%) Agilent Technologies 28,484 762,961 1.09 Emerson Electric 26,394 975,050 1.39
Industrial Transportation 3.13% (2.86%) Union Pacific 10,791 639,801 0.91 World Fuel Services 66,203 1,554,557 2.22
Support Services 4.43% (4.35%) Accenture 49,762 1,551,798 2.21 EnergySolutions 187,250 677,752 0.97 GeoEye 31,965 876,788 1.25
Household Goods & Home Construction 2.00% (0.00%) Toll Brothers 114,454 1,400,545 2.00
Personal Goods 1.01% (0.00%) Colgate-Palmolive 13,758 711,514 1.01
Health Care Equipment & Services 8.58% (12.53%) DaVita 17,822 800,940 1.14 HealthSouth 58,941 794,130 1.13 Medco Health Solutions 42,037 1,671,788 2.38 Parexel International 50,000 688,800 0.98 Thermo Fisher Scientific 57,814 2,072,844 2.95
- 55 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Pharmaceuticals & Biotechnology 5.37% (8.30%) Amgen 19,008 679,793 0.97 Lilly (Eli) 51,241 1,155,703 1.65 Merck 83,112 1,927,522 2.75
Food & Drug Retailers 2.33% (1.94%) Kroger 114,661 1,637,909 2.33
General Retailers 7.77% (6.73%) Corinthian Colleges 32,813 109,257 0.16 Dollar General 40,352 793,682 1.13 Nordstrom 24,934 681,522 0.97 Sotheby's 27,302 793,722 1.13 Staples 103,599 1,525,928 2.17 Wal-Mart Stores 44,618 1,553,167 2.21
Media 2.01% (2.26%) Interpublic 106,758 730,880 1.04 Walt Disney 28,328 683,798 0.97
Travel & Leisure 3.01% (2.95%) Carnival 49,364 1,459,905 2.08 Yum Brands 20,613 654,619 0.93
Mobile Telecommunications 3.86% (4.46%) Sprint Nextel 1,010,205 2,706,545 3.86
Banks 5.87% (4.87%) Bank of America 275,203 2,353,768 3.35 JPMorgan Chase 64,904 1,765,245 2.52
Non-life Insurance 1.96% (2.66%) Travelers 38,542 1,378,645 1.96
Life Insurance 2.73% (2.18%) Principal Financial 91,571 1,919,057 2.73
Real Estate Investment Trusts 1.40% (1.56%) Plum Creek Timber 40,863 984,533 1.40
Financial Services 4.28% (3.54%) Greenhill 13,765 738,383 1.05 Keefe Bruyette & Woods 54,806 993,970 1.42 Lazard Limited 49,886 1,267,150 1.81
Software & Computer Services 9.76% (7.46%) Ariba 54,443 823,991 1.17 LogMeIn 27,149 790,323 1.13 Microsoft 149,338 2,678,601 3.82 Parametric Technology 69,544 1,022,087 1.46 SPS Commerce 84,027 847,468 1.21 SuccessFactors 35,002 681,239 0.97
- 56 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Technology Hardware & Equipment 5.07% (6.42%) EMC 72,481 1,068,986 1.52 Qualcomm 77,697 2,487,985 3.55
Brazil 2.06% (0.00%) Petroleo Brasileiro ADR 34,786 755,448 1.07 Vale ADR 31,480 693,992 0.99
Portfolio of investments 69,434,322 98.94
Net current assets 745,552 1.06
Total Net Assets 70,179,874 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Industrial Engineering, Beverages and Leisure Goods portfolio categories, which, at 30 June 2010, represented 2.03%, 1.39% and 0.75% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
- 57 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 10,916,301 7,904,028
Revenue 442,401 355,124
Expenses (476,577) (351,163)
Finance costs: Interest (67) (2)
Net (expense)/revenue before taxation (34,243) 3,959
Taxation (61,890) (52,589)
Net expense after taxation (96,133) (48,630)
Total return before distributions 10,820,168 7,855,398
Finance costs: Distributions (1,653) (1,624) Change in net assets attributable to Shareholders from investment activities 10,818,515 7,853,774
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 56,494,774 38,495,825
Amounts receivable on issue of shares 29,880,372 10,775,206 Amounts payable on cancellation of shares (27,086,925) (6,770,537) 2,793,447 4,004,669
Dilution adjustment 73,138 14,847
Stamp Duty Reserve Tax - (229)
Change in net assets attributable to Shareholders from investment activities (see above) 10,818,515 7,853,774
Closing net assets attributable to Shareholders 70,179,874 50,368,886
- 58 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 69,434,322 56,279,882
Debtors 298,091 1,487,708
Cash and bank balances 540,723 299,371 Total other assets 838,814 1,787,079 Total assets 70,273,136 58,066,961
LIABILITIES
Creditors (93,262) (1,517,750)
Bank overdraft - (54,437)
Distribution payable on income shares - -
Total liabilities (93,262) (1,572,187)
Net assets attributable to Shareholders 70,179,874 56,494,774
- 59 - BNY Mellon Investment Funds Interim Report & Accounts – Newton American Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £ Analysis of total purchase costs:
Purchases before transaction costs 24,684,240 26,560,764 Commissions 16,216 17,547 Taxes - 217
Total purchase costs 16,216 17,764
Gross purchases total 24,700,456 26,578,528
Analysis of total sales proceeds:
Sales before transaction costs 22,443,640 22,540,046 Commissions (16,665) (15,974) Taxes (345) (504)
Total sales costs (17,010) (16,478)
Total sales net of transaction costs 22,426,630 22,523,568
- 60 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
BNY MELLON INVESTMENT FUNDS – NEWTON ASIAN INCOME FUND
Interim Report for the six months ended 31 December 2010
- 61 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Jason Pidcock
Fund Size £778.10m
Sector Asia Pacific Ex Japan
Yield as at 31/12/10:
Sterling Income Shares 4.58% Institutional Shares (Income) 4.61% Institutional Shares (Accumulation) 4.43% X Shares (Net Income) 4.65%
Key Dates: Fund Launch 30 November 2005
Aim
To achieve income together with long-term capital growth predominantly through investments in securities in the Asia Pacific ex. Japan (including Australia & New Zealand) region. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 31.98% 49.81% -25.23% 19.79% 17.42% Institutional Shares (Income) 32.74% 50.58% -24.90% 20.35% 17.99% Institutional Shares (Accumulation) 32.66% 50.59% -24.86% 20.34% 18.07% X Shares (Net Income)* 34.17% N/A N/A N/A N/A
FTSE AW Asia Pacific ex Japan TR GBP 23.88% 55.54% -33.05% 37.20% 17.15%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 62 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 24.76% against 21.95% for the FTSE AW Pacific Ex Japan Index.
The Fund produced a strong absolute return and outperformed its benchmark. Performance was led by stock selection in the technology sector; HTC produced a stellar return as sales volumes beat expectations. Exposure to the oil and gas sector also helped, notably the holdings in gas pipe company APA Group and oil-services company WorleyParsons. Stock selection in financials was positive, notably the positions in IOOF Holdings, Bank of the Philippine Islands and Link Real Estate Investment Trust (REIT). Other property exposure, notably to Renhe Commercial Holdings and K-Green Trust (focus on infrastructure assets), cost some performance. Elsewhere, other bright spots over the period included a new holding in China’s Xinyi Glass Holdings, which has performed solidly.
Our exposure to Malaysia increased as we added to Sunway REIT following its initial public offering and acquired a stake in Lafarge Malayan Cement. Other new holdings included Transurban Group, GZI Transport, United Overseas Bank and Korea Exchange Bank. We also participated in the initial public offering of Mapletree Industrial Trust. To fund these additions, we sold our holding in Centennial Coal at a premium to the market price. We also sold DBS Group and FKP Property Group. In the oil and gas sector, we sold out of CNOOC as we saw more potential for higher yielding ideas elsewhere and did the same in respect of Santos as the company is likely to cut its dividend.
The table below shows the top ten purchases and sales for the period:
Purchases Sales QBE Insurance CNOOC Transurban Santos Philippine Long Distance Telecom DBS Korea Exchange Bank HTC Taiwan Semiconductor Manufacturing WorleyParsons Xinyi Glass Centennial Coal United Overseas Bank FKP Property Lafarge Malayan Cement Bhd Hang Seng Bank APA Link Real Estate Investment Trust
- 63 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 116.25 98.78 4.1187
2007 140.27 113.17 5.4027
2008 133.32 74.58 6.0311
2009 135.26 83.87 6.1402
2010 168.26 126.82 8.2595
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2006 116.87 99.04 4.0968
2007 141.63 113.81 5.3914
2008 134.72 75.68 6.0611
2009 138.09 85.25 6.2765
2010 172.65 129.50 8.5536
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 121.19 100.18 4.1737
2007 152.88 118.76 5.7196
2008 146.33 85.98 6.7210
2009 166.54 98.11 7.3818
2010 219.73 157.46 10.5480
Highest Lowest Net Revenue X Shares (Net Income) Price (p) Price (p) per share (p)*
2009 (from 2 April) 136.82 93.75 5.1291
2010 172.79 128.41 8.6236
*Distributions are shown in the year declared rather than paid.
- 64 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 82,486,356 109.75 75,158,541
30/06/09 93,858,553 100.57 93,330,667
30/06/10 238,209,343 136.48 174,536,666
31/12/10 420,399,292 165.53 253,970,887
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 47,195,410 111.20 42,441,149
30/06/09 57,886,032 102.39 56,533,797
30/06/10 143,823,067 139.66 102,977,599
31/12/10 263,740,038 169.82 155,302,322
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 6,609,295 124.03 5,328,580
30/06/09 12,644,894 121.38 10,417,954
30/06/10 41,792,679 174.64 23,930,489
31/12/10 73,850,755 218.34 33,824,446
X Shares (Net Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 24,654,275 100.94 24,425,000
30/06/10 5,016,314 139.07 3,607,114
31/12/10 20,114,675 169.96 11,834,897
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.66 1.66
Institutional Shares (Income) 1.09 1.09
Institutional Shares (Accumulation) 1.08 1.09
X Shares (Net Income) 0.09 0.09 - 65 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Australia 25.87% (25.24%) AMP 5,000,000 17,314,209 2.23 APA 12,000,000 31,735,080 4.08 IOOF 3,000,000 15,219,485 1.95 Macquarie Airports Management 12,000,000 23,408,549 3.01 QBE Insurance 3,700,000 43,959,763 5.65 Telstra 12,000,000 21,916,058 2.82 Transurban 9,000,000 30,164,037 3.88 WorleyParsons 1,000,000 17,504,044 2.25
China 3.57% (2.00%) GZI Transport 20,000,000 7,457,421 0.96 Jiangsu Expressway 'H' 17,000,000 12,395,890 1.59 Renhe Commercial 70,000,000 7,830,292 1.01 RREEF China Commercial 5,000,000 103,575 0.01
Hong Kong 12.94% (18.58%) Hopewell Highway Infrastructure 25,000,000 12,366,889 1.59 Link Real Estate Investment Trust 15,000,000 30,016,118 3.86 NWS 35,000,000 34,163,272 4.39 Pico Far East 30,000,000 4,002,149 0.51 Xinyi Glass 38,000,000 20,151,608 2.59
Pakistan 1.53% (2.33%) Oil & Gas Development GDR 400,000 5,121,401 0.66 United Bank GDR 3,300,000 6,741,547 0.87
South Korea 7.33% (6.00%) Korea Exchange Bank 3,000,000 20,088,990 2.58 LG Uplus 3,000,000 12,189,591 1.57 MacQuarie Korea Infrastructure 9,000,000 24,745,210 3.18
Malaysia 5.24% (4.58%) Bursa Malaysia Berhad 7,000,000 11,331,001 1.46 Lafarge Malayan Cement 9,000,000 14,418,046 1.85 Sunway Real Estate Investment Trust 70,000,000 15,059,266 1.93
Phillipines 6.46% (5.06%) Bank of the Philippine Islands 15,000,000 12,734,516 1.64 Philippine Long Distance Telecom 1,000,000 37,486,887 4.82
Singapore 14.51% (13.35%) Cache Logistics Trust 17,000,000 8,196,775 1.05 Keppel 3,000,000 17,056,524 2.19 K-Green Trust 17,000,000 9,050,606 1.16 Mapletree Industrial Trust 17,000,000 9,221,372 1.18 Mapletree Logistics Trust 40,000,000 19,186,078 2.46 Parkway Life REIT 30,000,000 24,710,865 3.17 Singapore Tech Engineering 7,000,000 12,023,945 1.54 United Overseas Bank 1,500,000 13,711,517 1.76
- 66 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Taiwan 14.96% (15.96%) Compal Electronics 19,000,950 16,228,028 2.08 HTC 1,700,000 33,771,438 4.34 Simplo Technology 2,200,000 10,306,222 1.32 Taiwan Mobile 12,000,288 18,482,699 2.38 Taiwan Semiconductor Manufacturing 24,000,448 37,654,652 4.84
Thailand 7.10% (7.65%) Advanced Info Service 17,000,000 30,872,017 3.97 Bangkok Expressway 25,000,000 10,522,123 1.35 PTT 2,000,000 13,673,419 1.78
Portfolio of investments 774,293,174 99.51
Net current assets 3,811,586 0.49
Total Net Assets 778,104,760 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
GDR = Global Depositary Receipt
- 67 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 116,033,737 72,668,862
Revenue 18,594,898 7,708,417
Expenses (4,034,178) (1,681,063)
Finance costs: Interest - (6)
Net revenue before taxation 14,560,720 6,027,348
Taxation (1,605,555) (440,040)
Net revenue after taxation 12,955,165 5,587,308
Total return before distributions 128,988,902 78,256,170
Finance costs: Distributions (16,454,352) ( 7,104,079)
Change in net assets attributable to Shareholders from investment activities 112,534,550 71,152,091
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 428,841,403 189,043,754
Amounts receivable on issue of shares 249,559,453 96,882,211 Amounts payable on cancellation of shares (15,061,831) (15,626,114) 234,497,622 81,256,097
Dilution adjustment 336,966 65,905
Stamp Duty Reserve Tax - (846)
Change in net assets attributable to Shareholders from investment activities (see above) 112,534,550 71,152,091
Retained distribution on accumulation shares 1,894,219 480,716
Closing net assets attributable to Shareholders 778,104,760 341,997,717
- 68 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 774,293,174 432,030,013
Debtors 8,027,742 46,202,484
Cash and bank balances 4,957,250 1,089,968
Total other assets 12,984,992 47,292,452
Total assets 787,278,166 479,322,465
LIABILITIES
Creditors (2,097,279) (43,792,397)
Distribution payable on income shares (7,076,127) (6,688,665)
Total liabilities (9,173,406) (50,481,062) Net assets attributable to Shareholders 778,104,760 428,841,403
- 69 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.8359 0.1836 1.6523 0.0000 1.6523 Group 1:Shares purchased prior to 1 October 2010
Group 2 1.1537 0.1154 1.0383 0.6140 1.6523 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.0620 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.9148 0.1915 1.7233 0.0000 1.7233 Group 1:Shares purchased prior to 1 October 2010
Group 2 1.3196 0.1320 1.1876 0.5357 1.7233 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.1065 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.4354 0.2435 2.1919 0.0000 2.1919 Group 1:Shares purchased prior to 1 October 2010
Group 2 2.2472 0.2247 2.0225 0.1694 2.1919 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.3334 pence per share.
- 70 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Distribution Statement (continued)
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.9100 0.1910 1.7190 0.0000 1.7190 Group 1:Shares purchased prior to 1 October 2010
Group 2 1.0553 0.1055 0.9498 0.7692 1.7190 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=92.59%, U=7.41%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £26 which is equivalent to 0.0002 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.0951 pence per share.
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.0390 0.3039 2.7351 0.0000 2.7351 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.0980 0.1098 0.9882 1.7469 2.7351 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 2.1385 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.1369 0.3137 2.8232 0.0000 2.8232 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.1650 0.1165 1.0485 1.7747 2.8232 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 2.2012 pence per share.
- 71 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Distribution Statement (continued)
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 3.8386 0.3839 3.4547 0.0000 3.4547 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.6083 0.0608 0.5475 2.9072 3.4547 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 2.6082 pence per share.
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.1346 0.3135 2.8211 0.0000 2.8211 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.8933 0.1893 1.7040 1.1171 2.8211 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 2.1684 pence per share.
- 72 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Asian Income Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 291,781,172 118,128,331 Commissions 629,137 217,515 Taxes 73,884 43,859
Total purchase costs 703,021 261,374
Gross purchases total 292,484,193 118,389,705
Analysis of total sales proceeds:
Sales before transaction costs 66,695,353 41,465,029 Commissions (100,986) (66,967) Taxes (45,609) (10,535)
Total sales costs (146,595) (77,502)
Total sales net of transaction costs 66,548,758 41,387,527
- 73 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
BNY MELLON INVESTMENT FUNDS - NEWTON BALANCED FUND
Interim Report for the six months ended 31 December 2010
- 74 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Iain Stewart Matthew Brown
Fund Size £2,298.36m
Sector Balanced Managed
Yield as at 31/12/10:
Sterling Income Shares 3.01% Institutional Shares (Accumulation) 2.95%
Key Dates: Fund Launch 04 November 1986† † Managed by Newton since July 1997
Aim
To achieve a balance between capital growth and income predominantly from a portfolio of UK and international securities. The Sub-Fund may also invest in derivative instruments, forward transactions and collective investment schemes.
Fund Ratings
AAA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 9.82% 14.46% -4.08% 14.05% 8.78% Institutional Shares (Accumulation)* 10.45% 15.04% -3.60% 14.66% N/A
LCI UK Balanced & Intl Equity** 14.76% 19.77% -17.73% 7.61% 8.72%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
** 35% FTSE All Share, 50% FTSE World Ex UK and 15% FTSE A British Govt All Stocks.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 75 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 13.65% against 17.39% for the LCI UK Balanced & Intl Equity (35:15:50) Index.
Equity markets staged a volatile but impressive rally during the second half of 2010. The Fund generated a strong positive absolute return in this environment, but underperformed its benchmark due to the defensive positioning of its equity portfolio. Fixed interest positioning, in particular a void position in UK Gilts, was the most significant driver of Fund performance, as Gilts experienced declines during the review period. Within the Fund’s top performing holdings, exposure to real assets was a key factor. Newcrest Mining (gold), Wood Group (oil), K+S (agricultural chemicals), BP (oil), Noble Group (commodities) and BHP (mining) were all in the top ten contributing stocks. Despite holding the aforementioned stocks, such was the strength of the basic materials and industrial sectors that void positions in Rio Tinto and Xstrata in particular detracted from performance. Stock selection in telecoms was positive, with Vodafone being a notable contributor as its share price started to reflect some value for its North American asset Verizon Wireless.
Within the equity portion of the portfolio, the Fund took advantage of share price declines to reduce the significant underweight position in the financial sector by introducing Lloyds Banking Group and adding to an existing position in HSBC Holdings. Other new additions included Hypermarcas, Brazil’s largest consumer goods company, and Huabao, a Chinese tobacco and food flavouring manufacturer. Both provide exposure to increasing wealth of emerging market consumers. Don Quijote, a Japanese equivalent to Woolworths, was added to the Fund after an impressive meeting with the management. The Fund’s exposure to gold was maintained over the quarter with the purchase of Yamana Gold, a gold miner with South American assets which we feel are undervalued. However, the position in Goldfields was reduced. Other notable equity sales included reduction of the Fund’s significant overweight position in Vodafone after a period of strong performance, and disposal of the positions in both pharmaceutical company AstraZeneca and the stock market operator Deutsche Boerse. In the fixed income component of the portfolio, the Fund moved further up the yield curve in its Norwegian government bond holdings, switching the 6.5% Kingdom of Norway 2013 holding into a combination of 4.5% Kingdom of Norway 2019 and 3.75% Kingdom of Norway 2021.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Norway 4.50% Bonds 2019 Norway 6.50% Bonds 2013 Lloyds Banking Vodafone Norway 3.75% Bonds 2021 Gold Fields HSBC AstraZeneca Hypermarcas Deutsche Boerse Roche Procter & Gamble Huabao International Willis Tesco Johnson & Johnson INPEX Takeda Pharmaceutical Yamana Gold Royal Dutch Shell B
- 76 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 140.44 127.50 3.7521
2007 155.70 136.15 4.0562
2008 156.33 116.56 4.4416
2009 161.38 126.97 4.9298
2010 200.87 172.70 4.9022
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 (from 5 June) 143.22 127.50 1.9320
2007 163.93 140.55 4.2398
2008 166.84 126.80 4.8004
2009 182.99 140.27 5.4750
2010 170.38 146.93 5.8070
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 343,549,561 143.78 238,945,672
30/06/09 509,247,716 134.49 378,651,553
30/06/10 748,226,270 149.28 501,231,295
31/12/10 922,804,008 167.92 549,552,841
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 769,218,623 156.18 492,508,501
30/06/09 850,254,013 152.09 559,030,317
30/06/10 1,048,624,696 175.48 597,573,297
31/12/10 1,375,553,943 200.00 687,789,784
- 77 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.61 1.62
Institutional Shares (Accumulation) 1.04 1.05
- 78 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Government Stocks 3.42% (4.29%) Lithuania 7.375% Bonds 2020 USD3,070,000 2,189,750 0.10 Norway 4.50% Bonds 2019 NOK331,220,000 39,074,038 1.70 Norway 3.75% Bonds 2021 NOK175,140,000 19,375,743 0.84 USA Treasury 2.50% Bonds 2029 USD24,152,900 17,885,464 0.78
Sterling Denominated Corporate Bonds 3.11% (4.22%) British Telecommunications 3.50% Index Linked 2025 £4,010,000 5,626,150 0.24 BUPA Finance 7.50% Bonds 2016 £5,829,000 6,447,104 0.28 EDF Energy Networks 3.125% Index Linked 2032 £833,000 1,271,408 0.06 First 8.75% Bonds 2021 £2,073,000 2,547,296 0.11 Imperial Tobacco Finance 8.125% Notes 2024 £2,650,000 3,263,589 0.14 Iron Mountain 7.25% Bonds 2014 £2,332,000 2,370,944 0.10 John Lewis 8.375% Bonds 2019 £2,192,000 2,620,558 0.11 Juturna 5.0636% Bonds 2033 £3,707,000 3,628,133 0.16 LBG Capital 7.869% Bonds 2020 £4,290,000 3,726,723 0.16 Longstone Finance 4.791% Bonds 2030 £2,940,000 2,649,651 0.12 Matalan Finance 9.625% Bonds 2017 £4,521,000 4,814,775 0.21 Nationwide Building Society 5.625% Bonds 2019 £1,606,000 1,596,609 0.07 QBE Insurance 6.125% Bonds 2015 £2,150,000 2,268,994 0.10 Royal Bank of Scotland 6.00% Bonds 2017 £459,000 462,078 0.02 Telefonica Emisiones 5.888% Bonds 2014 £3,200,000 3,385,548 0.15 Tesco 1.982% Index Linked Bonds 2036 £2,099,000 2,416,789 0.11 Tesco Property Finance 5.744% Bonds 2040 £8,100,000 8,363,098 0.36 Thames Water Utilities Finance 3.375% Indexed Linked Notes 2021 £3,731,000 5,451,364 0.24 TUI Travel 6.00% Bonds 2014 £4,700,000 4,801,990 0.21 Virgin Media Finance 8.875% Bonds 2019 £3,180,000 3,609,618 0.16
Non-Sterling Denominated Corporate Bonds 6.71% (7.78%) Abengoa 8.50% Bonds 2016 EUR3,550,000 2,900,010 0.13 Altria 10.20% Bonds 2039 USD5,596,000 5,058,745 0.22 BAT International Finance 9.50% Bonds 2018 USD4,477,000 3,773,776 0.16 Bombardier 6.125% Bonds 2021 EUR7,370,000 6,193,290 0.27 BP Capital Markets 5.25% Bonds 2013 USD15,405,000 10,713,021 0.47 Campofrio Food 8.25% Bonds 2016 EUR4,640,000 4,099,126 0.18 Cemex Finance 9.50% Bonds 2016 USD2,891,000 1,925,695 0.08 Cemex Finance 9.625% Bonds 2017 EUR3,637,000 3,089,223 0.13 Chesapeake Energy 6.25% Bonds 2017 EUR3,090,000 2,684,298 0.12 Clearwire Comm/Finance 12.00% Bonds 2015 USD5,640,000 3,922,973 0.17 Conti-Gummi Finance 7.125% Bonds 2018 EUR6,019,000 5,304,409 0.23 Heidelberg Cement 8.50% Bonds 2019 EUR4,663,000 4,415,883 0.19 Heidelberg Cement 8.00% Bonds 2017 EUR2,850,000 2,622,226 0.11 Ineos Finance 9.25% Bonds 2015 EUR6,391,000 5,878,904 0.26 LBI Escrow 8.00% Bonds 2017 EUR4,314,000 3,622,429 0.16 Lecta FRN 2014 EUR6,155,000 4,973,346 0.22 Lottomatica 8.25% Bonds 2066 EUR4,197,000 3,508,812 0.15 Mubadala Development 7.625% Bonds 2019 USD6,388,000 4,835,693 0.21 Nextel Communications 6.875% Bonds 2013 USD23,297,000 15,008,307 0.65 Nextel Communications 7.375% Bonds 2015 USD8,450,000 5,432,863 0.24 OI European 6.75% Bonds 2020 EUR7,287,000 6,348,317 0.28 Phoenix PIB Finance 9.625% Bonds 2014 EUR4,690,000 4,396,341 0.19 Prudential 11.75% FRN 2049 USD7,130,000 5,315,241 0.23 Smiths 7.20% Bonds 2019 USD4,591,000 3,303,557 0.14
- 79 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Smurfit Kappa Acquisition 7.25% Bonds 2017 EUR5,176,000 4,617,256 0.20 Standard Chartered Bank 5.875% Bonds 2017 EUR3,850,000 3,466,317 0.15 Sunrise Communications International 7.00% Bonds 2017 CHF4,211,000 3,051,853 0.13 UPC Germany 8.125% Bonds 2017 EUR5,503,000 5,026,661 0.22 US Bank 4.375% Bonds 2017 EUR2,900,000 2,448,978 0.11 Versatel FRN SNR 2014 EUR5,223,000 4,054,794 0.18 Virgin Media Finance 9.50% Bonds 2016 USD2,985,000 2,169,018 0.09 Wind Acquisition Finance 11.75% Bonds 2017 EUR6,761,000 6,468,780 0.28 Woodside Finance 8.75% Bonds 2019 USD4,756,000 3,790,495 0.16
United Kingdom 30.84% (31.51%)
Oil & Gas Producers 4.43% (4.64%) BG 1,072,417 13,936,059 0.61 BP 11,286,334 52,910,334 2.30 Royal Dutch Shell B 1,647,042 35,032,583 1.52
Oil Equipment, Services & Distribution 0.49% (0.36%) Wood John 2,036,538 11,292,603 0.49
Forestry & Paper 0.00% (0.00%) Mondi 1 5 0.00
Mining 2.35% (1.86%) Anglo American 426,257 14,249,772 0.62 BHP Billiton 1,548,200 39,711,330 1.73
Aerospace & Defence 0.98% (1.13%) BAE Systems 2,935,642 9,722,846 0.42 Cobham 6,342,527 12,945,098 0.56
General Industrials 0.56% (0.61%) Smiths 1,021,202 12,816,085 0.56
Support Services 0.88% (1.16%) Atkins 862,193 6,048,284 0.26 Capita 756,854 5,309,331 0.23 Serco 1,590,615 8,986,975 0.39
Beverages 0.43% (0.49%) Diageo 834,130 9,926,147 0.43
Food Producers 1.40% (1.53%) Associated British Foods 1,834,654 21,703,957 0.94 Unilever 542,223 10,687,215 0.46
Tobacco 0.69% (0.75%) British American Tobacco 639,390 15,815,312 0.69
Health Care Equipment & Services 1.49% (1.41%) Smith & Nephew 4,999,759 34,223,350 1.49
Pharmaceuticals & Biotechnology 3.75% (4.62%) GlaxoSmithKline 6,909,530 86,334,577 3.75 - 80 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Food & Drug Retailers 2.01% (1.83%) Morrison Supermarkets 6,911,882 18,468,549 0.80 Tesco 6,456,922 27,745,394 1.21
Media 0.30% (0.36%) British Sky Broadcasting 930,300 6,847,008 0.30
Travel & Leisure 0.57% (0.56%) Whitbread 720,902 12,990,654 0.57
Fixed Line Telecommunications 0.48% (0.77%) Cable & Wireless Communications 11,779,443 5,713,030 0.25 Cable & Wireless Worldwide 7,974,853 5,327,202 0.23
Mobile Telecommunications 3.41% (4.18%) Vodafone 47,076,338 78,287,950 3.41
Gas, Water & Multiutilities 1.95% (1.98%) Centrica 4,834,846 16,071,028 0.70 Scottish & Southern Energy 1,381,474 17,019,760 0.74 Severn Trent 786,739 11,628,002 0.51
Banks 3.18% (1.98%) HSBC 4,831,867 31,701,879 1.38 Lloyds Banking 27,155,208 18,003,903 0.78 Standard Chartered 1,338,609 23,392,192 1.02
Non Life Insurance 0.39% (0.47%) RSA Insurance 7,137,544 8,979,030 0.39
Life Insurance 0.77% (0.42%) Prudential 1,475,142 9,853,949 0.43 Standard Life 3,618,400 7,822,981 0.34
Biotechnology/Life Sciences 0.33% (0.40%) Biotech Growth Trust 4,582,805 7,676,198 0.33
Investment Trusts 0.40% (0.69%) Impax Environmental Markets 7,131,027 9,199,025 0.40
Collective Investment Schemes 1.25% (1.47%) Capita Financial Managers Morant Wright Japan 'B' (Acc) 4,040,572 8,585,003 0.37 RWC Partners Global Convertibles Fund 'B' 34,409 20,182,586 0.88
Commodities 5.02% (5.18%) ETFS Agriculture DJ-AIGCISM 0.00% Secured Note 7,668,152 45,088,734 1.96 ETFS Physical Gold 0.00% Secured Note (AUD) 291,613 25,627,023 1.11 ETFS Physical Gold 0.00% Secured Note (GBP) 500,237 44,831,240 1.95
- 81 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Equities 37.33% (38.80%)
United States of America 8.11% (10.79%) Altria 959,536 15,202,284 0.66 Barrick Gold 534,901 18,120,559 0.79 Cisco Systems 822,351 10,714,343 0.47 Consol Energy 272,721 8,571,382 0.37 Devon Energy 122,844 6,186,110 0.27 eBay 719,122 13,028,210 0.57 Kroger 678,730 9,695,518 0.42 Medco Health Solutions 287,271 11,424,605 0.50 Medtronic 507,327 12,144,873 0.53 Millicom International Cellular 465,580 28,539,901 1.24 Newmont Mining 609,721 23,985,160 1.04 Pfizer 1,084,434 12,215,335 0.53 Sprint Nextel 6,192,584 16,591,196 0.72
Brazil 2.22% (1.66%) Hypermarcas 1,456,726 12,731,173 0.55 Petroleo Brasileiro ADR 801,027 17,395,911 0.76 Rossi Residencial 826,300 4,717,073 0.21 Tele Norte Leste Participacoes ADR 1,702,736 16,109,481 0.70
Canada 0.98% (0.00%) Potash of Saskatchewan 96,094 9,482,926 0.41 Yamana Gold 1,594,150 13,065,159 0.57
Peru 0.57% (0.61%) Minas Buenaventura ADR 420,887 13,106,129 0.57
Australia 2.10% (2.02%) Newcrest Mining 1,821,813 48,227,187 2.10
China 0.36% (0.41%) Yingde Gases 14,361,500 8,270,480 0.36
Hong Kong 0.79% (0.06%) AIA 3,163,800 5,728,047 0.25 Huabao International 11,845,000 12,327,381 0.54
India 0.51% (0.52%) Housing Development Finance 1,025,780 10,742,741 0.47 State Bank of India GDR 11,920 983,417 0.04
Japan 2.19% (1.44%) Canon 311,150 10,371,944 0.45 Don Quijote 576,800 11,294,257 0.49 INPEX 3,306 12,446,913 0.54 Makita 314,100 8,256,848 0.36 Nomura 1,968,200 8,025,734 0.35
Malaysia 0.10% (0.23%) Bursa Malaysia 1,411,300 2,284,492 0.10
- 82 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Singapore 1.37% (1.40%) DBS 1,376,000 9,896,561 0.43 Noble 19,835,043 21,618,011 0.94
South Korea 0.29% (0.39%) LG Uplus 1,665,564 6,767,515 0.29
Taiwan 0.54% (0.61%) Taiwan Mobile 8,024,026 12,358,508 0.54
Thailand 0.38% (0.48%) Advanced Info Service 4,808,700 8,732,604 0.38
South Africa 1.40% (1.51%) Gold Fields 1,138,634 13,316,020 0.58 MTN 1,447,263 18,772,266 0.82
Denmark 0.00% (0.00%) Carlsberg 217 14,013 0.00
France 2.90% (3.33%) Air Liquide 194,505 15,929,242 0.69 Alstom 228,850 7,034,650 0.31 L'Oreal 169,302 12,172,551 0.53 Suez Environnement 603,445 7,978,337 0.35 Thales 450,260 10,190,780 0.44 Total 385,670 13,236,295 0.58
Germany 3.00% (3.31%) Bayer 499,886 23,679,200 1.03 Deutsche Telekom 2,392,959 19,840,822 0.86 K+S 324,508 15,835,967 0.69 Siemens 120,500 9,659,753 0.42
Italy 0.26% (0.20%) Amplifon 1,883,551 6,014,713 0.26
Netherlands 0.48% (0.57%) Reed Elsevier 1,384,132 11,055,184 0.48
Norway 1.50% (1.25%) DNB 1,014,196 9,168,137 0.40 Statoil 1,658,966 25,379,088 1.10
Spain 0.72% (1.00%) Amadeus 727,008 9,809,381 0.43 Indra Sistemas 605,325 6,670,197 0.29
Poland 0.61% (0.61%) Telekomunikacja Polska 3,894,491 14,027,000 0.61
- 83 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Switzerland 6.43% (5.42%) Ericsson 1,134,703 8,516,162 0.37 TeliaSonera 2,127,671 10,890,916 0.47 Actelion 318,157 11,215,700 0.49 BB Biotech 184,356 7,799,991 0.34 Nestle 429,129 16,176,589 0.70 Novartis 782,191 29,593,441 1.29 Roche Hldgs 345,091 32,551,361 1.42 Syngenta 108,162 20,360,488 0.89 Zurich Financial Services 63,128 10,527,158 0.46
Turkey 0.50% (0.00%) Turkcell Iletisim Hizmetleri ADR 1,025,080 11,434,524 0.50
Derivatives 0.32% (-0.20%)
Futures & Options 0.30% (0.00%) Anglo American February 2011 3200 (Call Option) £880 2,534,400 0.11 Hang Seng Index February 2011 24400 (Call Option) £1,144 857,869 0.04 Rio Tinto February 2011 4400 (Call Option) £412 1,409,040 0.06 Xstrata February 2011 1500 (Call Option) £1,943 2,040,150 0.09
JPY Forward Foreign Currency Contracts -0.03% (-0.19%) Forward Foreign Currency Contracts 14/01/11 JPY(4,186,053,000) (33,144,617) (1.44) Forward Foreign Currency Contracts 14/01/11 £31,844,291 31,844,291 1.39 Forward Foreign Currency Contracts 14/01/11 JPY1,359,939,000 10,767,818 0.47 Forward Foreign Currency Contracts 14/01/11 £(10,289,979) (10,289,979) (0.45)
USD Forward Foreign Currency Contracts 0.02% (-0.04%) Forward Foreign Currency Contracts 15/03/11 USD(157,114,000) (101,261,173) (4.41) Forward Foreign Currency Contracts 15/03/11 £101,709,684 101,709,684 4.43
EUR Forward Foreign Currency Contracts 0.03% (0.02%) Forward Foreign Currency Contracts 13/05/11 EUR(42,323,000) (36,492,800) (1.59) Forward Foreign Currency Contracts 13/05/11 £37,197,685 37,197,685 1.62
Portfolio of investments 2,054,344,496 89.38
Net current assets 244,013,455 10.62
Total Net Assets 2,298,357,951 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Sweden portfolio category, which, at 30 June 2010, represented 0.98% of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt GDR = Global Depositary Receipt
- 84 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 252,506,678 261,432,513
Revenue 25,828,797 23,937,354
Expenses (13,218,048) (10,420,260)
Finance costs: Interest - (254) Net revenue before taxation 12,610,749 13,516,840
Taxation (645,099) (474,574) Net revenue after taxation 11,965,650 13,042,266
Total return before distributions 264,472,328 274,474,779
Finance costs: Distributions (22,426,715) (21,069,207) Change in net assets attributable to Shareholders from investment activities 242,045,613 253,405,572
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 1,796,850,966 1,359,501,729
Amounts receivable on issue of shares 261,159,724 221,772,236 Amounts payable on cancellation of shares (15,983,751) (6,226,718) 245,175,973 215,545,518
Stamp Duty Reserve Tax (111,781) (43,157)
Change in net assets attributable to Shareholders from investment activities (see above) 242,045,613 253,405,572
Retained distributions on accumulation shares 14,396,816 13,620,397
Unclaimed distributions 364 230
Closing net assets attributable to Shareholders 2,298,357,951 1,842,030,289
- 85 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 2,055,644,822 1,688,308,203
Debtors 20,837,921 27,711,453
Cash and bank balances 235,273,927 130,202,499
Total other assets 256,111,848 157,913,952
Total assets 2,311,756,670 1,846,222,155
LIABILITIES
Investment liabilities (1,300,326) (3,962,416)
Creditors (2,633,445) (29,470,119)
Distribution payable on income shares (9,464,948) (15,938,654)
Total other liabilities (12,098,393) (45,408,773)
Total liabilities (13,398,719) (49,371,189)
Net assets attributable to Shareholders 2,298,357,951 1,796,850,966
* Gross of investment liabilities
- 86 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.9137 0.1914 1.7223 0.0000 1.7223 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.8334 0.0833 0.7501 0.9722 1.7223 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The final distribution for the period ended 31 December 2009 was 1.9314 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.3258 0.2326 2.0932 0.0000 2.0932 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.1206 0.1121 1.0085 1.0847 2.0932 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=99.53%, U=0.47%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £14,240 which is equivalent to 0.0020 pence per share.
The final distribution for the period ended 31 December 2009 was 2.1939 pence per share
- 87 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Balanced Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 325,461,601 413,822,692 Commissions 320,234 285,468 Taxes 424,848 545,307
Total purchase costs 745,082 830,775
Gross purchases total 326,206,683 414,653,467
Analysis of total sales proceeds: 213,831,533 158,317,953
Sales before transaction costs Commissions (123,001) (107,199) Taxes (3,114) (717)
Total sales costs (126,115) (107,916)
Total sales net of transaction costs 213,705,418 158,210,037
- 88 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
BNY MELLON INVESTMENT FUNDS - NEWTON CAUTIOUS MANAGED FUND
Interim Report for the six months ended 31 December 2010
- 89 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Simon Nichols Rob Stewart
Fund Size £46.05m
Sector IMA Cautious Managed
Yield as at 31/12/10:
Sterling Income Shares 3.72%
Key Dates: Fund Launch 31 January 1994
Aim
To achieve income and capital growth from a portfolio of equities and fixed interest securities. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 10.95% 19.71% -21.30% 3.56% 11.33%
IMA Sector* 8.66% 19.76% -21.75% 4.14% 9.84%
*IMA Cautious Managed. Prior to 1 January 2010, data is for IMA Balanced Managed.
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 90 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 12.66% against 8.95% for the IMA Cautious Managed Sector.
The Fund generated a strong performance over the period, helped by its higher exposure to shares and lower allocation to bonds. The holdings in resource stocks such as BHP Billiton, Rio Tinto and Anglo American performed very well amid rising commodity prices, and BP recovered significantly from the Gulf of Mexico disaster following cessation of the spill. Meanwhile, the Fund’s bond holdings performed less well due to the increase in yields (decline in prices), and some of the more defensive equity holdings such as Morrison (WM) Supermarkets and the defence contractor Cobham also struggled.
Within the equity portion of the portfolio, the manager sold the Fund’s position in AstraZeneca following very strong performance on some favourable legal rulings. The valuation of the stock compared with its peers had become less attractive than it had earlier been, despite the company’s lack of product pipeline. The proceeds from the sale were switched into Roche. The manager reduced the Fund’s holding in Vodafone following a strong performance, and added China Mobile to the portfolio. China Mobile offers exposure to the Chinese telecoms market and though the company is not growing as fast as previously this is reflected in the valuation. The manager added a position in inflation-linked UK government bonds, and also established to a position in short-dated Norwegian bonds as the economic situation of the country should make the currency relatively attractive.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Treasury 2.50% Index Linked 2024 Vodafone Norway 6.50% Bonds 2013 National Grid Roche AstraZeneca John Lewis 6.125% Bonds 2025 HSBC LBG Capital No.1 7.869% Bonds 2020 RWE Finance 6.50% EMTN 2021 New South Wales Treasury 2.75% Index Linked Bonds 2025 BAT International Finance 9.50% Bonds 2018 Tesco Sainsbury China Mobile Scottish & Southern Energy 5.00% Bonds 2018 Consol Energy 8.00% Bonds 2017 Reed Elsevier Investment 5.625% Bonds 2016 Reed Elsevier Australia 3.00% Index Linked 2025
- 91 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 177.62 158.92 5.6760
2007 185.78 166.87 6.5645
2008 177.37 115.24 6.9953
2009 152.92 111.92 6.0698
2010 162.74 143.71 5.8935
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 53,883,356 159.09 33,868,825
30/06/09 41,535,815 125.15 33,189,488
30/06/10 43,928,035 145.01 30,293,253
31/12/10 46,050,552 160.90 28,620,047
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.41 1.54
- 92 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 1.54% (0.00%) Treasury Stock 2.50% Index Linked 2024 £250,000 708,078 1.54
Overseas Government Stocks 2.64% (0.00%) New South Wales Treasury 2.75% Index Linked Bonds 2025 AUD760,000 505,700 1.10 Norway 6.50% Bonds 2013 NOK5,900,000 711,067 1.54
Sterling Denominated Corporate Bonds 22.25% (28.00%) British Telecommunications 7.50% Variable Bonds 2016 £450,000 539,339 1.17 Cable & Wireless International Finance 8.625% Bonds 2019 £440,000 449,117 0.98 Cable & Wireless 8.75% Variable Bonds 2012 £560,000 590,050 1.28 Centrica 6.375% Bonds 2022 £550,000 611,334 1.33 CRH Finance 8.25% Bonds 2015 £200,000 222,071 0.48 Daily Mail & General Trust 7.50% Bonds 2013 £500,000 526,070 1.14 Firstgroup 6.125% Variable Bonds 2019 £484,000 501,028 1.09 GE Capital 5.875% Bonds 2020 £600,000 630,895 1.37 Go-Ahead 5.375% Bonds 2017 £500,000 505,216 1.10 HSBC Bank 5.75% Bonds 2017 £500,000 513,001 1.11 Imperial Tobacco Finance 8.125% Notes 2024 £450,000 554,194 1.20 John Lewis 8.375% Bonds 2019 £450,000 537,980 1.17 John Lewis 6.125% Bonds 2025 £545,000 555,905 1.21 LBG Capital No.1 7.869% Bonds 2020 £600,000 521,220 1.13 QBE Insurance 6.125% Bonds 2015 £360,000 379,925 0.83 Scottish & Southern Energy 5.453% Bonds 2049 £450,000 433,980 0.94 Smiths 7.25% Variable Bonds 2016 £321,000 358,020 0.78 Standard Chartered Bank 5.375% Perpetual 2049 £587,000 527,835 1.15 Tesco Property Finance 2 6.0517% Bonds 2039 £450,000 479,127 1.04 United Business Media 6.50% Bonds 2016 £450,000 481,650 1.05 Wal-Mart Stores 5.625% Bonds 2034 £300,000 321,982 0.70
Non-Sterling Denominated Corporate Bonds 7.16% (6.60%) Consol Energy 8.00% Bonds 2017 USD664,000 455,439 0.99 FMC Finance III 6.875% Bonds 2017 USD1,125,000 768,017 1.67 Heidelberg Cement 8.50% Bonds 2019 EUR677,000 641,122 1.39 ICAP 7.50% Bonds 2014 EUR650,000 595,408 1.29 Nextel Communications 6.875% Bonds 2013 USD942,000 606,851 1.32 Santos Finance 8.25% Bonds 2070 EUR270,000 228,604 0.50
United Kingdom 37.04% (42.12%)
Oil & Gas Producers 7.55% (6.37%) BG 54,614 709,709 1.54 BP 239,573 1,123,118 2.44 Royal Dutch Shell B 77,318 1,644,554 3.57
Mining 4.50% (2.87%) Anglo American 12,667 423,458 0.92 BHP Billiton 38,627 990,783 2.15 Rio Tinto 14,549 656,742 1.43
- 93 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Aerospace & Defence 1.66% (1.74%) BAE Systems 101,099 334,840 0.73 Cobham 210,668 429,973 0.93
Support Services 0.78% (1.40%) Bunzl 50,000 360,750 0.78
Beverages 1.02% (1.10%) Diageo 39,328 468,003 1.02
Food Producers 2.46% (2.41%) Associated British Foods 54,000 638,820 1.39 Unilever 24,969 492,139 1.07
Personal Goods 0.77% (1.07%) PZ Cussons 88,106 353,746 0.77
Tobacco 1.05% (0.00%) Imperial Tobacco 24,628 485,664 1.05
Health Care Equipment & Services 1.17% (0.00%) Smith & Nephew 78,747 539,023 1.17
Pharmaceuticals & Biotechnology 3.18% (5.04%) GlaxoSmithKline 117,297 1,465,626 3.18
Food & Drug Retailers 2.03% (2.08%) Morrison Supermarkets 172,465 460,826 1.00 Tesco 109,955 472,477 1.03
General Retailers 0.52% (0.53%) Halfords 52,681 240,489 0.52
Media 1.03% (0.00%) Reed Elsevier 87,813 473,751 1.03
Travel & Leisure 1.18% (1.11%) Whitbread 30,298 545,970 1.18
Mobile Telecommunications 2.16% (3.83%) Vodafone 597,186 993,120 2.16
- 94 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Electricity 1.18% (1.13%) Scottish & Southern Energy 44,299 545,764 1.18
Gas, Water & Multiutilities 0.67% (2.97%) Centrica 93,444 310,608 0.67
Banks 2.99% (5.01%) HSBC 137,687 903,364 1.96 Standard Chartered 27,133 474,149 1.03
Nonlife Insurance 1.14% (1.13%) Catlin 73,698 273,346 0.59 RSA Insurance 200,000 251,600 0.55
Investment Trusts 1.06% (0.81%) 3I Infrastructure 406,078 487,700 1.06
Collective Investment Schemes 0.70% (0.57%) BNY MFM Newton UK Smaller Companies Class 'X' Acc 24,506 321,536 0.70
Overseas Equities 18.09% (14.22%)
United States of America 1.23% (1.18%) AT&T 16,000 302,132 0.66 Johnson & Johnson 6,600 263,286 0.57
Brazil 0.76% (0.84%) Tele Norte Leste Participacoes ADR 36,902 349,128 0.76
Australia 1.05% (1.09%) Newcrest Mining 18,203 481,871 1.05
China 0.98% (0.00%) China Mobile (Hong Kong) 70,500 450,099 0.98
Singapore 3.46% (1.92%) DBS 75,000 539,420 1.17 Mapletree Logistics 1,205,920 578,422 1.26 United Overseas Bank 52,000 475,333 1.03
Taiwan 0.87% (0.75%) Taiwan Semiconductor Manufacturing ADS 50,503 402,671 0.87
- 95 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Germany 1.73% (2.30%) Bayer 11,500 544,746 1.18 Fresenius Medical Care 6,806 254,173 0.55
Italy 0.76% (0.71%) ENI 25,000 350,787 0.76
Norway 2.14% (1.04%) DNB 19,372 175,119 0.38 Statoil 52,956 810,128 1.76
Switzerland 5.11% (2.37%) Novartis 16,984 642,573 1.39 Roche 6,708 632,745 1.37 Syngenta 2,822 531,215 1.15 Zurich Financial Services 3,308 551,639 1.20
Derivatives -0.05% (0.00%)
AUD Forward Currency Contracts -0.05% (0.00%) Forward Foreign Currency Contracts 15/06/11 AUD(762,000) (488,238) (1.06) Forward Foreign Currency Contracts 15/06/11 £465,500 465,500 1.01
Portfolio of investments 41,644,622 90.43
Net current assets 4,405,930 9.57
Total Net Assets 46,050,552 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Oil Equipment & Services, Household Goods & Home Construction, Fixed Line Telecommunications, General Financial, France, Netherlands and Spain portfolio categories, which, at 30 June 2010, represented 0.49%, 0.37%, 0.74%, 0.73%, 0.94%, 0.59% and 0.49% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt ADS = American Depositary Share
- 96 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 4,928,913 8,667,715
Revenue 841,021 991,646
Expenses (324,313) (389,839)
Net revenue before taxation 516,708 601,807 Taxation (34,989) (8,057)
Net revenue after taxation 481,719 593,750 Total return before distributions 5,410,632 9,261,465
Finance costs: Distributions (710,880) (874,812)
Change in net assets attributable to Shareholders from investment activities 4,699,752 8,386,653
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 43,928,035 41,535,815
Amounts receivable on issue of shares 541,206 657,836 Amounts payable on cancellation of shares (3,119,047) (2,169,581) (2,577,841) (1,511,745)
Stamp Duty Reserve Tax (3,331) (3,747)
Change in net assets attributable to Shareholders from investment activities (see above) 4,699,752 8,386,653
Unclaimed distributions 3,937 950
Closing net assets attributable to Shareholders 46,050,552 48,407,926
- 97 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 41,667,360 40,555,335
Debtors 563,377 654,757
Cash and bank balances 4,291,915 3,471,919
Total other assets 4,855,292 4,126,676
Total assets 46,522,652 44,682,011
LIABILITIES
Investment liabilities (22,738) -
Creditors (134,341) (121,847)
Distribution payable on income shares (315,021) (632,129)
Total other liabilities (449,362) (753,976)
Total liabilities (472,100) (753,976)
Net assets attributable to Shareholders 46,050,552 43,928,035
- 98 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distributions for Sterling Income Shares (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.2230 0.1223 1.1007 0.0000 1.1007 Group 1:Shares purchased prior to 1 October 2010 Group 2 0.4482 0.0448 0.4034 0.6973 1.1007 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=71.93%, U=28.07%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 1.2460 pence per share.
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.4670 0.1467 1.3203 0.0000 1.3203 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.5974 0.0597 0.5377 0.7826 1.3203 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=79.49%, U=20.51%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 30 September 2009 was 1.4219 pence per share.
- 99 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Cautious Managed Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 10,871,287 8,821,373 Commissions 5,159 1,014 Taxes 16,783 4,240 Total purchase costs 21,942 5,254
Gross purchases total 10,893,229 8,826,627
Analysis of total sales proceeds:
Sales before transaction costs 14,734,509 13,192,951 Commissions (6,719) (12,186) Taxes (34) (859) Total sales costs (6,753) (13,045)
Total sales net of transaction costs 14,727,756 13,179,906
- 100 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
BNY MELLON INVESTMENT FUNDS - NEWTON CONTINENTAL EUROPEAN FUND
Interim Report for the six months ended 31 December 2010
- 101 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Raj Shant Thomas Beevers
Fund Size £265.63m
Sector Europe Ex UK
Yield as at 31/12/10:
Sterling Income Shares 1.16% Euro Accumulation Shares 0.61% Exempt Shares 1 (Net Accumulation) 2.15%
Key Dates: Fund Launch 01 June 1987
Aim
To achieve capital growth from a portfolio of predominantly European securities. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 2.32% 15.09% -18.21% 15.50% 18.26% Euro Accumulation Shares 1.32% 13.73% -17.99% 14.52% 18.13% Exempt Shares 1 (Net Accumulation) 3.42% 16.04% -17.55% 16.60% 19.47%
FTSE Europe ex UK TR GBP 5.75% 20.09% -23.99% 15.72% 20.13%
Source: Lipper as at 31 December 2010 - Total return including income net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 102 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 17.28% against 18.84% for the FTSE World Europe Ex UK Index.
The Fund generated a strong return in absolute terms, but nevertheless lost some performance relative to the market during the strong equity market rally seen in the second half of 2010. At the stock level, the holding in the Spanish infrastructure and construction company Acciona reduced performance, as did the Italian bank Intesa Sanpaulo and Swiss bank UBS. Both banks are suffering from low volume growth and the regulatory uncertainty which is currently clouding the financial sector. Meanwhile, the position in the Spanish telecoms provider Telefonica also struggled over the six-month period. The Fund’s top performing holding over the period was the German car company Volskwagen, which is benefiting from the cyclical rebound in car demand, particularly in China. Meanwhile, the German fertilizer company K+S benefited from rising commodity prices.
During the six-month period the manager participated in two initial public offerings which led to new positions in the Russian supermarket O’Key and Danish jewellery company Pandora. O’Key is expanding its footprint in the Russian hypermarket space, benefiting from an increasing demand for fresh produce. Pandora has a very good growth profile due to the global popularity of its charm bracelets and charms, and industry-leading margins given its Thai production facilities. Other purchases included the Swiss staffing company Adecco and German semi-conductor producer Infineon. During the period, sales included the Anglo-Dutch publishing company Reed Elsevier. The manager also sold the Fund’s position in French transport and energy infrastructure company Alstom after more signs that competition from Chinese companies is having a negative effect on its sales and margins. Other notable sales included the German reinsurer Munich Re and the Swiss biotech business Lonza.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Telefonica Deutsche Telekom Intesa Sanpaolo UBS Banco Santander Banco Santander Infineon Technologies Bank of Ireland Metro Reed Elsevier Renault Carrefour Sulzer Ahold (Kon) Pandora Roche Nokia Deutsche Post Adecco Telekomunikacja Polska
- 103 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share*
2006 160.30 137.05 0.6675
2007 185.72 155.78 1.3007
2008 192.83 122.03 2.1842
2009 176.55 119.30 2.5335
2010 174.38 141.46 1.9553
Highest Price Lowest Price Net Revenue per Euro Accumulation Shares (cents) (cents) share (cents)*
2006 115.66 96.45 N/A
2007 129.64 110.66 0.5307
2008 121.58 72.12 0.7168
2009 94.22 64.22 0.9950
2010 100.08 84.11 0.7392
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share*
2006 135.09 113.92 1.7708
2007 158.89 131.58 2.4145
2008 165.87 106.59 3.1971
2009 158.26 104.59 3.2372
2010 157.09 129.56 3.3519
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 306,547,756 174.59 175,582,997
30/06/09 238,790,336 135.39 176,374,098
30/06/10 232,312,714 144.27 161,029,141
31/12/10 255,562,701 169.06 151,170,730 - 104 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 4,994,227 107.50 5,861,079
30/06/09 2,508,368 79.13 3,719,359
30/06/10 2,617,997 88.65 3,611,867
31/12/10 2,556,900 98.31* 3,017,812
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 6,582,820 153.50 4,288,521
30/06/09 4,895,679 121.02 4,045,381
30/06/10 3,321,595 132.13 2,513,875
31/12/10 7,513,720 155.67 4,826,834
* Euro/Sterling exchange rate at midday 31 December 2010: 1.160248
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.64 1.64
Euro Accumulation Shares 2.14 2.14
Exempt Shares 1 (Net Accumulation) 0.57 0.57
- 105 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Belgium 3.69% (4.39%) Anheuser-Busch 114,713 4,221,724 1.59 Umicore 165,121 5,588,011 2.10
Denmark 3.07% (0.00%) Pandora 210,240 8,158,277 3.07
Finland 2.15% (0.00%) Nokia 854,871 5,699,152 2.15
France 17.32% (20.09%) Air Liquide 100,586 8,237,623 3.10 BNP Paribas 161,616 6,699,364 2.52 EADS 175,881 2,657,359 1.00 L'Oreal 104,559 7,517,630 2.83 Renault 170,079 6,355,346 2.39 SES 200,829 3,105,262 1.17 Thales 117,494 2,659,253 1.00 Total 256,465 8,801,946 3.31
Germany 30.47% (32.24%) Allianz 103,468 7,914,505 2.98 Bayer 153,771 7,284,009 2.74 Bilfinger Berger 102,583 5,548,910 2.09 Brenntag 66,355 4,347,613 1.64 Deutsche Post 196,078 2,139,498 0.81 Infineon Technologies 1,093,550 6,599,485 2.49 K+S 195,200 9,525,746 3.59 Metro 152,832 7,131,516 2.68 Qiagen 298,083 3,768,918 1.42 SAP 150,980 4,953,950 1.87 Siemens 128,647 10,312,848 3.88 Volkswagen 74,852 7,844,880 2.95 Wacker Chemie 31,330 3,544,125 1.33
Italy 2.15% (0.00%) Intesa Sanpaolo 3,279,363 5,709,396 2.15
Netherlands 3.25% (8.50%) ArcelorMittal 174,782 4,308,361 1.62 SBM Offshore 295,529 4,331,378 1.63
Norway 2.67% (3.73%) DNB 785,579 7,101,483 2.67
Russia 2.30% (0.56%) O'Key GDR 711,055 6,113,598 2.30
Spain 5.94% (3.20%) Acciona 45,628 2,084,283 0.79 Amadeus IT 522,925 7,055,727 2.66 Telefonica 452,046 6,609,762 2.49
Poland 0.93% (2.04%) Telekomunikacja Polska 686,890 2,474,009 0.93 - 106 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Sweden 2.01% (2.24%) TeliaSonera 1,045,102 5,349,567 2.01
Switzerland 20.67% (17.44%) Adecco 126,635 5,340,412 2.01 Julius Baer 73,305 2,209,654 0.83 Novartis 185,945 7,035,049 2.65 Roche 61,313 5,783,465 2.18 Sulzer 72,621 7,075,117 2.66 Swiss Life 30,825 2,869,424 1.08 Syngenta 46,563 8,765,050 3.30 Transocean 164,358 7,248,113 2.73 UBS 484,615 5,121,771 1.93 Zurich Financial Services 20,731 3,457,079 1.30
Turkey 1.15% (0.00%) Turkcell Iletisim Hizmetleri 684,888 3,057,305 1.15
Portfolio of investments 259,716,953 97.77
Net current assets 5,916,368 2.23
Total net assets 265,633,321 100.00
Total unapproved securities 0.00%
Comparitive figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Ireland portfolio category, which, at 30 June 2010 represented 2.62% of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
GDR = Global Depositary Receipt
- 107 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 41,009,932 59,253,481
Revenue 1,211,355 1,088,186
Expenses (2,079,432) (2,302,874)
Finance costs: Interest - (13) Net expense before taxation (868,077) (1,214,701)
Taxation (157,367) (132,156) Net expense after taxation (1,025,444) (1,346,857)
Total return before distributions 39,984,488 57,906,624
Finance costs: Distributions (421) (97)
Change in net assets attributable to Shareholders from investment activities 39,984,067 57,906,527
Statement of Changes in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 238,252,306 246,194,383
Amounts receivable on issue of shares 7,425,775 4,698,729 Amounts payable on cancellation of shares (20,030,716) (11,830,889) (12,604,941) (7,132,160)
Change in net assets attributable to shareholders from investment activities (see above) 39,984,067 57,906,527
Unclaimed distributions 1,889 1,202 Closing net assets attributable to shareholders 265,633,321 296,969,952
- 108 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 259,716,953 231,227,045
Debtors 1,319,264 5,870,077
Cash and bank balances 5,200,098 11,207,898
Total other assets 6,519,362 17,077,975
Total assets 266,236,315 248,305,020
LIABILITIES
Creditors (602,994) (6,904,111)
Distribution payable on income shares - (3,148,603)
Total liabilities (602,994) (10,052,714)
Net assets attributable to Shareholders 265,633,321 238,252,306
- 109 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Continental European Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs: Purchases before transaction costs 153,709,463 149,370,808 Commissions 117,856 141,381 Taxes 626 15,728 Total purchase costs 118,482 157,109
Gross purchases total 153,827,945 149,527,917
Analysis of total sales proceeds: Sales before transaction costs 166,782,450 162,924,492 Commissions (150,290) (132,253) Taxes (447) (5,096) Total sales costs (150,737) (137,349)
Total sales net of transaction costs 166,631,713 162,787,143
- 110 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
BNY MELLON INVESTMENT FUNDS - NEWTON CORPORATE BOND FUND
Interim Report for the six months ended 31 December 2010
- 111 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Howard Cunningham Parmeshwar Chadha
Fund Size £64.17m
Sector IMA £ Corporate Bond
Distribution yield as at 31/12/10:
Sterling Income Shares 5.44% X Shares (Net Accumulation) 5.49%
Key Dates: Fund Launch 03 November 1997
Aim
To provide a high yield through a flexible allocation between investment grade and sub-investment grade corporate bonds and other predominantly fixed interest securities. The Sub-Fund may also invest in deposits, derivative instruments, forward transactions and collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 8.42% 16.72% -16.41% -2.35% 1.86% X Shares (Net Accumulation)** 9.56% 17.98% N/A N/A N/A
IMA £ Corporate Bond* 6.91% 14.33% -10.26% -0.68% -0.72%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Fund was in UK Other Bonds sector until June 2008. Performance figures for UK Other Bonds sector are available upon request.
** Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 112 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 1.75% against 1.88% for the IMA UK Corporate Bond Sector.
Over the six-month period, the Fund delivered a positive absolute return, but nevertheless underperformed its peer group sector average. The Fund’s holdings in the high yielding banking sector reduced performance; specifically, the Fund had exposure to Allied Irish Banks and Bank of Ireland subordinated bonds, both of which fell. Outside of the banking sector, low single digit capital price falls were the norm for investment grade bonds, but several of the sub- investment grade holdings appreciated in value – namely Dubai Holdings, Zlomrex, Phoenix, and Taylor Wimpey – as demand for the asset class remained strong and several of these companies made progress on debt refinancing. Meanwhile, the Fund maintained a relatively short duration, which hindered in the first half but helped in a period of rising yields in the final three months, and had a nearly 20% exposure to sub-investment grade shorter maturity bonds, which was a positive factor particularly in the closing months.
Notable activity centred much on the banking sector; these included sales of Lloyds Banking Group, Credit Suisse and HSBC Holdings. Meanwhile, the Fund’s Irish exposure was reduced with the sale of the state-owned utility ESB. The manager also purchased the 4.25% Treasury 2032, 4.75% Treasury 2030, as well as 0.625% Index-linked 2040, the latter aimed at adding value as inflationary pressures mount.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Treasury 4.25% Stock 2032 Treasury 4.50% Stock 2019 Treasury 4.75% Stock 2030 Credit Suisse Finance 6.875% Perp Bonds 2049 Scottish & Southern Energy 5.453% Bonds 2049 Treasury 6.00% Stock 2028 FCE Bank 7.875% EMTN 2011 FCE Bank 7.875% EMTN 2011 Anglo American Capital 6.875% Bonds 2018 Svenska Handelsbanken 5.50% Bonds 2016 France Telecom 7.25% MTN 2020 HSBC Capital Funding 8.208% Perp Bonds 2049 Nationwide Building Society 6.75% Bonds 2020 GlaxoSmithKline Capital 6.375% Bonds 2039 Santos Finance 8.25% Bonds 2070 Corral Petroleum 2.00% Notes 2011 Treasury 0.625% Stock Index-Linked 2040 Marks & Spencer 6.125% Bonds 2019 BNP Paribas 4.75% EMTN 2015 Deutsche Telekom International Finance 6.50% Bonds 2022
- 113 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Sterling Income Shares Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 96.73 91.52 4.6542
2007 92.77 85.05 4.7924
2008 86.11 66.68 4.4672
2009 75.55 60.26 3.7475
2010 81.00 74.66 3.3988
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2008 (from 19 March) 82.76 70.13 3.5529
2009 84.87 64.42 4.1373
2010 95.40 84.42 3.9923
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 86,229,287 77.87 110,730,837
30/06/09 65,140,560 66.19 98,419,952
30/06/10 67,592,363 77.22 87,534,764
31/12/10 63,786,033 76.98 82,856,603
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 434,341 79.58 545,781
30/06/09 1,384,464 72.70 1,904,444
30/06/10 613,582 89.64 684,472
31/12/10 381,556 91.86 415,352
- 114 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Statistics
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.16 1.16
X Shares (Net Accumulation) 0.09 0.09
- 115 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom Government Stocks 4.11% (3.70%) Treasury 0.00% Stock 2011 £250,000 249,950 0.39 Treasury 4.25% Stock 2032 £1,000,000 1,012,058 1.58 Treasury 4.75% Stock 2030 £600,000 649,795 1.01 Treasury 0.625% Stock Index-Linked 2040 £700,000 727,165 1.13
Sterling Denominated Corporate Bonds 76.04% (79.34%) Allied Irish Banks 12.50% Bonds 2019 £850,000 228,735 0.36 Allstate Life Funding 6.375% EMTN 2011 £1,000,000 1,001,380 1.56 Anglo American Capital 6.875% Bonds 2018 £700,000 785,220 1.22 Annington Finance No.1 7.75% Bonds 2011 £1,000,000 205,820 0.32 Annington Finance No.4 0.00% 2023 £3,000,000 1,471,200 2.29 Arsenal Securities 5.1418% Bonds 2029 £1,240,000 971,529 1.52 Australia & New Zealand Bank 4.75% EMTN 2018 £915,000 932,959 1.45 Bank of Ireland 9.25% FRN 2020 £750,000 375,000 0.58 Bank Nederlandse Gemeenten 5.375% Bonds 2021 £1,200,000 1,324,220 2.06 BBVA International 9.10% Bonds 2049 £500,000 438,923 0.68 BG Energy Capital 5.125% Bonds 2017 £820,000 874,277 1.36 Birmingham Airport Finance 6.25% Gtd Bonds 2021 £683,000 688,170 1.07 BUPA Finance 6.125% Perp 2049 £1,000,000 851,314 1.33 Centrica 6.375% Bonds 2022 £650,000 722,485 1.13 CGIS 9.625% 1st Mortgage Debenture 2019 £650,000 606,658 0.95 Clydesdale Bank 4.875% FRN 2016 £350,000 347,970 0.54 Co-Operative Bank 5.625% EMTN 2021 £800,000 705,361 1.10 Coventry Building Society 5.875% Bonds 2022 £585,000 557,716 0.87 Dubai Holding Commercial Operations 6.00% EMTN 2017 £750,000 557,850 0.87 Enterprise Inns 6.50% Bonds 2018 £750,000 640,733 1.00 European Investment Bank 8.75% Bonds 2017 £600,000 793,530 1.24 European Investment Bank 4.50% Bonds 2029 £700,000 710,429 1.11 Export Development Canada 3.625% Bonds 2015 £908,000 960,083 1.50 F&C Commercial Property 5.23% FRN 2017 £500,000 507,485 0.79 Firstgroup 6.125% Bonds 2019 £620,000 641,813 1.00 France Telecom 7.25% MTN 2020 £600,000 713,424 1.11 Gaz Capital 6.58% EMTN 2013 £400,000 426,300 0.66 General Electric Capital 6.44% Bonds 2022 £2,047,000 1,087,638 1.70 Glencore Finance Europe 6.50% EMTN 2019 £500,000 510,157 0.80 HSBC 6.75% Bonds 2028 £600,000 626,915 0.98 Imperial Tobacco Finance 8.125% Notes 2024 £335,000 412,567 0.64 Imperial Tobacco Finance 6.25% EMTN 2018 £108,000 119,040 0.19 Intercontinental Hotels 6.00% Bonds 2016 £764,000 795,579 1.24 Juneau Investments 5.90% EMTN 2021 £810,000 675,135 1.05 Kensington 9.00% Bonds 2015 £328,000 262,400 0.41 Koninklijke KPN NV 5.75% Bonds 2029 £500,000 513,626 0.80 Kreditanstalt Fur Wiederaufbau 4.75% Bonds 2012 £1,000,000 1,066,734 1.66 Land Securities Capital Markets 4.875% EMTN 2019 £800,000 834,701 1.30 LBG Capital No.2 14.50% Bonds 2022 £450,000 546,750 0.85 Lehman Brothers 7.875% Bonds 2018 £900,000 186,750 0.29 Lloyds TSB Bank 6.50% Bonds 2040 £640,000 591,814 0.92 Lloyds TSB Bank 6.375% Bonds 2014 £400,000 421,319 0.66 London & Quadrant Housing 5.50% Bonds 2040 £600,000 623,804 0.97 Metlife Global Funding I 5.25% EMTN 2014 £600,000 631,656 0.99 National Australia Bank 5.125% Bonds 2021 £700,000 703,689 1.10 National Bank of Abu Dhabi 5.875% EMTN 2012 £500,000 515,965 0.81 National Grid 6.125% Bonds 2014 £700,000 762,513 1.19 Network Rail Finance 4.875% Bonds 2015 £900,000 992,242 1.55 - 116 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Sterling Denominated Corporate Bonds (continued) North British Housing 5.09% Bonds 2043 £640,000 643,834 1.00 Pacific Life Funding 5.125% Bonds 2015 £700,000 728,567 1.14 QBE Insurance 6.125% Bonds 2015. £600,000 633,208 0.99 Royal Bank of Scotland 7.50% Bonds 2024 £653,000 673,841 1.05 Royal Bank of Scotland 6.00% Bonds 2017 £729,000 733,888 1.14 RWE Finance 5.50% Bonds 2022 £700,000 725,990 1.13 Scottish & Southern Energy 5.453% Bonds 2049 £890,000 858,316 1.34 Scottish & Southern Energy 5.00% Bonds 2018 £665,000 690,247 1.08 Silverstone Master 5.063% Bonds 2055 £616,000 637,190 0.99 SLM Student Loan Trust 5.15% EMTN 2015 £1,400,000 1,337,000 2.08 Smiths 7.25% Bonds 2016 £600,000 669,195 1.04 Southern Gas Network 4.875% EMTN 2029 £1,200,000 1,124,879 1.75 Sun-Metway 4.00% Bonds 2014 £650,000 685,545 1.07 Taylor Wimpey 10.375% Bonds 2015 £456,000 476,515 0.74 Temasek Financial I 5.125% Bonds 2040 £600,000 618,380 0.96 Tesco Property Finance 3 5.744% Bonds 2040 £700,000 722,737 1.13 Tesco Property Finance 2 6.0517% Bonds 2039 £605,000 644,160 1.00 Thomas Cook 7.75% Bonds 2017 £520,000 516,100 0.81 Tullett Prebon 7.04% Bonds 2016 £1,055,000 1,032,634 1.61 UBS Jersey 5.25% EMTN 2021 £500,000 500,533 0.78 Unicredito Italiano 5.00% EMTN 2016 £528,000 464,126 0.72 Vector 7.625% Bonds 2019 £450,000 499,545 0.78 Vodafone 5.375% Bonds 2017 £600,000 642,227 1.00 Yorkshire Building Society 5.649% Perp Bonds 2049 £840,000 600,600 0.94
Non-Sterling Denominated Corporate Bonds 14.91% (11.58%) Abengoa 8.50% Bonds 2016 EUR600,000 490,142 0.76 ASML 5.75% Bonds 2017 EUR750,000 679,562 1.06 Barclays Bank 4.75% FRN Perp 2049 EUR950,000 538,764 0.84 Boats Investment Netherlands FRN PIK 2015 EUR800,000 367,568 0.57 Conti-Gummi Finance 7.125% Bonds 2018 EUR384,000 338,410 0.53 CRC Breeze Finance 6.11% Bonds 2016 EUR1,050,000 377,604 0.59 EN Germany 10.75% Bonds 2015 EUR600,000 519,717 0.81 ERC Ireland Preferred FRN 2017 EUR1,968,258 118,749 0.19 Hellas Telecom Finance FRN PIK 2015 EUR1,117,936 5,396 0.01 ICAP 7.50% Bonds 2014 EUR740,000 677,848 1.06 Ineos Finance 9.25% Bonds 2015 EUR310,000 285,160 0.44 KPNQwest 10.00% Conv Bonds 2012 EUR282,000 24 0.00 Metro 4.25% Bonds 2017 EUR750,000 666,485 1.04 Nationwide Building Society 6.75% Bonds 2020 EUR900,000 732,676 1.14 OTE 5.375% Bonds 2011 EUR550,000 474,435 0.74 Phoenix PIB Finance 9.625% Bonds 2014 EUR400,000 374,955 0.58 PTS Acquisition 9.75% Bonds 2017 EUR400,000 339,583 0.53 Santos Finance 8.25% Bonds 2070 EUR400,000 338,672 0.53 Stena 6.125% Bonds 2017 EUR400,000 329,240 0.51 Sunrise Communications International 7.00% Bonds 2017 CHF417,000 302,214 0.47 US Bank 4.375% Bonds 2017 EUR1,000,000 844,475 1.32 Winstar Communications 12.75% Bonds 2010 EUR900,000 0 0.00 Zlomrex International Finance 8.50% Bonds 2014 EUR1,200,000 765,354 1.19
Kazakhstanian Equities 0.00% (0.00%) Alliance Bank GDR 288 0 0.00
- 117 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Preference Shares 0.00% (0.00%) Alliance Bank Preference Shares GDR 120 0 0.00
Derivatives 0.14% (0.68%)
CHF Forward Foreign Currency Contracts -0.04% (0.00%) Forward Foreign Currency Contracts 10/02/11 CHF(417,000) (287,297) (0.45) Forward Foreign Currency Contracts 10/02/11 £264,570 264,570 0.41
EUR Forward Foreign Currency Contracts 0.18% (0.68%) Forward Foreign Currency Contracts 10/02/11 EUR(13,402,316) (11,553,511) (18.01) Forward Foreign Currency Contracts 10/02/11 £11,673,739 11,673,739 18.19 Forward Foreign Currency Contracts 10/02/11 EUR1,390,000 1,198,254 1.87 Forward Foreign Currency Contracts 10/02/11 £(1,197,778) (1,197,778) (1.87)
Portfolio of investments 61,084,813 95.20
Net current assets 3,082,776 4.80
Total Net Assets 64,167,589 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers.
GDR = Global Depositary Receipt
- 118 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Portfolio Statement by Credit Rating as at 31 December 2010 Market Total Net Total Net Value (£’000’s) Assets (%) Assets (%) Standard & Poor’s Ratings: 31/12/10 31/12/10 30/06/10
AAA 11,514 17.94 17.31 AA 6,583 10.26 11.34 A 11,825 18.44 17.45 BBB 11,592 18.07 17.74 BB 2,158 3.36 2.43 B 2,305 3.58 1.99 CCC 347 0.55 1.00 CC 765 1.19 0.89 C 378 0.59 0.40 D 375 0.58 - Not rated (by S&P) 13,145 20.50 24.07 Derivatives 98 0.14 0.68
Portfolio of investments 61,085 95.20 95.30
Net current assets 3,083 4.80 4.70
Total Net Assets 64,168 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows:
Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In default D
- 119 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 242,156 8,000,690
Revenue 1,960,992 2,186,146
Expenses (397,281) (408,438)
Finance costs: Interest - (5)
Net revenue before taxation 1,563,711 1,777,703
Taxation - -
Net revenue after taxation 1,563,711 1,777,703
Total return before distributions 1,805,867 9,778,393
Finance costs: Distributions (1,906,217) (2,129,804)
Change in net assets attributable to Shareholders from investment activities (100,350) 7,648,589
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 68,205,945 66,525,024
Amounts receivable on issue of shares 1,609,239 932,787 Amounts payable on cancellation of shares (5,566,525) (5,515,372) (3,957,286) (4,582,585)
Change in net assets attributable to Shareholders from investment activities (see above) (100,350) 7,648,589
Retained distributions on accumulation shares 15,364 25,844
Unclaimed distributions 3,916 1,115
Closing net assets attributable to Shareholders 64,167,589 69,617,987
- 120 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 61,107,539 65,107,774
Debtors 1,734,100 2,048,042
Cash and bank balances 2,005,878 2,741,169
Total other assets 3,739,978 4,789,211
Total assets 64,847,517 69,896,985
LIABILITIES
Investment liabilities (22,726) (105,326)
Creditors (435,146) (1,328,362)
Distribution payable on income shares (222,056) (257,352)
Total other liabilities (657,202) (1,585,714)
Total liabilities (679,928) (1,691,040)
Net assets attributable to Shareholders 64,167,589 68,205,945
* Gross of investment liabilities
- 121 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Distribution Statement for the six months ended 31 December 2010
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.3350 0.0670 0.2680 0.0000 0.2680 Group 1:Shares purchased prior to 1 December 2010
Group 2 0.1934 0.0387 0.1547 0.1133 0.2680 Group 2:Shares purchased 1 December 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 0.2606 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.4036 0.0807 0.3229 0.0000 0.3229 Group 1:Shares purchased prior to 1 December 2010
Group 2 0.4036 0.0807 0.3229 0.0000 0.3229 Group 2:Shares purchased 1 December 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 0.2975 pence per share.
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.3854 0.0771 0.3083 0.0000 0.3083 Group 1:Shares purchased prior to 1 November 2010
Group 2 0.1685 0.0337 0.1348 0.1735 0.3083 Group 2:Shares purchased 1 November 2010 to 30 November 2010
The interim distribution for the period ended 30 November 2009 was 0.2712 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.4613 0.0923 0.3690 0.0000 0.3690 Group 1:Shares purchased prior to 1 November 2010
Group 2 0.4613 0.0923 0.3690 0.0000 0.3690 Group 2:Shares purchased 1 November 2010 to 30 November 2010
The interim distribution for the period ended 30 November 2009 was 0.3079 pence per share.
- 122 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Distribution Statement (continued)
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.3481 0.0696 0.2785 0.0000 0.2785 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.1063 0.0213 0.0850 0.1935 0.2785 Group 2:Shares purchased 1 October 2010 to 31 October 2010
The interim distribution for the period ended 31 October 2009 was 0.3127 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.4158 0.0832 0.3326 0.0000 0.3326 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.4158 0.0832 0.3326 0.0000 0.3326 Group 2:Shares purchased 1 October 2010 to 31 October 2010
The interim distribution for the period ended 31 October 2009 was 0.3528 pence per share.
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.3824 0.0765 0.3059 0.0000 0.3059 Group 1:Shares purchased prior to 1 September 2010
Group 2 0.2033 0.0407 0.1626 0.1433 0.3059 Group 2:Shares purchased 1 September 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 0.3136 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.4536 0.0907 0.3629 0.0000 0.3629 Group 1:Shares purchased prior to 1 September 2010
Group 2 0.4536 0.0907 0.3629 0.0000 0.3629 Group 2:Shares purchased 1 September 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 0.3518 pence per share.
- 123 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Corporate Bond Fund
Distribution Statement (continued)
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.3768 0.0754 0.3014 0.0000 0.3014 Group 1:Shares purchased prior to 1 August 2010
Group 2 0.1894 0.0379 0.1515 0.1499 0.3014 Group 2:Shares purchased 1 August 2010 to 31 August 2010
The interim distribution for the period ended 31 August 2009 was 0.2649 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.4451 0.0890 0.3561 0.0000 0.3561 Group 1:Shares purchased prior to 1 August 2010
Group 2 0.0568 0.0114 0.0454 0.3107 0.3561 Group 2:Shares purchased 1 August 2010 to 31 August 2010
The interim distribution for the period ended 31 August 2009 was 0.2964 pence per share.
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.3675 0.0735 0.2940 0.0000 0.2940 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.1043 0.0209 0.0834 0.2106 0.2940 Group 2:Shares purchased 1 July 2010 to 31 July 2010
The interim distribution for the period ended 31 July 2009 was 0.3262 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.4321 0.0864 0.3457 0.0000 0.3457 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4321 0.0864 0.3457 0.0000 0.3457 Group 2:Shares purchased 1 July 2010 to 31 July 2010
The interim distribution for the period ended 31 July 2009 was 0.3619 pence per share.
- 124 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
BNY MELLON INVESTMENT FUNDS – NEWTON EUROPEAN HIGHER INCOME FUND
Interim Report for the six months ended 31 December 2010
- 125 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Raj Shant Thomas Beevers/ Fred Moore
Fund Size £25.98m
Yield as at 31/12/10:
Sterling Income Shares 4.37% Institutional Shares (Income) 4.42% Institutional Shares (Accumulation) 4.27% X Shares (Net Income) 4.24%
Key Dates: Fund Launch 30 January 2007
Aim To achieve income together with long-term capital growth predominantly through investments in European securities (excluding UK). The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
A Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares* 3.11% 7.09% -18.64% N/A N/A Institutional Shares (Income)* 3.71% 7.66% -18.20% N/A N/A Institutional Shares (Accumulation)* 3.67% 8.19% -18.28% N/A N/A X Shares (Net Income)* N/A N/A N/A N/A N/A
FTSE Europe ex UK TR GBP 5.75% 20.09% -23.99% 15.72% 20.13%
Source: Lipper as at 31 December 2010 – Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 126 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 17.95% against 18.84% for the FTSE Europe Ex UK TR GBP Index.
The Fund generated a strong return in absolute terms, but nevertheless lost some performance relative to the market during the strong equity market rally seen in the second half of 2010. At the stock level, the French directory company Pagesjaunes Groupe struggled over the period, as questions were raised over the likelihood of Google impinging on its efforts to move its business online. The Danish insurer Trygvesta was a negative contributor as the company announced a profit warning on the back of a rise in employee compensation claims. Elsewhere in the financial sector, the Zurich Financial Services lost performance. Meanwhile, the Norwegian oil services company Seadrill was one of the best performing stocks over the six-month period, while the German fertilizer company K+S benefited from rising commodity prices. Finally the German ladies clothing retailer Gerry Weber performed strongly.
During the final six months of 2010, the manager sold out of the French aircraft equipment company Safran. The French franking machine company Neopost was also sold on concerns over the electronic substitution of mail and how that will affect the business going forward. New holdings in the Fund included the Turkish milk company Pinar Sut, the dominant branded dairy products company in the country. It offers an attractive yield and stands to benefit from urbanisation and increasing wealth generation in Turkey. Other purchases included the Spanish oil company Repsol, which is experiencing an improved operating environment in its Argentine business, and the Swiss insurance company Swiss Life.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Telefonica Deutsche Telekom Banco Santander Unilever Siemens Philips Electronic Roche UBS Transocean Banco Santander Novartis Novartis KappAhl Telekomunikacja Polska Nokia Total Neopost Vinci Gjensidige Forsikring Telefonica
- 127 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2007 (from 30 January) 110.27 95.53 3.9645
2008 110.83 68.50 4.3249
2009 91.25 65.44 4.1824
2010 89.69 72.00 4.2414
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2007 (from 30 January) 110.80 95.80 4.0134
2008 111.36 69.10 4.3794
2009 92.52 66.15 4.2661
2010 91.16 73.26 4.3781
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2007 (from 10 September) 112.24 100.12 0.5096
2008 113.26 73.29 4.4988
2009 104.06 70.40 4.6083
2010 103.07 85.61 5.0399
Highest Lowest Net Revenue X Shares (Net Income)** Price (p) Price (p) per share (p)*
2009 (from 2 April) 92.00 67.23 3.9333
2010 (to 28 April) 91.06 80.04 0.4680
2010 (from 12 November) 105.12 96.67 0.5762
** The X Shares (Net Income) Share Class was launched on 2 April 2009, closed on 28 April 2010 and re-opened on 12 November 2010.
*Distributions are shown in the year declared rather than paid.
- 128 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 24,146,105 95.29 25,340,381
30/06/09 20,863,982 71.04 29,371,058
30/06/10 25,130,656 73.02 34,417,524
31/12/10 16,566,668 84.33 19,645,800
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 7,934,443 95.98 8,266,708
30/06/09 5,846,880 71.91 8,130,392
30/06/10 5,976,932 74.29 8,045,072
31/12/10 6,645,328 86.02 7,725,753
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 21,776 101.08 21,544
30/06/09 10,470 80.24 13,049
30/06/10 179,088 86.94 205,991
31/12/10 300,459 102.68 292,628
X Shares (Net Income)** Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 27,505,549 71.30 38,576,000
31/12/10 2,464,071 104.41 2,360,000
** The X Shares (Net Income) Share Class was launched on 2 April 2009, closed on 28 April 2010 and re-opened on 12 November 2010.
- 129 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.69 1.66
Institutional Shares (Income) 1.12 1.11
Institutional Shares (Accumulation) 1.12 1.11
X Shares (Net Income) 0.11 0.08
- 130 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Equities 98.72% (99.08%)
Austria 0.98% (1.87%) Vienna Insurance 7,580 255,313 0.98
Belgium 1.69% (0.00%) Befimmo 8,302 437,765 1.69
Finland 5.02% (5.38%) Fortum 37,634 730,787 2.81 Nokia 86,208 574,721 2.21
France 13.19% (24.64%) BNP Paribas 15,754 653,040 2.51 GDF Suez 25,988 605,884 2.33 Schneider Electric 7,383 713,644 2.75 SES 54,394 841,052 3.24 Total 17,827 611,827 2.36
Germany 21.59% (20.59%) Allianz 7,458 570,480 2.20 Axel Springer 5,424 570,333 2.20 Bilfinger Berger 9,796 529,884 2.04 Brenntag 6,251 409,569 1.58 Deutsche Post 18,839 205,561 0.79 Gagfah 67,595 388,588 1.50 Gerry Weber International 15,734 499,041 1.92 K+S 19,236 938,715 3.61 Metro 10,938 510,394 1.96 Siemens 12,282 984,573 3.79
Italy 4.33% (3.49%) Atlantia 27,333 357,609 1.38 ENI 28,944 406,127 1.56 Terna 133,252 362,345 1.39
Netherlands 3.44% (10.93%) Eurocommercial Properties 17,012 510,104 1.96 SBM Offshore 26,159 383,396 1.48
Norway 14.15% (4.15%) Atea 53,464 340,791 1.31 DNB 58,283 526,867 2.03 Fred Olsen Energy 17,796 505,992 1.95 Gjensidige Forsikring 86,272 556,107 2.14 Seadrill 45,495 990,252 3.81 Statoil 21,241 324,948 1.25 Statoil Fuel & Retail 73,363 431,193 1.66
Russia 2.03% (0.00%) O’Key 61,290 526,967 2.03
- 131 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Spain 10.40% (4.44%) Amadeus IT 40,460 545,919 2.10 Iberdrola 75,685 375,996 1.45 Repsol 31,925 573,702 2.21 Technicas Reunidas 15,397 631,872 2.43 Telefonica 39,324 574,991 2.21
Poland 0.92% (2.29%) Telekomunikacja Polska 66,103 238,087 0.92
Sweden 4.04% (4.47%) Byggmax 54,897 300,508 1.16 KappAhl 52,741 230,458 0.89 TeliaSonera 101,518 519,640 1.99
Switzerland 14.23% (9.36%) Novartis 17,353 656,534 2.53 Roche 9,539 899,784 3.46 Swiss Life 4,174 388,547 1.50 Swisscom 1,096 310,222 1.19 Transocean 15,694 692,098 2.66 UBS 42,115 445,103 1.71 Zurich Financial Services 1,831 305,336 1.18
Turkey 2.71% (0.00%) Pinar Sut Mamulleri Sanayii 66,002 404,771 1.56 Turkcell Iletism Hizmetleri 66,685 297,678 1.15
Portfolio of investments 25,645,115 98.72
Net current assets 331,411 1.28
Total Net Assets 25,976,526 100.00
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Czech Republic, Denmark and Ireland portfolio categories, which, at 30 June 2010, represented 1.94%, 1.43% and 4.10% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
- 132 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 4,585,833 12,222,460
Revenue 626,558 983,730
Expenses (213,623) (261,344)
Finance costs: Interest (106) - Net revenue before taxation 412,829 722,386
Taxation (53,623) (119,104) Net revenue after taxation 359,206 603,282
Total return before distributions 4,945,039 12,825,742
Finance costs: Distributions (548,367) (824,920)
Change in net assets attributable to Shareholders from investment activities 4,396,672 12,000,822
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 31,286,676 54,226,881
Amounts receivable on issue of shares 3,740,706 4,544,325 Amounts payable on cancellation of shares (13,478,761) (3,056,416) (9,738,055) 1,487,909
Dilution adjustment 25,369 2,469
Change in net assets attributable to Shareholders from investment activities (see above) 4,396,672 12,000,822
Retained distributions on accumulation shares 5,864 880
Closing net assets attributable to Shareholders 25,976,526 67,718,961
- 133 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS
Investment assets 25,645,115 30,999,402
Debtors 202,480 1,349,876
Cash and bank balances 449,349 2,980,345
Total other assets 651,829 4,330,221
Total assets 26,296,944 35,329,623
LIABILITIES
Creditors (43,717) (3,125,872)
Distribution payable on income shares (276,701) (917,075)
Total liabilities (320,418) (4,042,947) Net assets attributable to Shareholders 25,976,526 31,286,676
- 134 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.0563 0.1056 0.9507 0.0000 0.9507 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.4429 0.0443 0.3986 0.5521 0.9507 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for period ended 31 December 2009 was 0.4418 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.0978 0.1098 0.9880 0.0000 0.9880 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.5528 0.0553 0.4975 0.4905 0.9880 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for period ended 31 December 2009 was 0.4637 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.2958 0.1296 1.1662 0.0000 1.1662 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.4096 0.0410 0.3686 0.7976 1.1662 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for period ended 31 December 2009 was 0.5220 pence per share.
- 135 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Distribution Statement (continued)
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.6402 0.0640 0.5762 0.0000 0.5762 Group 1:Shares purchased on 12 November 2010 Group 2 0.6402 0.0640 0.5762 0.0000 0.5762 Group 2:Shares purchased 13 November 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=98.63%, U=1.37% The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax. The interim distribution for period ended 31 December 2009 was 0.4614 pence per share.
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.7712 0.0771 0.6941 0.0000 0.6941 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4388 0.0439 0.3949 0.2992 0.6941 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for period ended 30 September 2009 was 0.6120 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.8006 0.0801 0.7205 0.0000 0.7205 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.5282 0.0528 0.4754 0.2451 0.7205 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for period ended 30 September 2009 was 0.6333 pence per share.
- 136 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.9362 0.0936 0.8426 0.0000 0.8426 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.5832 0.0583 0.5249 0.3177 0.8426 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for period ended 30 September 2009 was 0.7064 pence per share.
Interim Distribution for X Shares (Net Income) (in pence per share)
The X Shares (Net Income) Share Class was launched on 2 April 2009, closed on 28 April 2010, and re-opened on 12 Noveber 2010
The interim distribution for period ended 30 September 2009 was 0.6244 pence per share.
- 137 - BNY Mellon Investment Funds Interim Report & Accounts – Newton European Higher Income Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 22,174,706 43,323,338 Commissions 17,505 33,724 Taxes 1,016 -
Total purchase costs 18,521 33,724
Gross purchases total 22,193,227 43,357,062
Analysis of total sales proceeds:
Sales before transaction costs 32,245,033 44,682,190 Commissions (27,125) (38,646) Taxes (37) -
Total sales costs (27,162) (38,646)
Total sales net of transaction costs 32,217,871 44,643,544
- 138 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
BNY MELLON INVESTMENT FUNDS – NEWTON GLOBAL BALANCED FUND
Interim Report for the six months ended 31 December 2010
- 139 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Iain Stewart Matthew Brown
Fund Size £559.96m
Benchmark CAP Pooled Median Net
Yield as at 31/12/10:
Exempt Shares 1 (Net Accumulation) 2.66% Exempt Shares 2 (Net Accumulation) 2.60% X Shares (Net Accumulation) 3.00%
Key Dates: Fund Launch 23 September 1998 Converted to ICVC 02 August 2004
Aim
To maximise returns by investing predominantly in a worldwide portfolio of equities and fixed interest securities. The Sub-Fund may also invest in derivative instruments, forward transactions and collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 1 (Net Accumulation) 11.34% 17.14% -4.21% 15.22% 9.92% Exempt Shares 2 (Net Accumulation) 11.25% 17.05% -4.28% 15.12% 9.83% X Shares (Net Accumulation) 11.78% 17.61% -3.82% 15.68% 10.36%
CAP Pooled Median Net 13.05% 20.50% -20.30% 7.10% 11.00%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 7%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 140 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Exempt 1 Net Sterling Acc Share Class of the Fund returned 14.61% against 16.99% for the CAPS Pooled Fund Median (Net).
Equity markets staged a volatile but impressive rally during the second half of 2010. The Fund generated a strong positive absolute return in this environment, outperforming its peer group sector average. Fixed interest positioning, in particular a void position in UK Gilts, was the most significant driver of Fund performance, as Gilts experienced declines during the review period. Within the Fund’s top performing holdings, exposure to real assets was a key factor. Newcrest Mining (gold), Wood Group (oil), K+S (agricultural chemicals), BP (oil), Noble Group (commodities) and BHP (mining) were all in the top ten contributing stocks. Despite holding the aforementioned stocks, such was the strength of the basic materials and industrial sectors that void positions in Rio Tinto and Xstrata in particular detracted from performance. Stock selection in telecoms was positive, with Vodafone being a notable contributor as its share price started to reflect some value for its North American asset Verizon Wireless.
Within the equity portion of the portfolio, the Fund took advantage of share price declines to reduce the significant underweight position in the financial sector by introducing Lloyds Banking Group and adding to an existing position in HSBC Holdings. Other new additions included Hypermarcas, Brazil’s largest consumer goods company, and Huabao, a Chinese tobacco and food flavouring manufacturer. Both provide exposure to increasing wealth of emerging market consumers. Don Quijote, a Japanese equivalent to Woolworths, was added to the Fund after an impressive meeting with the management. The Fund’s exposure to gold was maintained over the quarter with the purchase of Yamana Gold, a gold miner with South American assets which we feel are undervalued. However, the position in Gold Fields was reduced. Other notable equity sales included reduction of the Fund’s significant overweight position in Vodafone after a period of strong performance, and disposal of the positions in both pharmaceutical company AstraZeneca and the stock market operator Deutsche Boerse. In the fixed income component of the portfolio, the Fund moved further up the yield curve in its Norwegian government bond holdings, switching the 6.5% Kingdom of Norway 2013 holding into a combination of 4.5% Kingdom of Norway 2019 and 3.75% Kingdom of Norway 2021.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Norway 4.50% Bonds 2019 Norway 6.50% Bonds 2013 Source Physical Markets Secured Gold Linked Note (USD) Vodafone Norway 3.75% Bonds 2021 ETFS Physical Gold 0.00% Secured Note (AUD) Lloyds Banking Gold Fields HSBC AstraZeneca Hypermarcas Procter & Gamble Yamana Gold Royal Dutch Shell B Huabao International Willis INPEX Deutsche Boerse Don Quijote Takda Pharmaceutical
- 141 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Exempt Shares 1 (Net Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 187.51 166.03 4.2360
2007 215.68 184.16 5.3776
2008 220.16 164.00 5.3826
2009 243.72 182.41 6.5629
2010 269.63 230.29 6.9568
Exempt Shares 2 (Net Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 127.62 113.04 2.7872
2007 146.68 125.32 3.5540
2008 149.68 111.47 3.5501
2009 165.49 123.94 4.3438
2010 182.94 156.31 4.5884
X Shares (Net Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 188.59 166.65 4.9654
2007 217.82 185.38 6.1934
2008 222.71 166.20 6.2583
2009 248.14 185.11 7.5241
2010 275.63 234.95 8.1062
*Distributions are shown in the year declared rather than paid.
- 142 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Statistics (continued)
Net Asset Value History by Share Class
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 362,389,404 205.20 176,603,130
30/06/09 411,213,272 199.16 206,471,311
30/06/10 480,245,433 234.22 205,041,416
31/12/10 516,642,651 268.37 192,514,756
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 8,039,762 139.49 5,763,514
30/06/09 15,104,966 135.29 11,164,769
30/06/10 18,157,192 158.98 11,421,152
31/12/10 21,114,772 182.08 11,596,234
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 28,860,498 207.67 13,897,100
30/06/09 22,200,670 202.38 10,970,039
30/06/10 21,908,658 238.95 9,168,708
31/12/10 22,204,893 274.34 8,093,939
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Exempt Shares 1 (Net Accumulation) 0.55 0.55
Exempt Shares 2 (Net Accumulation) 0.65 0.65
X Shares (Net Accumulation) 0.05 0.05
- 143 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Government Stocks 3.84% (4.29%) Lithuania 7.375% Bonds 2020 USD900,000 641,946 0.11 Norway 3.75% Bonds 2021 NOK45,800,000 5,066,855 0.91 Norway 4.50% Bonds 2019 NOK86,960,000 10,258,675 1.83 USA Treasury Bonds 2.50% TII 2029 USD7,450,000 5,516,800 0.99
Sterling Denominated Corporate Bond 3.65% (3.88%) British Telecommunications 3.50% Index Linked 2025 £1,572,000 2,205,563 0.39 BUPA Finance 7.50% Bonds 2016 £1,350,000 1,493,153 0.27 EDF Energy Networks 3.125% Index Linked 2032 £394,000 601,362 0.11 Firstgroup 8.75% Bonds 2021 £794,000 975,665 0.17 Imperial Tobacco Finance 8.125% Notes 2024 £785,000 966,761 0.17 John Lewis 8.375% Bonds 2019 £880,000 1,052,049 0.19 Juturna 5.0636% Bonds 2033 £1,000,000 978,725 0.18 LBG Capital No.1 7.869% Bonds 2020 £1,710,000 1,485,477 0.27 Longstone Finance 4.791% Bonds 2030 £1,134,000 1,022,008 0.18 Matalan Finance 9.625% Bonds 2017 £1,333,000 1,419,618 0.25 Nationwide Building Society 5.625% Bonds 2019 £537,000 533,860 0.10 QBE Insurance 6.125% Bonds 2015 £715,000 754,572 0.14 Tesco 1.982% Index Linked 2036 £888,000 1,022,443 0.18 Tesco Property Finance 3 5.744% Bonds 2040 £2,280,000 2,354,057 0.42 Thames Water Utilities Finance 3.375% Index Linked Notes 2021 £1,660,000 2,425,426 0.43 Virgin Media Finance 8.875% Bonds 2019 £1,000,000 1,135,100 0.20
Non-Sterling Denominated Corporate Bond 7.42% (7.57%) Altria 10.20% Bonds 2039 USD1,850,000 1,672,387 0.30 BAT International Finance 9.50% Bonds 2018 USD1,780,000 1,500,407 0.27 Bombardier 6.125% Bonds 2021 EUR2,060,000 1,731,096 0.31 BP Capital Markets 5.25% Bonds 2013 USD4,415,000 3,070,301 0.55 Campofrio Food 8.25% Bonds 2016 EUR1,500,000 1,325,149 0.24 Cemex Finance 9.50% Bonds 2016 USD850,000 566,185 0.10 Cemex Finance 9.625% Bonds 2017 EUR1,140,000 968,302 0.17 Clearwire Comm/Finance 12.00% Bonds 2015 USD1,428,000 993,263 0.18 Conti-Gummi Finance 7.125% Bonds 2018 EUR1,698,000 1,496,409 0.27 HeidelbergCement 8.00% Bonds 2017 EUR850,000 782,068 0.14 HeidelbergCement 8.50% Bonds 2019 EUR1,500,000 1,420,507 0.25 Ineos Finance 9.25% Bonds 2015 EUR1,885,000 1,733,959 0.30 Lecta FRN 2014 EUR1,850,000 1,494,832 0.27 Lottomatica 8.25% Bonds 2066 EUR1,488,000 1,244,010 0.22 Mubadala Development 7.625% Bonds 2019 USD2,000,000 1,513,993 0.27 Nextel Communications 6.875% Bonds 2013 USD7,211,000 4,645,444 0.83 OI European 6.75% Bonds 2020 EUR2,081,000 1,812,933 0.32 Phoenix PIB Finance 9.625% Bonds 2014 EUR1,370,000 1,284,219 0.23 Prudential 11.75% FRN 2049 USD2,120,000 1,580,409 0.28 Smiths 7.20% Bonds 2019 USD1,632,000 1,174,342 0.21 Smurfit Kappa Acquisition 7.25% Bonds 2017 EUR1,630,000 1,454,044 0.26 Sunrise Communications 7.00% Bonds 2017 CHF1,176,000 852,287 0.15 UPC Germany GmbH 8.125% Bonds 2017 EUR1,800,000 1,644,192 0.29 US Bank 4.375% Bonds 2017 EUR1,100,000 928,922 0.17 Versatel FRN SNR 2014 EUR996,000 773,229 0.14 Virgin Media Finance 9.50% Bonds 2016 USD800,000 581,311 0.10 Wind Acquisition Finance 11.75% Bonds 2017 EUR2,400,000 2,296,268 0.41 Woodside Finance 8.75% Bonds 2019 USD1,324,000 1,055,217 0.19
- 144 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 35.30% (34.27%)
Oil & Gas Producers 4.96% (4.65%) BG 312,618 4,062,471 0.73 BP 3,057,897 14,335,421 2.56 Royal Dutch Shell B 439,872 9,356,077 1.67
Equipment, Services & Distribution 0.59% (0.38%) Wood (John) 592,610 3,286,022 0.59
Mining 2.38% (1.88%) Anglo American 116,459 3,893,224 0.69 BHP Billiton 368,383 9,449,024 1.69
Aerospace & Defence 1.11% (1.20%) BAE Systems 871,886 2,887,686 0.52 Cobham 1,618,604 3,303,571 0.59
General Industries 0.65% (0.70%) Smiths 291,113 3,653,468 0.65
Support Services 1.12% (1.30%) Atkins 280,681 1,968,977 0.35 Capita 235,981 1,655,407 0.30 Serco 464,147 2,622,431 0.47
Beverages 0.57% (0.63%) Diageo 267,668 3,185,249 0.57
Food Producers 1.53% (1.47%) Associated British Foods 500,521 5,921,163 1.06 Unilever 133,128 2,623,953 0.47
Tobacco 0.81% (0.78%) British American Tobacco 183,384 4,536,003 0.81
Health Care & Equipment Services 1.62% (1.60%) Smith & Nephew 1,321,274 9,044,121 1.62
Pharmaceuticals & Biotechnology 3.91% (4.62%) GlaxoSmithKline 1,751,420 21,883,993 3.91
Food & Drug Retailers 2.10% (1.85%) Morrison (WM) Supermarkets 1,810,240 4,836,961 0.86 Tesco 1,611,746 6,925,673 1.24
Media 0.35% (0.37%) British Sky Broadcasting 262,534 1,932,250 0.35
Travel & Leisure 0.66% (0.59%) Whitbread 205,989 3,711,922 0.66
Fixed Line Telecommunications 0.55% (0.77%) Cable & Wireless Communications 3,397,172 1,647,628 0.29 Cable & Wireless Worldwide 2,172,366 1,451,140 0.26 - 145 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Mobile Telecommunications 3.58% (4.09%) Vodafone 12,065,225 20,064,469 3.58
Electricity 0.75% (0.59%) Scottish & Southern Energy 339,316 4,180,373 0.75
Gas, Water & Multiutilities 1.31% (1.37%) Centrica 1,284,759 4,270,539 0.76 Severn Trent 207,080 3,060,642 0.55
Banks 3.49% (2.02%) HSBC 1,236,344 8,111,653 1.45 Lloyds Banking 6,775,878 4,492,407 0.80 Standard Chartered 397,387 6,944,338 1.24
Nonlife Insurance 0.44% (0.48%) RSA Insurance 1,978,203 2,488,579 0.44
Life Insurance 0.81% (0.44%) Prudential 354,038 2,364,974 0.42 Standard Life 1,013,500 2,191,187 0.39
Investment Trusts 0.54% (0.95%) Impax Environmental Markets 2,363,825 3,049,334 0.54
Collective Investment Schemes 1.47% (1.54%) Capita Financial Managers Morant Wright Japan B (Acc) 1,291,177 2,743,365 0.49 RWC Partners Global Convertibles Fund 'B' 9,367 5,493,969 0.98
Commodities 6.04% (5.12%) ETFS Agriculture DJ-AIGSM 0.00% Secured Note (USD) 2,129,117 12,505,666 2.23 ETFS Physical Gold 0.00% Secured Note (USD) 120,768 10,824,552 1.93 Source Physical Markets Secured Gold Linked Note (USD) 116,208 10,518,369 1.88
Overseas Equities 42.17% (41.27%)
Canada 1.06% (0.00%) Potash Corp of Saskatchewan 24,614 2,429,004 0.43 Yamana Gold 427,379 3,502,666 0.63
United States of America 9.05% (11.51%) Altria 261,532 4,143,548 0.74 Barrick Gold 148,115 5,017,614 0.90 Cisco Systems 227,472 2,963,714 0.53 Consol Energy 85,331 2,681,879 0.48 Devon Energy 42,728 2,151,673 0.38 eBay 196,189 3,554,323 0.63 Kroger 180,361 2,576,420 0.46 Medco Health Solutions 80,073 3,184,458 0.57 Medtronic 138,751 3,321,553 0.59 Millicom International Cellular 110,835 6,794,149 1.21 Newmont Mining 182,113 7,163,948 1.28 Pfizer 233,882 2,634,505 0.47 Sprint Nextel 1,683,667 4,510,887 0.81
- 146 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Brazil 2.18% (1.55%) Hypermarcas 356,629 3,116,788 0.56 Petroleo Brasileiro ADR 211,496 4,593,061 0.82 Tele Norte Leste Participacoes ADR 471,946 4,465,052 0.80
Peru 0.63% (0.64%) Minas Buenaventura ADR 112,416 3,500,556 0.63
Australia 2.37% (2.03%) Newcrest Mining 501,174 13,267,120 2.37
China 0.39% (0.40%) Yingde Gases 3,786,000 2,180,276 0.39
Hong Kong 0.86% (0.10%) AIA 889,200 1,609,893 0.29 Huabao International 3,050,000 3,174,210 0.57
India 0.61% (0.55%) Housing Development Finance 282,093 2,954,290 0.53 State Bank of India GDR 5,187 427,935 0.08
Japan 2.22% (1.48%) Canon 80,650 2,688,405 0.48 Don Quijote 142,900 2,798,109 0.50 INPEX 2,810,562 3,072,196 0.55 Makita 85,000 2,234,422 0.40 Nomura 404,100 1,647,799 0.29
Korea 0.34% (0.40%) LG Uplus 473,504 1,923,940 0.34
Malaysia 0.18% (0.35%) Bursa Malaysia 610,200 987,740 0.18
Singapore 1.63% (1.49%) DBS 431,000 3,099,868 0.55 Noble 5,555,440 6,054,817 1.08
Taiwan 0.59% (0.60%) Taiwan Mobile 2,160,413 3,327,442 0.59
Thailand 0.36% (0.51%) Advanced Info Service 1,099,100 1,995,967 0.36
South Africa 1.50% (1.58%) Gold Fields 305,219 3,569,455 0.64 MTN 372,144 4,827,033 0.86
Denmark 0.00% (0.00%) Carlsberg 33 2,131 0.00
- 147 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
France 3.28% (3.34%) Air Liquide 53,742 4,401,272 0.79 Alstom 63,627 1,955,839 0.35 L'Oreal 46,648 3,353,919 0.60 Suez Environnement 152,655 2,018,300 0.36 Thales 129,227 2,924,808 0.52 Total 107,414 3,686,476 0.66
Germany 3.15% (3.42%) Bayer 132,632 6,282,672 1.12 Deutsche Telekom 589,796 4,890,195 0.87 K+S 78,287 3,820,400 0.68 Siemens 33,595 2,693,107 0.48
Italy 0.34% (0.34%) Amplifon 601,974 1,922,274 0.34
Netherlands 0.49% (0.52%) Reed Elsevier 341,256 2,725,642 0.49
Norway 1.64% (1.75%) DNB 295,121 2,667,837 0.48 Statoil 424,485 6,493,829 1.16
Spain 0.77% (1.03%) Amadeus IT 191,471 2,583,482 0.46 Indra Sistemas 158,639 1,748,075 0.31
Poland 0.68% (0.61%) Telekomunikacja Polska 1,061,750 3,824,163 0.68
Sweden 0.95% (0.98%) Ericsson 311,424 2,337,296 0.42 TeliaSonera 580,594 2,971,888 0.53
Switzerland 6.40% (6.09%) Actelion 91,399 3,222,006 0.58 BB Biotech 56,193 2,377,492 0.42 Nestle 145,439 5,482,517 0.98 Novartis 201,460 7,622,045 1.36 Roche 95,190 8,978,977 1.60 Syngenta 27,235 5,126,735 0.92 Zurich Financial Services 17,973 2,997,158 0.54
Turkey 0.50% (0.00%) Turkcell Iletisim Hizmetler ADR 252,732 2,819,165 0.50
Derivatives 0.32% (-0.21%)
EUR Forward Currency Contracts 0.05% (0.02%) Forward Foreign Currency Contracts 12/11/10 EUR(17,320,000) (14,934,086) (2.67) Forward Foreign Currency Contracts 13/05/11 £15,222,548 15,222,548 2.72
- 148 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives (continued)
JPY Forward Currency Contracts -0.05% (-0.18%) Forward Foreign Currency Contracts 14/01/11 JPY(1,216,547,000) (9,632,459) (1.72) Forward Foreign Currency Contracts 14/01/11 £18,943,142 9,254,559 1.65 Forward Foreign Currency Contracts 15/03/11 JPY304,720,000 2,412,733 0.43 Forward Foreign Currency Contracts 15/03/11 £(2,305,664) (2,305,664) (0.41)
USD Forward Currency Contracts 0.02% (-0.05%) Forward Foreign Currency Contracts 15/03/11 USD(48,882,000) (31,504,822) (5.63) Forward Foreign Currency Contracts 15/03/11 £31,644,365 31,644,365 5.65
Futures & Options 0.30% (0.00%) Anglo American February 2011 3200 (Call Option) £218 627,840 0.11 Hang Seng Index February 2011 24400 (Call Option) HKD282 211,468 0.04 Rio Tinto February 2011 4400 (Call Option) £102 348,840 0.06 Xstrata February 2011 1500 (Call Option) £481 505,050 0.09
Portfolio of investments 552,910,838 98.74
Net current assets 7,051,478 1.26
Total Net Assets 559,962,316 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt GDR = Global Depositary Receipt
- 149 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 71,192,698 88,059,041
Revenue 7,306,335 7,654,920
Expenses (1,508,803) (1,347,618)
Finance costs: Interest (12) (106)
Net revenue before taxation 5,797,520 6,307,196
Taxation (472,048) (493,556)
Net revenue after taxation 5,325,472 5,813,640
Total return before distributions 76,518,170 93,872,681
Finance costs: Distributions (5,325,542) (5,813,636) Change in net assets attributable to Shareholders from investment activities 71,192,628 88,059,045
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 520,311,283 448,518,908
Amounts receivable on issue of shares 34,168,830 17,970,927 Amounts payable on cancellation of shares (70,825,144) (24,736,515) (36,656,314) (6,765,588)
Dilution adjustment 146,039 18,990
Stamp Duty Reserve Tax (30,454) (98,629)
Change in net assets attributable to Shareholders from investment activities (see above) 71,192,628 88,059,045
Retained distributions on accumulation shares 4,999,134 5,772,067
Closing net assets attributable to Shareholders 559,962,316 535,504,793
- 150 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 553,288,738 501,659,463
Debtors 3,801,411 6,180,283
Cash and bank balances 4,238,509 20,964,973 Total other assets 8,039,920 27,145,256 Total assets 561,328,658 528,804,719
LIABILITIES Investment liabilities (377,900) (1,165,164)
Creditors (988,442) (7,328,272)
Total other liabilities (988,442) (7,328,272)
Total liabilities (1,366,342) (8,493,436)
Net assets attributable to Shareholders 559,962,316 520,311,283
*Gross of investment liabilities.
- 151 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 1 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.6441 0.2644 2.3797 0.0000 2.3797 Group 1:Shares purchased prior 1 July 2010
Group 2 1.7717 0.1772 1.5945 0.7852 2.3797 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=79.82%, U=20.18%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 2.5815 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.7182 0.1718 1.5464 0.0000 1.5464 Group 1:Shares purchased prior 1 July 2010
Group 2 0.7367 0.0737 0.6630 0.8834 1.5464 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=83.25%, U=16.75 %
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 1.6921 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 3.2746 0.3275 2.9471 0.0000 2.9471 Group 1:Shares purchased prior 1 July 2010
Group 2 1.5227 0.1523 1.3704 1.5767 2.9471 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=66.24%, U=33.76%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 3.0840 pence per share. - 152 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Balanced Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 87,427,223 70,534,346 Commissions 84,111 48,109 Taxes 85,032 61,685
Total purchase costs 169,143 109,794
Gross purchases total 87,596,366 70,644,140
Analysis of total sales proceeds:
Sales before transaction costs 108,129,852 66,336,763 Commissions (67,081) (46,316) Taxes (2,980) (301)
Total sales costs (70,061) (46,617)
Total sales net of transaction costs 108,059,791 66,290,146
- 153 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
BNY MELLON INVESTMENT FUNDS - NEWTON GLOBAL DYNAMIC BOND FUND
Interim Report for the six months ended 31 December 2010
- 154 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Paul Brain Howard Cunningham/Parmeshwar Chadha
Fund Size £406.20m
Sector Global Bonds
Yields as at 31/12/10:
Sterling Income Shares 5.49% Exempt Shares 2 (Gross Accumulation) 5.56% Institutional Shares (Net Income) 5.57% X Shares (Net Accumulation) 5.57% X Shares (Net Income) 5.57%
Key Dates: Fund Launch 28 April 2006
Aim To maximise the total return from income and capital growth from a globally diversified portfolio of predominantly higher yielding corporate and government fixed interest securities. The Sub-Fund may also invest in deposits, derivative instruments, forward transactions, approved money market instruments and collective investment schemes.
Fund Ratings
A Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares* 11.34% 18.95% 0.14% 2.40% N/A Exempt Shares 2 (Gross Accumulation)* 13.89% 21.70% 2.45% 4.58% N/A Institutional Shares (Income)* 11.95% 19.61% 0.70% 2.97% N/A X Shares (Net Accumulation)* 12.79% 20.51% N/A N/A N/A X Shares (Net Income)* N/A N/A N/A N/A N/A
LIBOR GBP 1 Month + 2% 2.56% 2.91% 7.54% 7.98% 6.86%
Source: Lipper as at 31 December 2010 – Sterling Income; Institutional Shares (Income); Sterling X Shares (Net Accumulation) – Total return including revenue net of UK tax and annual charges, but excluding initial charge. Exempt Shares 2 (Gross Accumulation) – Total return including gross revenue and annual charges but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 155 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 5.24% against 1.27% for LIBOR GBP 1 Month + 2%.
Over the period, the Fund delivered a positive absolute return, outperforming its peer group sector average. Positive contribution was generated from an exposure to a broad spectrum of bond markets, especially to corporate and emerging debt, as yields fell across the board. Government bond and investment-grade bond markets weakened mid- way through the period, a consequence of slightly stronger economic data. This caused a modest pause in the strong rally of risk assets. The resumption of the rally was advantageous to the Fund due, in part, to the defensive adjustment to positions, but also helped by its high weighting in the riskier emerging market and high yield bond markets, which continued to do well. In addition, the Fund’s currency positions in Asian and commodity-related currencies, which appreciated relative to sterling, helped performance.
Over the period, the government debt positions were initially increased, but then reduced towards the end of the year. Additions to the investment-grade holdings centred on senior bank debt and utilities. New high-yield bonds (bonds that are rated below BBB by the independent ratings agency Standard & Poor’s) offer exposure to an economic recovery, while the remaining government bonds offer protection if growth falters. The overall duration of the Fund was initially high, but reduced towards the end of the period. As expectations of a further round of US quantitative easing gained momentum in October, all sectors of the bond market rose together. With markets becoming increasingly correlated, the diversification benefits within the Fund were reduced. To offset this concern, the manager chose to take profits across the board by raising cash and increasing exposure to both index-linked securities and those with floating rates. Meanwhile, positions in the German bond market, such as 3.5% Germany 2020, together with longer-dated US Treasuries, such as 4.5% US Treasury 2039, were sold and re-invested in shorter-dated bonds.
The table below shows the top ten purchases and sales in the period:
Purchases Sales Treasury 0.00% Stock 2011 USA Treasury 4.50% Bonds 2039 USA Treasury 4.50% Bonds 2039 USA Treasury 3.75% Bonds 2018 Sweden 4.50% Bonds 2015 Canada 3.00% Bonds 2014 Treasury 0.00% Stock 2010 USA Treasury 6.25% Bonds 2023 Norway 6.50% Bonds 2013 Poland 6.25% Bonds 2015 Poland 5.25% Bonds 2013 Sweden 6.75% Bonds 2014 UK Treasury 0.00% Stock 2011 Germany 3.25% Bonds 2015 Germany 3.25% Bonds 2015 Canada 3.50% Bonds 2020 Australia 5.75% Bonds 2012 USA Treasury 1.25% Notes 2015 Sweden 6.75% Bonds 2014 iShares iBoxx $ High Yield Corporate Bond
- 156 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 (from 28 April) 100.75 97.88 2.7531
2007 99.80 95.35 4.5856
2008 97.44 85.19 4.7372
2009 105.30 86.15 5.2547
2010 112.15 103.17 5.8674
Highest Lowest Gross Revenue Exempt Shares 2 (Gross Accumulation) Price (p) Price (p) per share (p)*
2006 (from 28 April) 103.62 98.81 3.5507
2007 107.54 102.49 6.2155
2008 112.16 100.58 7.2858
2009 134.42 104.15 8.2518
2010 154.99 134.22 9.9560
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2006 (from 29 June) 101.59 98.48 2.2133
2007 100.76 96.50 4.6931
2008 98.78 86.73 5.1421
2009 107.71 87.86 5.4224
2010 115.31 105.65 6.0852
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2008 (from 19 March) 99.66 89.25 4.0891
2009 118.07 92.07 5.8205
2010 134.73 117.65 6.9499
*Distributions are shown in the year declared rather than paid.
- 157 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued) Calendar Year
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2010 (from 11 October) 100.34 97.79 1.0419
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 183,113,790 92.20 198,599,557
30/06/09 197,630,037 91.38 216,269,561
30/06/10 251,780,382 105.60 238,436,301
31/12/10 272,723,558 108.46 251,457,012
Exempt Shares 2 (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 12,976,888 106.63 12,169,674
30/06/09 9,564,960 114.13 8,380,906
30/06/10 13,916,140 142.86 9,741,116
31/12/10 58,119,202 152.27 38,168,700
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 6,785,034 93.70 7,241,260
30/06/09 3,722,790 93.33 3,988,760
30/06/10 3,204,420 108.40 2,956,216
31/12/10 3,842,171 111.62 3,442,315
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 436,459 94.92 459,796
30/06/09 1,085,132 100.60 1,078,653
30/06/10 27,290,106 124.61 21,901,035
31/12/10 60,115,280 132.21 45,469,590
- 158 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
X Shares (Net Income) Net Asset Pence Shares as at Value (£) per share in issue
31/12/10 11,397,658 97.42 11,700,000
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.38 1.39
Exempt Shares 2 (Gross Accumulation) 0.47 0.46
Institutional Shares (Income) 0.81 0.81
X Shares (Net Accumulation) 0.06 0.06
X Shares (Net Income) 0.05 N/A
- 159 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 7.52% (0.00%) Treasury 0.00% Stock 2011 £19,130,000 19,122,348 4.71 Treasury 0.00% Stock 2011 £8,000,000 7,992,800 1.97 Treasury 1.25% Index-Linked 2032 £2,920,000 3,423,162 0.84
Overseas Government Bonds 20.72% (28.89%) Australia 5.75% Bonds 2012 AUD12,170,000 8,040,828 1.98 Belarus 8.75% Bonds 2015 USD3,750,000 2,473,112 0.61 Colombia 7.375% Bonds 2019 USD1,625,000 1,255,354 0.31 Commonwealth Bank of Australia FRN 2013 AUD7,200,000 4,821,862 1.19 Croatia 6.625% Bonds 2020 USD4,550,000 3,017,998 0.74 Georgia 7.50% Bonds 2013 USD1,440,000 953,024 0.24 Greece 4.30% Bonds 2017 EUR2,700,000 1,435,349 0.35 Iceland 3.75% EMTN 2011 EUR975,000 822,691 0.20 Indonesia 7.75% Bonds 2038 USD1,980,000 1,549,366 0.38 Latvia 4.25% Bonds 2014 EUR1,310,000 1,132,795 0.28 Lebanese 7.875% Bonds 2011 USD3,200,000 2,109,976 0.52 Lithuania 7.375% Bonds 2020 USD2,320,000 1,654,794 0.41 Lithuania 5.125% Bonds 2017 USD2,381,000 1,510,763 0.37 Mexico 7.75% Bonds 2017 MXN54,000,000 2,976,333 0.73 Mexico 9.00% Bonds 2012 MXN77,000,000 4,297,636 1.06 New South Wales Treasury 2.75% Index-Linked 2025 AUD8,940,000 5,948,639 1.47 New Zealand 6.00% Bonds 2015 NZD16,210,000 8,491,556 2.09 Norway 6.50% Bonds 2013 NOK86,420,000 10,415,316 2.56 Poland 5.25% Bonds 2025 EUR850,000 740,881 0.18 Poland 5.25% Bonds 2013 PLN44,900,000 9,841,882 2.42 Sri Lanka 8.25% Bonds 2012 USD1,360,000 941,586 0.23 Sweden 4.50% Bonds 2015 SEK60,480,000 6,256,636 1.54 Venezuela 10.75% Bonds 2013 USD2,690,000 1,663,168 0.41 Vietnam 6.875% Bonds 2016 USD2,700,000 1,820,780 0.45
Sterling Denominated Corporate Bonds 14.31% (18.02%) Allied Irish Banks 12.50% Bonds 2019 £8,000,000 2,152,800 0.53 Anglo American Capital 6.875% Bonds 2018 £2,100,000 2,355,659 0.58 Arsenal Securities 5.1418% Bonds 2029 £2,363,000 1,851,390 0.46 BNP Paribas 5.945% 2049 £2,000,000 1,726,183 0.42 British Sugar 10.75% Red Deb 2013 £1,247,000 1,454,601 0.36 Carlsberg Finance 6.625% MTN 2011 £2,340,000 2,435,566 0.60 Citigroup FRN 2011 £275,000 273,732 0.07 Clydesdale Bank 4.875% FRN 2016 £3,010,000 2,992,542 0.74 Co-Operative Bank 5.75% Bonds 2024 £900,000 728,587 0.18 Co-Operative Bank 5.625% EMTN 2021 £1,600,000 1,410,722 0.35 Coventry Building Society 5.875% Bonds 2022 £2,760,000 2,631,277 0.65 Deutsche Telekom International Finance 5.625% Bonds 2013 £3,650,000 3,918,220 0.97 Dubai Commercial Operations 6.00% EMTN 2017 £2,350,000 1,747,930 0.43 Enterprise Inns 6.875% Bonds 2025 £2,100,000 1,616,559 0.40 France Telecom 7.50% (9.00%) Bonds 2011 £3,660,000 3,704,469 0.91 John Lewis 8.375% Bonds 2019 £1,760,000 2,104,098 0.52 Juneau Investments 5.90% EMTN 2021 £2,750,000 2,292,125 0.56 Lehman Brothers 7.875% Bonds 2018 £2,200,000 456,500 0.11 Lloyds TSB Bank 6.50% Bonds 2040 £2,430,000 2,247,045 0.55 Matalan Finance 9.625% Bonds 2017 £1,681,000 1,790,231 0.44 Old Mutual 5.00% FRN 2016 £3,617,000 3,607,958 0.89
- 160 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Sterling Denominated Corporate Bonds (continued) Royal Bank of Scotland 7.387% Perp EMTN 2049 £1,051,000 1,025,776 0.25 Scottish & Southern Energy 5.453% Bonds 2049 £3,050,000 2,941,420 0.72 SLM Student Loan Trust 5.15% EMTN 2015 £2,807,000 2,680,685 0.66 Taylor Wimpey 10.375% Bonds 2015 £1,302,000 1,360,577 0.33 Thomas Cook 7.75% Bonds 2017 £2,180,000 2,163,650 0.53 TUI Travel 6.00% Cnv Bonds 2014 £1,600,000 1,634,720 0.40 Tullett Prebon 7.04% Bonds 2016 £1,843,000 1,803,928 0.44 Virgin Media Finance 7.00% Bonds 2018 £1,000,000 1,060,000 0.26
Non-Sterling Denominated Corporate Bonds 45.36% (48.06%) Abengoa 8.50% Bonds 2016 EUR2,250,000 1,838,035 0.45 AfriSam Investment FRN 2012 EUR1,400,000 904,979 0.22 Akzo Nobel 4.25% Bonds 2011 EUR4,300,000 3,750,764 0.92 Alcatel Lucent 4.75% Cnv Bonds 2011 EUR110,000 1,590,131 0.39 Alliance Bank FRN 2020 USD492,234 222,090 0.06 Altria Group 9.95% Bonds 2038 USD2,762,000 2,461,276 0.61 ASML 5.75% Bonds 2017 EUR3,250,000 2,944,768 0.72 Bank Nederlandse Gemeent FRN 2013 USD5,930,000 3,812,704 0.94 Barclays Bank FRN 2015 AUD3,900,000 2,547,329 0.63 Beverage Packaging 8.00% Bonds 2016 EUR2,250,000 1,940,857 0.48 Boardriders 8.875% Bonds 2017 EUR1,368,000 1,241,136 0.31 Boats Investment Netherlands FRN PIK 2015 EUR2,250,000 1,320,852 0.33 BNP Paribas Australia FRN 2015 AUD3,000,000 1,948,271 0.48 BP Capital Markets 6.375% Bonds 2014 AUD3,070,000 2,000,905 0.49 Breeze Finance 6.708% Bonds 2027 EUR2,150,000 1,088,205 0.27 Breeze Finance 4.524% Bonds 2027 EUR2,750,000 1,518,626 0.37 Campofrio Food 8.25% Bonds 2016 EUR2,200,000 1,943,550 0.48 CEDC Finance 8.875% Bonds 2016 EUR1,416,000 1,275,336 0.31 Cemex Finance 9.50% Bonds 2016 USD950,000 632,795 0.16 Cemex Finance 9.625% Bonds 2017 EUR1,600,000 1,359,020 0.34 Chesapeake Energy 6.25% Bonds 2017 EUR2,030,000 1,763,470 0.43 Clearwire Comm/Finance 12.00% Bonds 2015 USD2,700,000 1,878,019 0.46 Codere Finance 8.25% Notes 2015 EUR1,400,000 1,200,606 0.30 Consol Energy 8.00% Bonds 2017 USD3,000,000 2,057,706 0.51 Conti-Gummi Finance 7.125% Bonds 2018 EUR2,896,000 2,552,179 0.63 Continental Airlines 9.00% Bonds 2016 USD1,730,000 1,224,205 0.30 Crown 7.125% Bonds 2018 EUR1,779,000 1,602,571 0.39 Edcon Holdings Proprietary FRN 2015 EUR873,000 624,664 0.15 Edcon Holdings Proprietary FRN 2014 EUR2,100,000 1,534,121 0.38 Enercoal Resources 9.25% Cnv Bonds 2014 USD2,200,000 1,645,799 0.41 EN Germany 10.75% Bonds 2015 EUR2,200,000 1,905,628 0.47 ERC Ireland Finance FRN 2016 EUR1,550,000 601,298 0.15 ERC Ireland Preferred FRN 2017 EUR2,037,801 122,945 0.03 FCE Bank 7.125% Bonds 2013 EUR1,600,000 1,441,210 0.35 FCE Bank 7.25% Bonds 2013 EUR600,000 540,091 0.13 FMC Finance III 6.875% Bonds 2017 USD2,200,000 1,501,900 0.37 GE Capital European Fund 4.375% Bonds 2011 EUR4,320,000 3,750,375 0.92 GeoEye 9.625% Bonds 2015 USD2,100,000 1,528,305 0.38 Glencore Finance Europe 8.00% Bonds 2049 USD8,800,000 5,681,716 1.40 Gold Fields Orogen 4.875% Bonds 2020 USD2,460,000 1,495,657 0.37 HBOS 6.75% FRN 2017 AUD5,420,000 2,927,051 0.72 HeidelbergCement 8.50% Bonds 2019 EUR1,800,000 1,704,608 0.42 Hellas Telecom II FRN 2015 EUR1,600,000 3,585 0.00
- 161 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Hellas Telecom Finance FRN PIK 2015 EUR3,577,403 17,267 0.00 HTM Sport & Freizeitgerate 8.50% Notes 2014 EUR1,575,000 1,235,297 0.30 ICAP 7.50% Bonds 2014 EUR2,220,000 2,033,546 0.50 Impress Holdings FRN 2013 EUR3,200,000 2,753,883 0.68 Ineos 7.875% Bonds 2016 EUR2,200,000 1,732,605 0.43 Ineos Finance 9.25% Bonds 2015 EUR1,936,000 1,780,872 0.44 ING Bank 2.625% Bonds 2012 USD5,820,000 3,822,071 0.94 International Personal Finance 11.50% Notes 2015 EUR1,407,000 1,294,649 0.32 Interpublic Group of Companies 10.00% Bonds 2017 USD1,840,000 1,378,795 0.34 Intesa Sanpaolo FRN 2016 EUR2,850,000 2,401,555 0.59 ISS Financing 11.00% Bonds 2014 EUR1,800,000 1,709,317 0.42 Kabel Deutschland 10.625% Notes 2014 USD594,467 397,368 0.10 Kabel Deutschland 10.75% Bonds 2014 EUR2,550,000 2,061,521 0.51 Koninklijke 4.50% Bonds 2011 EUR4,300,000 3,766,188 0.93 Kronos International 6.50% Bonds 2013 EUR1,900,000 1,639,043 0.40 Lecta FRN SNR 2014 EUR2,300,000 1,813,837 0.45 Lottomatica 8.25% Bonds 2066 EUR2,050,000 1,713,858 0.42 Lumena Resources 12.00% Bonds 2014 USD1,800,000 1,082,089 0.27 Magyar Telecom FRN 2013 EUR1,570,000 1,224,609 0.30 Motors Liquidation 7.125% Bonds 2013 USD4,000,000 859,921 0.21 National Wealth Management FRN 2026 AUD3,720,000 2,060,957 0.51 Nationwide Building Society 6.75% Bonds 2020 EUR3,800,000 3,093,523 0.76 New World Resources 7.375% Bonds 2015 EUR2,000,000 1,737,474 0.43 Nextel Communications 6.875% Bonds 2013 USD3,601,000 2,319,823 0.57 Offshore Group Investments 11.50% Bonds 2015 USD64,000 44,723 0.01 Offshore Group Investments 11.50% Bonds 2015 USD2,400,000 1,662,832 0.41 OI European 6.75% Bonds 2020 EUR2,754,000 2,399,240 0.59 OTE 5.375% Bonds 2011 EUR2,100,000 1,811,479 0.45 Peermont Global 7.75% Bonds 2014 EUR1,100,000 820,179 0.20 Petroleos de Venezuela 8.00% Bonds 2013 USD2,306,250 1,217,483 0.30 Phoenix PIB Finance 9.625% Bonds 2014 EUR2,600,000 2,437,203 0.60 Prudential 11.75% FRN 2049 USD2,900,000 2,161,879 0.53 PTS Acquisition 9.75% Bonds 2017 EUR2,000,000 1,697,914 0.42 Renhe Commercial 13.00% Bonds 2016 USD2,500,000 1,679,334 0.41 Rexel 8.25% Bonds 2016 EUR2,200,000 2,076,660 0.51 Reynolds American 7.625% Bonds 2016 USD4,000,000 2,883,945 0.71 Royal Bank of Scotland FRN 2012 USD5,900,000 3,824,248 0.94 Royal Bank of Scotland 4.50% Bonds 2016 EUR2,025,000 1,466,066 0.36 Santos Finance 8.25% Bonds 2070 EUR3,900,000 3,302,052 0.81 Sazka 8.50% Bonds 2021 EUR1,700,000 691,577 0.17 Silverstone Master Issuer FRN 2055 USD4,810,000 3,093,400 0.76 Smurfit Kappa Acquisition 7.25% Bonds 2017 EUR1,810,000 1,614,612 0.40 Statoil 7.50% Bonds 2016 USD5,000,000 3,931,732 0.97 Stena 6.125% Bonds 2017 EUR2,222,000 1,828,929 0.45 Sunrise Communications 7.00% Bonds 2017 CHF1,442,000 1,045,066 0.26 Telemovil Finance 8.00% Bonds 2017 USD3,152,000 2,088,406 0.51 UBS 0.00% EMTN 2011 USD3,300,000 3,147,189 0.78 UPC Germany 8.125% Bonds 2017 EUR2,300,000 2,100,912 0.52 US Bank 4.375% Bonds 2017 EUR2,600,000 2,195,635 0.54 Vale Overseas 6.875% Bonds 2039 USD3,495,000 2,441,843 0.60 Wachovia Bank FRN 2017 AUD6,080,000 3,441,088 0.85 Wind Acquisition Finance 11.75% Bonds 2017 EUR2,300,000 2,200,590 0.54 Woodside Finance 8.75% Bonds 2019 USD2,850,000 2,271,428 0.56 Ziggo Bond 8.00% Bonds 2018 EUR2,270,000 2,020,260 0.50 - 162 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Zlomrex International Finance 8.50% Bonds 2014 EUR1,600,000 1,020,472 0.25
Preference Shares 0.60% (0.92%) American International Group 8.50% Preference Units 430,120 2,418,334 0.60
Global/International Bond Funds 2.04% (1.98%) iShares II JPMorgan $ Emerging Mkts 121,948 8,303,177 2.04
Khazakstan 0.00% (0.00%) Alliance Bank GDR (Rep 1/40 Prf Shs) 320 0 0.00 Alliance Bank GDR (Rep 1/4 Ord KZT) 644 0 0.00
Derivatives -1.60% (1.46%)
Futures & Options 0.02% (0.00%) Euro - Bund Future March 2011 (Put Option) EUR190 91,705 0.02
AUD Forward Foreign Currency Positions -0.38% (0.10%) Forward Foreign Currency Contracts 17/03/11 AUD(51,010,586) (33,039,870) (8.13) Forward Foreign Currency Contracts 17/03/11 £31,349,143 31,349,143 7.72 Forward Foreign Currency Contracts 17/03/11 AUD6,050,000 3,918,622 0.96 Forward Foreign Currency Contracts 17/03/11 £(3,773,879) (3,773,879) (0.93)
CAD Forward Foreign Currency Contracts 0.06% (0.05%) Forward Foreign Currency Contracts 17/03/11 CAD13,058,177 8,415,547 2.07 Forward Foreign Currency Contracts 17/03/11 £(8,168,436) (8,168,436) (2.01)
CHF Forward Foreign Currency Contracts s -0.02% (0.00%) Forward Foreign Currency Contracts 17/03/11 CHF(1,520,000) (1,048,481) (0.26) Forward Foreign Currency Contracts 17/03/11 £976,516 976,516 0.24
CNY Forward Foreign Currency Contracts 0.12% (-0.12%) Forward Foreign Currency Contracts 17/03/11 CNY293,950,000 28,722,410 7.07 Forward Foreign Currency Contracts 17/03/11 £(28,223,133) (28,223,133) (6.95)
EUR Forward Foreign Currency Contracts -0.77% (0.28%) Forward Foreign Currency Contracts 17/03/11 EUR(135,155,000) (116,536,741) (28.69) Forward Foreign Currency Contracts 17/03/11 £113,368,476 113,368,476 27.91 Forward Foreign Currency Contracts 17/03/11 EUR2,620,000 2,251,787 0.55 Forward Foreign Currency Contracts 17/03/11 £(2,197,518) (2,197,518) (0.54)
IDR Forward Foreign Currency Contracts 0.01% (0.00%) Forward Foreign Currency Contracts 17/03/11 IDR85,329,940,000 6,019,351 1.48 Forward Foreign Currency Contracts 17/03/11 £(5,973,517) (5,973,517) (1.47)
NOK Forward Foreign Currency Contracts 0.01% (0.00%) Forward Foreign Currency Contracts 17/03/11 NOK6,465,564 710,916 0.18 Forward Foreign Currency Contracts 17/03/11 £(677,296) (677,296) (0.17) Forward Foreign Currency Contracts 17/03/11 NOK(34,190,000) (3,759,335) (0.93) Forward Foreign Currency Contracts 17/03/11 £3,765,129 3,765,129 0.93
NZD Forward Foreign Currency Contracts -0.10% (0.04%) Forward Foreign Currency Contracts 17/03/11 NZD(17,240,000) (8,572,044) (2.11) Forward Foreign Currency Contracts 17/03/11 £8,144,565 8,144,565 2.01 - 163 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives (continued)
PLN Forward Foreign Currency Contracts -0.12% (-0.02%) Forward Foreign Currency Contracts 17/03/11 PLN(45,820,000) (9,921,099) (2.44) Forward Foreign Currency Contracts 17/03/11 £9,423,330 9,423,330 2.32
SEK Forward Foreign Currency Contracts -0.02% (-0.01%) Forward Foreign Currency Contracts 17/03/11 SEK(68,290,000) (6,540,854) (1.61) Forward Foreign Currency Contracts 17/03/11 £6,448,023 6,448,023 1.59
SGD Forward Foreign Currency Contracts 0.06% (-0.04%) Forward Foreign Currency Contracts 17/03/11 SGD13,179,739 6,624,639 1.63 Forward Foreign Currency Contracts 17/03/11 £(6,380,540) (6,380,540) (1.57)
USD Forward Foreign Currency Contracts -0.47% (1.14%) Forward Foreign Currency Contracts 17/03/11 USD33,560,000 21,629,676 5.32 Forward Foreign Currency Contracts 17/03/11 £(21,470,781) (21,470,781) (5.29) Forward Foreign Currency Contracts 17/03/11 USD(189,318,892) (122,017,473) (30.04) Forward Foreign Currency Contracts 17/03/11 £119,981,312 119,981,312 29.54
Portfolio of investments 361,319,028 88.95
Net current assets 44,878,841 11.05
Total Net Assets 406,197,869 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Japanese Yen, South Korean Won and Mexican Peso Forward Foreign Currency portfolio categories, which, at 30 June 2010, represented -0.01%, 0.00% and 0.05% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers.
GDR = Global Depositary Receipt
- 164 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Portfolio Statement by Credit Rating as at 31 December 2010 Market Total Net Total Net Value (£’000’s) Assets (%) Assets (%) Standard & Poor’s Ratings: 31/12/10 31/12/10 30/06/10
AAA 56,590 13.93 11.66 AA 11,123 2.74 3.17 A 37,375 9.19 14.95 BBB 45,700 11.26 14.66 BB 44,799 11.02 11.27 B 45,087 11.12 9.97 CCC 9,572 2.35 2.67 CC 1,712 0.42 0.18 C 1,088 0.27 0.33 Not Rated (by S&P) 104,012 25.61 26.11 Preference Shares 2,418 0.60 0.92 Global/International Bond Funds 8,303 2.04 1.98 Derivatives (6,460) (1.60) 1.46
Portfolio of investments 361,319 88.95 99.33
Net current assets 44,879 11.05 0.67
Total Net Assets 406,198 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows:
Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C
- 165 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 8,654,279 28,198,947
Revenue 11,203,120 9,315,948
Expenses (1,942,304) (1,602,756)
Finance costs: Interest - (81) Net revenue before taxation 9,260,816 7,713,111
Taxation - (8,659)
Net revenue after taxation 9,260,816 7,704,452
Total return before distributions 17,915,095 35,903,399
Finance costs: Distributions (11,012,139) (9,147,902)
Change in net assets attributable to Shareholders from investment activities 6,902,956 26,755,497
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 296,191,048 212,002,919
Amounts receivable on issue of shares 115,481,677 44,794,375 Amounts payable on cancellation of shares (15,041,499) (18,077,696) 100,440,178 26,716,679
Dilution adjustment 299,399 61,250
Change in net assets attributable to Shareholders from investment activities (see above) 6,902,956 26,755,497
Retained distributions on accumulation shares 2,364,288 930,514
Closing net assets attributable to Shareholders 406,197,869 266,466,859
- 166 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 369,304,225 295,482,737
Debtors 18,924,175 6,150,538
Cash and bank balances 46,757,461 1,721,687
Total other assets 65,681,636 7,872,225
Total assets 434,985,861 303,354,962
LIABILITIES
Investment liabilities (7,985,197) (1,290,568)
Creditors (17,274,343) (2,273,064)
Distribution payable on income shares (3,528,452) (3,600,282)
Total other liabilities (20,802,795) (5,873,346)
Total liabilities (28,787,992) (7,163,914)
Net assets attributable to Shareholders 406,197,869 296,191,048
* Gross of investment liabilities.
- 167 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 1.6696 0.3339 1.3357 0.0000 1.3357 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.7229 0.1446 0.5783 0.7574 1.3357 Group 2:Shares purchased 1 October 2010 to 31 December 2010
The Interim distribution for the period ended 31 December 2009 was 1.4368 pence per share.
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 2.3348 0.0000 2.3348 Group 1: Shares purchased prior to 1 October 2010
Group 2 0.4148 1.9200 2.3348 Group 2: Shares purchased 1 October 2010 to 31 December 2010
The Interim distribution for the period ended 31 December 2009 was 2.3181 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 1.7371 0.3474 1.3897 0.0000 1.3897 Group 1: Shares purchased prior to 1 October 2010
Group 2 0.2489 0.0498 0.1991 1.1906 1.3897 Group 2: Shares purchased 1 October 2010 to 31 December 2010
The Interim distribution for the period ended 31 December 2009 was 1.4854 pence per share.
Interim Distribution for X Shares (Accumulation) (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 2.0299 0.4060 1.6239 0.0000 1.6240 Group 1: Shares purchased prior to 1 October 2010
Group 2 1.1958 0.2392 0.9566 0.6674 1.6240 Group 2: Shares purchased 1 October 2010 to 31 December 2010
The Interim distribution for the period ended 31 December 2009 was 1.6262 pence per share.
- 168 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Distribution Statement (continued)
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 1.3024 0.2065 1.0419 0.0000 1.0419 Group 1: Shares purchased prior to 1 October 2010
Group 2 0.8356 0.1671 0.6685 0.3734 1.0419 Group 2: Shares purchased 1 October 2010 to 31 December 2010
As the share class was launched in October 2010, there was no distribution for the period ended 31 December 2009.
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 1.9143 0.3829 1.5314 0.0000 1.5314 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.0054 0.2011 0.8043 0.7271 1.5314 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The Interim distribution for the period ended 30 September 2009 was 1.5367 pence per share.
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 2.6230 0.0000 2.6230 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.9168 1.7062 2.6230 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The Interim distribution for the period ended 30 September 2009 was 2.4306 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 1.9860 0.3972 1.5888 0.0000 1.5888 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.2118 0.2424 0.9694 0.6194 1.5888 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The Interim distribution for the period ended 30 September 2009 was 1.5848 pence per share.
- 169 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Dynamic Bond Fund
Distribution Statement (continued)
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 2.2850 0.4570 1.8280 0.0000 1.8280 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.7641 0.1528 0.6113 1.2167 1.8280 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The Interim distribution for the period ended 30 September 2009 was 1.7116 pence per share.
- 170 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
BNY MELLON INVESTMENT FUNDS - NEWTON GLOBAL HIGH YIELD BOND FUND
Interim Report for the six months ended 31 December 2010
- 171 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Parmeshwar Chadha Howard Cunningham
Fund Size £95.78m
Sector IMA £ High Yield
Distribution Yield as at 31/12/10:
Sterling Income Shares 7.67% X Shares (Net Accumulation) 7.71%
Key Dates: Fund Launch 02 October 2000
Aim
To achieve a high yield from a globally diversified portfolio which may include but is not limited to fixed interest bonds and other debt instruments (such as floating rate notes and index-linked notes). The Sub-Fund may also invest in deposits, derivative instruments, forward transactions and collective investment schemes. At least 80% of the Sub- Fund’s assets should be in Sterling denominated assets or hedged back to Sterling.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 15.40% 50.18% -28.96% -2.67% 4.61% X Shares (Net Accumulation)** 16.66% 51.84% N/A N/A N/A
IMA £ High Yield* 10.62% 45.94% -25.73% -0.31% 5.52%
Source: Lipper as at 31 December 2010. Total return, including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Fund was in the IMA Global Bonds sector until October 2009. The performance figures for the IMA Global Bonds sector are available upon request.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
** Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
- 172 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 8.45% against 9.35% for the Bank of America Merrill Lynch Global High Yield excluding Bank Capital & Junior Subordinated GBP (Hedged) Index.
Over the period, the Fund delivered a positive absolute return, but lost some performance relative to the market. Notable contributions came from the drugs wholesaler Phoenix and the emerging markets consumer lending specialist International Personal Finance. Meanwhile, having struggled earlier in the year, financial bonds became the top- performing sector. Negative contributions came from the Fund’s subordinated Irish bank bonds (Allied Irish and Bank of Ireland), which fell on renewed sovereign debt concerns. However, other bank bonds generally performed well in response to benign Basel III proposals and equity issuance in the sector. Elsewhere, high yield corporate bonds from the periphery of the Eurozone came under pressure due to the large fall in prices in their underlying government bond markets.
The Fund continued to experience significant inflows over the period and transactions were therefore biased towards purchases, both adding to existing holdings and building new positions. Notable new positions included bonds issued by Santos Finance Limited, the aircraft manufacturer Bombardier and the Swiss telecoms company Sunrise Communications. The latter was later sold following a run of strong performance. There was also a lot of new issuance in the high-yield market during the period and the Fund participated in several of these, including Continental, the tyre and motor parts manufacturer. Meanwhile, notable sales over the period included the clothing manufacturer Levi Strauss due to concerns about rising cotton prices, and Central Euro Media Enterprises.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Santos Finance 8.25% Bonds 2070 Levi Strauss 7.75% Bonds 2018 Bombardier 6.125% Bonds 2021 Sunrise Communications 7.00% Bonds 2017 Cable & Wireless 8.625% Bonds 2019 Prime Dig 11.75% Bonds 2014 Clearwire 12.00% Bonds 2015 Central Euro Media Enterprise 11.625% Bonds 2016 Agco 6.875% Bonds 2014 Belarus 8.75% Bonds 2015 Boats Investment Netherlands 11.00% PIK 2017 Lukoil 7.25% Bonds 2019 Offshore 11.50% Bonds 2015 Conti-Gummi Finance 7.50% Bonds 2017 ISS 8.875% Bonds 2016 Bank of Ireland 4.625% Bonds 2013 International Personal Finance 11.50% Notes 2015 Rhodia FRN 2013 Kabel Deutschland 10.75% Bonds 2014 Grohe FRN 2014
- 173 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Statistics
Price and Revenue Record by Share Class Calendar Year Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 77.95 74.71 4.2861
2007 76.74 69.33 4.7801
2008 69.91 44.73 4.6986
2009 64.35 42.63 4.3220
2010 69.00 63.73 4.6256
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2008 (from 20 March) 66.45 47.76 3.7527
2009 74.83 46.66 4.9248
2010 87.31 75.47 5.7323
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 17,454,211 62.67 27,849,428
30/06/09 14,280,613 50.70 28,165,128
30/06/10 25,757,355 64.44 39,972,149
31/12/10 37,675,962 67.64 55,697,785
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 114,015 64.33 177,228
30/06/09 2,518,279 57.40 4,387,437
30/06/10 26,624,613 79.45 33,511,627
31/12/10 58,106,194 86.78 66,960,502
- 174 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Statistics
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.15 1.18
X Shares (Net Accumulation) 0.08 0.10
- 175 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Government Bonds 1.68% (1.96%) Greece 4.30% Bonds 2017 EUR600,000 318,966 0.33 Iceland 3.75% EMTN 2011 EUR250,000 210,946 0.22 Mexico 9.00% Bonds 2012 MXN8,580,000 478,880 0.50 Venezuela 10.75% Bonds 2013 USD970,000 599,730 0.63
Sterling Denominated Corporate Bonds 13.98% (17.05%) Allied Irish Banks 12.50% Bonds 2019 £3,000,000 807,300 0.84 Bank of Ireland 9.25% FRN 2020 £400,000 200,000 0.21 BBVA International 9.10% Bonds 2049 £100,000 87,785 0.09 Cable & Wireless International Finance 8.625% Bonds 2019 £1,500,000 1,531,080 1.60 Cable & Wireless 8.75% Bonds 2012 £640,000 674,342 0.71 Cable & Wireless 5.75% Cnv Bonds 2014 £400,000 414,200 0.43 CGIS 9.625% Bonds 2019 £100,000 93,332 0.10 Co-Operative Bank 5.75% Bonds 2024 £300,000 242,862 0.25 Co-Operative Bank 5.625% EMTN 2021 £190,000 167,523 0.18 Dubai Holding Commercial Ops 6.00% EMTN 2017 £600,000 446,280 0.47 Enterprise Inns 6.375% Bonds 2031 £278,000 191,820 0.20 Enterprise Inns 6.50% Bonds 2018 £396,000 338,307 0.35 Enterprise Inns 6.875% Bonds 2025 £220,000 169,354 0.18 GKN 6.75% Bonds 2019 £327,000 337,758 0.35 Iron Mountain 7.25% Bonds 2014 £900,000 915,030 0.96 Kensington 9.00% Bonds 2015 £54,000 43,200 0.05 LBG Capital No.1 7.8673% Bonds 2019 £491,000 434,535 0.45 LBG Capital No.2 14.50% Bonds 2022 £350,000 425,250 0.44 Lehman Brothers 7.875% Bonds 2018 £200,000 41,500 0.04 Matalan Finance 9.625% Bonds 2017 £500,000 532,490 0.56 Northern Rock 5.75% Bonds 2017 £200,000 140,000 0.15 Royal Bank of Scotland 7.387% Perp EMTN 2049 £164,000 160,064 0.17 Taylor Wimpey 10.375% Bonds 2015 £651,000 680,288 0.71 Thomas Cook 7.75% Bonds 2017 £655,000 650,088 0.68 TUI Travel 6% Cnv Bonds 2014 £600,000 613,020 0.64 Tullett Prebon 7.04% Bonds 2016 £470,000 460,036 0.48 Virgin Media Finance 7.00% Bonds 2018 £1,130,000 1,197,800 1.25 Virgin Media Finance 8.875% Bonds 2019 £1,050,000 1,191,855 1.25 Yorkshire Building Society 5.649% Perp 2049 £250,000 178,750 0.19
Non-Sterling Denominated Corporate Bonds 74.03% (73.92%) Abengoa 8.50% Bonds 2016 EUR700,000 571,833 0.59 AfriSam Investment FRN 2012 EUR500,000 323,206 0.34 Agco 6.875% Bonds 2014 EUR1,803,000 1,569,519 1.64 Alcatel-Lucent 4.75% Cnv Bonds 2011 EUR44,000 636,052 0.67 Alliance Bank FRN 2020 USD328,155 148,059 0.15 Ardagh Glass Finance 7.125% Bonds 2017 EUR1,150,000 944,618 0.99 Ardagh Glass Finance 9.25% Bonds 2016 EUR558,000 526,363 0.55 ART Five FRN 2014 EUR850,000 686,725 0.72 Barclays Bank 4.75% FRN Perp 2049 EUR700,000 396,984 0.42 Beverage Packaging 8.00% Bonds 2016 EUR1,300,000 1,121,384 1.17 Boardriders 8.875% Bonds 2017 EUR684,000 620,568 0.65 Boats Investment Netherlands 11.00% PIK 2017 EUR1,350,000 1,359,926 1.42 Boats Investment Netherlands FRN PIK 2015 EUR720,000 434,706 0.45 Bombardier 6.125% Bonds 2021 EUR1,540,000 1,294,120 1.35 BP Capital Markets 6.375% Bonds 2014 AUD1,100,000 716,936 0.75 Breeze Finance 6.708% Bonds 2027 'B' EUR300,000 151,843 0.16 BTA Bank 0.00% ELN 2020 USD136,892 6,774 0.01 - 176 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) BTA Bank 10.75% Bonds 2018 USD66,263 46,197 0.05 BTA Bank 7.20% Bonds 2025 USD15,014 6,965 0.01 Campofrio Food 8.25% Bonds 2016 EUR1,565,000 1,382,571 1.44 CEDC 8.875% Bonds 2016 EUR1,060,000 954,701 1.00 Cemex Finance 9.50% Bonds 2016 USD900,000 599,490 0.63 Cemex Finance 9.625% Bonds 2017 EUR700,000 594,571 0.62 Chesapeake 7.00% Bonds 2014 EUR550,000 23,702 0.03 Chesapeake Energy 6.25% Bonds 2017 EUR1,318,000 1,144,953 1.20 Citic Resources Finance 6.75% Bonds 2014 USD200,000 133,347 0.14 Citic Resources Finance 6.75% Bonds 2014 USD520,000 346,622 0.36 Clearwire Comm/Finance 12.00% Bonds 2015 USD1,500,000 1,043,343 1.09 Codere Finance 8.25% Notes 2015 EUR650,000 557,424 0.58 Consol Energy 8.00% Bonds 2017 USD730,000 500,709 0.52 Consol Glass 7.625% Bonds 2014 EUR950,000 837,214 0.88 Conti-Gummi Finance 7.125% Bonds 2018 EUR1,089,000 959,711 1.00 Conti-Gummi Finance 8.50% Bonds 2015 EUR310,000 289,227 0.30 Co-Operative Bank FRN 2016 EUR560,000 424,737 0.44 CRC Breeze Finance 6.11% Bonds 2016 EUR350,000 125,868 0.13 Crown Euro 7.125% Bonds 2018 EUR877,000 790,026 0.82 Edcon Proprietary FRN 2015 EUR775,000 554,541 0.58 Edcon Proprietary FRN 2014 EUR1,000,000 730,533 0.76 EN Germany 10.75% Bonds 2015 EUR900,000 779,575 0.81 Enercoal Resources 9.25% Cnv Bonds 2014 USD1,100,000 822,900 0.86 ERC Ireland Finance FRN 2016 EUR500,000 193,967 0.20 ERC Ireland Preferred FRN 2017 EUR676,489 40,814 0.04 FCE Bank 7.125% Bonds 2013 EUR750,000 675,567 0.70 FCE Bank 7.25% Bonds 2013 EUR250,000 225,038 0.24 FCE Bank 9.375% Bonds 2014 EUR400,000 382,712 0.40 FMC Finance III 6.875% Bonds 2017 USD1,225,000 836,285 0.87 Food 8.875% Bonds 2012 EUR1,150,000 1,006,035 1.05 GeoEye 9.625% Bonds 2015 USD1,266,000 921,350 0.96 Gerresheimer 7.875% Bonds 2015 EUR200,000 106,076 0.11 Glencore Finance Europe 8.00% Bonds 2049 USD1,420,000 916,822 0.96 Gold Fields Orogen 4.875% Bonds 2020 USD440,000 267,516 0.28 HBOS 6.75% FRN 2017 AUD1,300,000 702,060 0.73 HeidelbergCement 7.50% Bonds 2014 EUR450,000 420,854 0.44 HeidelbergCement 7.50% Bonds 2020 EUR430,000 383,111 0.40 HeidelbergCement 8.50% Bonds 2019 EUR636,000 602,295 0.63 Hellas Telecom II FRN 2015 EUR300,000 672 0.00 Hellas Telecom Finance FRN PIK 2015 EUR552,457 2,666 0.00 HTM Sport & Freizeitgerate 8.50% Notes 2014 EUR616,000 483,138 0.51 Impress FRN 2013 EUR785,000 675,562 0.71 Indo Integrated Energy II 9.75% Bonds 2016 USD500,000 363,062 0.38 Ineos 7.875% Bonds 2016 EUR675,000 531,594 0.56 Ineos 8.50% Bonds 2016 USD150,000 87,913 0.09 Ineos Finance 9.25% Bonds 2015 EUR428,000 393,706 0.41 InterGen 8.50% Bonds 2017 EUR1,100,000 1,014,439 1.06 International Personal Finance 11.50% Notes 2015 EUR1,124,000 1,034,247 1.08 ISS 8.875% Bonds 2016 EUR1,100,000 979,953 1.02 ISS Financing 11.00% Bonds 2014 EUR600,000 569,772 0.59 Kabel Deutschland 10.625% Notes 2014 USD409,388 273,653 0.29 Kabel Deutschland 10.75% Bonds 2014 EUR1,200,000 970,127 1.01 Kerling 10.625% Bonds 2017 EUR1,000,000 939,541 0.98 KPNQwest 10.00% Cnv Bonds 2012 EUR22,000 2 0.00 - 177 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Kronos International 6.50% Bonds 2013 EUR1,200,000 1,035,185 1.08 LBI Escrow 8.00% Bonds 2017 EUR1,085,000 911,065 0.95 Lecta FRN 2014 EUR1,200,000 969,620 1.01 Lecta FRN SNR 2014 EUR800,000 630,900 0.66 Lottomatica 8.25% Bonds 2066 EUR1,300,000 1,086,837 1.13 Lumena Resources 12.00% Bonds 2014 USD1,100,000 661,277 0.69 Magyar Telecom FRN 2013 EUR515,000 401,704 0.42 Naftogaz Ukraine 9.50% Bonds 2014 USD250,000 175,903 0.18 National Wealth Management FRN 2026 AUD560,000 310,251 0.32 National Westminster Bank 6.625% FRN 2049 EUR218,000 143,267 0.15 New World Resources 7.375% Bonds 2015 EUR600,000 521,242 0.54 New World Resources 7.875% Bonds 2018 EUR600,000 534,424 0.56 Nextel Communications 6.875% Bonds 2013 USD2,450,000 1,578,329 1.65 Nielsen Company 0.00%-Var 2016 EUR350,000 309,311 0.32 Offshore Investment 11.50% Bonds 2015 USD23,000 16,072 0.02 Offshore Investment 11.50% Bonds 2015 USD1,530,000 1,060,056 1.11 OI European 6.75% Bonds 2020 EUR936,000 815,428 0.85 OTE 5.375% Bonds 2011 EUR1,100,000 948,870 0.99 Owens-Brockway Glass 6.75% Bonds 2014 EUR900,000 793,047 0.83 Pakistan Mobile Communications 8.625% Bonds 2013 USD200,000 126,208 0.13 PE Paper Escrow 11.75% Bonds 2014 EUR470,000 465,857 0.49 Peermont Global 7.75% Bonds 2014 EUR800,000 596,494 0.62 Petroleos de Venezuela 8.00% Bonds 2013 USD405,000 213,802 0.22 Phoenix PIB Finance 9.625% Bonds 2014 EUR830,000 778,030 0.81 Prudential 11.75% FRN 2049 USD532,000 396,593 0.41 PTS Acquisition 9.75% Bonds 2017 EUR1,150,000 976,300 1.02 Renhe Commercial 13.00% Bonds 2016 USD1,000,000 671,733 0.70 Rexel 8.25% Bonds 2016 EUR900,000 849,543 0.89 Santos Finance 8.25% Bonds 2070 EUR1,750,000 1,481,690 1.55 Sazka 8.50% Bonds 2021 EUR400,000 162,724 0.17 Smurfit Kappa Acquisition 7.25% Bonds 2017 EUR1,100,000 981,256 1.02 Smurfit Kappa Funding 7.75% Bonds 2015 USD700,000 462,662 0.48 Stena 6.125% Bonds 2017 EUR1,410,000 1,160,571 1.21 Sunrise Communications International 7.00% Bonds 2017 CHF797,000 577,612 0.60 Telemovil Finance 8.00% Bonds 2017 USD1,351,000 895,126 0.93 Tereos Europe 6.375% Bonds 2014 EUR600,000 524,267 0.55 UPC Germany 8.125% Bonds 2017 EUR1,750,000 1,598,521 1.67 Versatel FRN SNR 2014 EUR1,200,000 931,601 0.97 Waterford Wedgwood 9.875% Bonds 2010 EUR340,000 440 0.00 Wind Acquisition Finance 11.75% Bonds 2017 EUR1,550,000 1,483,007 1.55 Winstar Communications 12.75% Bonds 2010 EUR400,000 0 0.00 Ziggo Bond 8.00% Bonds 2018 EUR1,290,000 1,148,077 1.20 Zlomrex International Finance 8.50% Bonds 2014 EUR600,000 382,677 0.40
Preference Shares 0.39% (0.80%) American International 8.50% Cnv Prf Units 66,100 371,645 0.39
Kazakhstan 0.00% (0.00%) Alliance Bank GDR (Rep 1/40 Prf Shs) 80 0 0.00 Alliance Bank GDR (Rep 1/4 Ord KZT) 144 0 0.00 BTA Bank GDR 321 3,718 0.00
- 178 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives -0.03% (2.65%)
AUD Forward Currency Contracts -0.11% (-0.02%) Forward Foreign Currency Contracts 10/02/11 AUD(2,580,000) (1,682,384) (1.76) Forward Foreign Currency Contracts 10/02/11 £1,579,936 1,579,936 1.65
CHF Forward Currency Contracts -0.04% (0.00%) Forward Foreign Currency Contracts 10/02/11 CHF(800,000) (551,168) (0.57) Forward Foreign Currency Contracts 10/02/11 £507,569 507,569 0.53
CNY Forward Currency Contracts 0.34% (0.03%) Forward Foreign Currency Contracts 10/02/11 CNY122,520,000 11,951,366 12.48 Forward Foreign Currency Contracts 10/02/11 £(11,629,229) (11,629,229) (12.14)
EUR Forward Currency Contracts 0.35% (2.78%) Forward Foreign Currency Contracts 10/02/11 EUR(69,287,522) (59,729,541) (62.36) Forward Foreign Currency Contracts 10/02/11 £60,052,881 60,052,881 62.70 Forward Foreign Currency Contracts 10/02/11 EUR1,000,000 862,053 0.90 Forward Foreign Currency Contracts 10/02/11 £(849,684) (849,684) (0.89)
IDR Forward Currency Contracts 0.03% (0.00%) Forward Foreign Currency Contracts 10/02/11 IDR19,000,000,000 1,352,006 1.41 Forward Foreign Currency Contracts 10/02/11 £(1,320,637) (1,320,637) (1.38)
MYR Forward Currency Contracts 0.00% (0.03%) Forward Foreign Currency Contracts 10/02/11 MYR(5,000,000) (1,042,253) (1.09) Forward Foreign Currency Contracts 10/02/11 £1,007,861 1,007,861 1.05 Forward Foreign Currency Contracts 10/02/11 MYR5,000,000 1,042,253 1.09 Forward Foreign Currency Contracts 10/02/11 £(1,005,763) (1,005,763) (1.05)
NOK Forward Currency Contracts 0.12% (0.00%) Forward Foreign Currency Contracts 10/02/11 NOK18,460,000 2,034,960 2.12 Forward Foreign Currency Contracts 10/02/11 £(1,916,698) (1,916,698) (2.00)
USD Forward Currency Contracts -0.72% (-0.11%) Forward Foreign Currency Contracts 10/02/11 USD(30,625,000) (19,728,485) (20.60) Forward Foreign Currency Contracts 10/02/11 £19,042,182 19,042,182 19.88
Portfolio of investments 86,253,630 90.05
Net current assets 9,528,526 9.95
Total Net Assets 95,782,156 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010
During the six months ended 31 December 2010, the Fund disposed of its holdings in the KRW Forward Currency Contract portfolio category, which, at 30 June 2010, represented -0.06% of the Total Net Assets of the Fund.
Unless otherwise indicated the holdings in the Portfolio Statement represents Debt Securities issued by the relevant companies or issuers.
GDR = Global Depositary Receipt
- 179 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Portfolio Statement by Credit Rating as at 31 December 2010 Market Total Net Total Net Value (£’000’s) Assets (%) Assets (%) Standard & Poor’s Ratings: 31/12/10 31/12/10 30/06/10 AAA - - - AA - - - A 2,388 2.49 2.91 BBB 2,957 3.09 4.42 BB 31,959 33.36 33.03 B 26,079 27.22 29.35 CCC 4,006 4.18 5.26 CC 545 0.57 0.46 C 278 0.29 0.42 D 200 0.21 0.13 Not Rated (by S&P) 17,493 18.28 16.95 Preference Shares 372 0.39 0.80 Derivatives (23) (0.03) 2.65
Portfolio of investments 86,254 90.05 96.38
Net current assets 9,528 9.95 3.62
Total Net Assets 95,782 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows:
Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In Default D
- 180 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 2,825,130 4,116,702
Revenue 3,129,754 1,107,531
Expenses (203,166) (109,352)
Finance costs: Interest - -
Net revenue before taxation 2,926,588 998,179
Taxation - -
Net revenue after taxation 2,926,588 998,179
Total return before distributions 5,751,718 5,114,881
Finance costs: Distributions (3,088,643) (1,088,053)
Change in net assets attributable to Shareholders from investment activities 2,663,075 4,026,828
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 52,381,968 16,798,892
Amounts receivable on issue of shares 42,649,255 7,846,983 Amounts payable on cancellation of shares (3,487,860) (1,022,627) 39,161,395 6,824,356
Dilution Adjustment 125,867 44,128
Change in net assets attributable to Shareholders from investment activities (see above) 2,663,075 4,026,828
Retained distributions on accumulation shares 1,447,723 176,476
Unclaimed distributions 2,128 554
Closing net assets attributable to Shareholders 95,782,156 27,871,234
- 181 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets * 87,120,372 50,604,350
Debtors 2,469,418 1,260,058
Cash and bank balances 7,736,457 1,144,045
Total other assets 10,205,875 2,404,103
Total assets 97,326,247 53,008,453
LIABILITIES
Investment liabilities (866,742) (119,111)
Creditors (465,697) (340,970)
Distribution payable on income shares (211,652) (166,404)
Total other liabilities (677,349) (507,374)
Total liabilities (1,544,091) (626,485)
Net assets attributable to Shareholders 95,782,156 52,381,968
* Gross of investment liabilities.
- 182 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Distribution Statement for the six months ended 31 December 2010
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.4750 0.0950 0.3800 0.0000 0.3800 Group 1:Shares purchased prior to 1 December 2010
Group 2 0.2266 0.0453 0.1813 0.1987 0.3800 Group 2:Shares purchased 1 December 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 0.3227 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.6109 0.1222 0.4887 0.0000 0.4887 Group 1:Shares purchased prior to 1 December 2010
Group 2 0.5441 0.1088 0.4353 0.0534 0.4887 Group 2:Shares purchased 1 December 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 0.3836 pence per share.
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.4338 0.0868 0.3470 0.0000 0.3470 Group 1:Shares purchased prior to 1 November 2010
Group 2 0.1715 0.0343 0.1372 0.2098 0.3470 Group 2:Shares purchased 1 November 2010 to 30 November 2010
The interim distribution for the period ended 30 November 2009 was 0.3806 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.5546 0.1109 0.4437 0.0000 0.4437 Group 1:Shares purchased prior to 1 November 2010
Group 2 0.1711 0.0342 0.1369 0.3068 0.4437 Group 2:Shares purchased 1 November 2010 to 30 November 2010
The interim distribution for the period ended 30 November 2009 was 0.4485 pence per share.
- 183 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Distribution Statement (continued)
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.4850 0.0970 0.3880 0.0000 0.3880 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.1444 0.0289 0.1155 0.2725 0.3880 Group 2:Shares purchased 1 October 2010 to 31 October 2010
The interim distribution for the period ended 31 October 2009 was 0.4269 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.6158 0.1232 0.4926 0.0000 0.4926 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.4489 0.0898 0.3591 0.1335 0.4926 Group 2:Shares purchased 1 October 2010 to 31 October 2010
The interim distribution for the period ended 31 October 2009 was 0.4988 pence per share.
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.4751 0.0950 0.3801 0.0000 0.3801 Group 1:Shares purchased prior to 1 September 2010
Group 2 0.1764 0.0353 0.1411 0.2390 0.3801 Group 2:Shares purchased 1 September 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 0.4375 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.5993 0.1199 0.4794 0.0000 0.4794 Group 1:Shares purchased prior to 1 September 2010
Group 2 0.2644 0.0529 0.2115 0.2679 0.4794 Group 2:Shares purchased 1 September 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 0.5069 pence per share.
- 184 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global High Yield Bond Fund
Distribution Statement (continued)
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.4598 0.0920 0.3678 0.0000 0.3678 Group 1:Shares purchased prior to 1 August 2010
Group 2 0.2459 0.0492 0.1967 0.1711 0.3678 Group 2:Shares purchased 1 August 2010 to 31 August 2010
The interim distribution for the period ended 31 August 2009 was 0.3827 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.5765 0.1153 0.4612 0.0000 0.4612 Group 1:Shares purchased prior to 1 August 2010
Group 2 0.4255 0.0851 0.3404 0.1208 0.4612 Group 2:Shares purchased 1 August 2010 to 31 August 2010
The interim distribution for the period ended 31 August 2009 was 0.4405 pence per share.
Interim Interest Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 0.5490 0.1098 0.4392 0.0000 0.4392 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.1734 0.0347 0.1387 0.3005 0.4392 Group 1:Shares purchased prior to 1 July 2010 to 31 July 2010
The interim distribution for the period ended 31 July 2009 was 0.4578 pence per share.
Interim Interest Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 0.6821 0.1364 0.5457 0.0000 0.5457 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.1979 0.0396 0.1583 0.3874 0.5457 Group 1:Shares purchased prior to 1 July 2010 to 31 July 2010
The interim distribution for the period ended 31 July 2009 was 0.5216 pence per share.
- 185 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
BNY MELLON INVESTMENT FUNDS – NEWTON GLOBAL HIGHER INCOME FUND
Interim Report for the six months ended 31 December 2010
- 186 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: James Harries Rob Hay
Fund Size £1,662.63m
Sector Global
Yield as at 31/12/10:
Sterling Income Shares 4.77% Institutional Shares (Income) 4.82% Institutional Shares (Accumulation) 4.65% Exempt Shares 2 (Net Income) 4.80% X Shares (Net Accumulation) 4.61% X Shares (Net Income) 4.68%
Key Dates: Fund Launch 30 November 2005
Aim
To achieve increasing annual distributions together with long-term capital growth from investing predominantly in global securities. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 13.31% 17.71% -16.94% 18.27% 16.26% Institutional Shares (Income) 13.96% 18.31% -16.56% 18.81% 16.85% Institutional Shares (Accumulation) 13.95% 18.35% -16.58% 18.84% 16.87% Exempt Shares 2 (Net Income)* 14.24% 18.57% -16.39% 19.07% N/A X Shares (Net Accumulation)* 15.09% 19.39% -15.90% N/A N/A X Shares (Net Income)* N/A N/A N/A N/A N/A
FTSE World TR GBP 16.28% 19.64% -18.18% 9.45% 6.54%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested
- 187 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 16.27% against 19.25% for the FTSE World Index (GBP).
Over the six-month period, the Fund generated a strong positive return in absolute terms, although it nevertheless underperformed relative to the market. The chief area of positive performance was the technology sector, in which HTC gathered strength in the Android phones market. The company offers exposure to new product launches at an attractive valuation, while reflecting Newton’s ‘Networked world’ theme, which focuses upon the growth in data communications across the world. The position was later reduced, and profits taken. A further positive performer over the quarter was Transocean, whose share price recovered following the sealing of the Macondo well in the Gulf of Mexico, and which benefited from greater clarity over its financial liability. On the negative front, stock selection in the telecoms area accounted for some loss of relative performance, a notable laggard being Tele Norte Leste, the major telecom services provider in Brazil. Its share price came under pressure in the run-up to Portugal Telecom’s agreement to buy a stake. Elsewhere in the sector, Cable & Wireless Worldwide struggled following a profit warning. Meanwhile, the Fund’s preference for more resilient financial sector names, such as the Swiss insurer Zurich Financial Services was a disadvantage, as these stocks lagged behind their peers during the sector’s rally.
Notable activity included the sale of the Japanese pharmaceutical company Takeda following the recent strength of the yen – the proceeds were switched into Roche. The varying recent fortunes of the two companies, as well as the currencies in which they are denominated, meant that Takeda had substantially outperformed Roche. Roche is now a substantial position within the Fund. Finally, Philippine Long Distance Telecom was switched into MTN. Both are emerging telecom companies but MTN currently offers a better growth profile by having a higher proportion of the business engaged in mobile telecoms. The company’s management has also recently announced that the recent period of high capital expenditure is coming to an end, providing greater scope to pay dividends. Meanwhile, other notable sales included the Italian oil company ENI and the German reinsurer Munich Re.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Roche Muenchener Rueckversicherungs MTN ENI Scottish & Southern Energy HTC Bayer Philippine Long Distance Telecom Mitsubishi Hongkong Land Parkway Life Takeda Pharmaceutical Reynolds American HSBC Statoil Bunge 5.125% Cnv Preference Shares Deutsche Telekom Royal Dutch Shell Fresenius Finance 5.625% Cnv Bonds 2011 Telekomunikacja Polska
- 188 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Statistics
Price and Revenue Record by Share Class Calendar Year Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 116.70 100.53 3.6336
2007 133.84 112.62 4.4428
2008 138.06 85.41 5.7890
2009 119.65 85.30 5.3642
2010 127.41 108.53 6.0220
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2006 117.33 100.80 3.6512
2007 135.13 113.59 4.4232
2008 139.77 86.67 5.8177
2009 122.15 86.71 5.4790
2010 130.73 111.06 6.2497
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 121.11 101.60 3.7113
2007 144.33 119.04 4.6459
2008 151.23 96.66 6.3537
2009 144.06 97.88 6.3115
2010 162.55 136.38 7.5722
Highest Lowest Net Revenue Exempt Shares 2 (Net Income) Price (p) Price (p) per share (p)*
2006 (from 4 August) 117.39 105.02 1.1245
2007 135.51 113.84 4.3686
2008 140.34 87.12 5.7841
2009 123.16 87.23 5.4911
2010 132.14 112.12 6.2980
*Distributions are shown in the year declared rather than paid.
- 189 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued)
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 1 October) 135.60 125.26 0.7108
2008 142.70 91.54 5.7607
2009 137.81 92.95 5.8785
2010 157.06 130.57 7.2592
Highest Lowest Net Revenue X Shares (Net Income) Price (p) Price (p) per share (p)*
2010 (from 8 October) 107.25 100.00 0.7396
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 257,647,354 123.21 209,110,947
30/06/09 391,291,512 94.99 411,937,230
30/06/10 786,925,180 109.80 716,661,223
31/12/10 1,099,927,411 125.53 876,224,895
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 99,660,347 124.82 79,845,073
30/06/09 126,012,896 96.72 130,282,920
30/06/10 207,464,021 112.36 184,636,278
31/12/10 321,581,216 128.78 249,708,619
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 15,810,241 137.21 11,522,813
30/06/09 32,498,597 112.84 28,801,177
30/06/10 64,087,391 138.40 46,307,134
31/12/10 100,338,989 161.43 62,157,311
- 190 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Exempt Shares 2 (Net Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 24,229,402 125.38 19,325,501
30/06/09 16,975,868 97.39 17,431,017
30/06/10 26,634,970 113.44 23,479,924
31/12/10 19,763,005 130.18 15,181,862
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 8,839,666 129.60 6,820,835
30/06/09 14,592,720 107.43 13,583,077
30/06/10 16,399,970 133.07 12,324,598
31/12/10 23,747,722 155.98 15,224,675
X Shares (Net Income) Net Asset Pence Shares as at Value (£) per share in issue
31/12/10 97,271,503 105.79 91,950,001
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.63 1.64
Institutional Shares (Income) 1.06 1.07
Institutional Shares (Accumulation) 1.06 1.07
Exempt Shares 2 (Net Income) 0.81 0.82
X Shares (Net Accumulation) 0.06 0.07
X Shares (Net Income) 0.06 N/A
- 191 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds 3.10% (2.94%) Enercoal Resources 9.25% Cnv Bonds 2014 USD1,000,000 748,090 0.04 Fresenius Finance 5.625% Cnv Bonds 2011 EUR18,500,000 19,512,538 1.17 Standard Chartered 8.125% Non-Cum Red Prf USD47,000,000 31,434,642 1.89
United Kingdom 11.98% (10.81%) Aberdeen Asset Management 6,814,782 13,813,563 0.83 BAE Systems 5,000,000 16,560,000 1.00 BP 4,702,271 22,044,246 1.33 Cable & Wireless Communications 9,556,314 4,634,812 0.28 Cable & Wireless Worldwide 9,978,314 6,665,514 0.40 GlaxoSmithKline 2,545,963 31,811,808 1.91 ICAP 3,594,419 19,140,281 1.15 Scottish & Southern Energy 2,775,000 34,188,000 2.06 Vodafone 30,163,189 50,161,383 3.02
Overseas Equities 79.12% (83.83%)
United States of America 23.94% (24.94%) Annaly Capital Management 2,650,000 30,567,077 1.84 AT&T 1,640,000 30,968,506 1.86 Clorox 460,920 18,894,544 1.14 Coca-Cola 450,550 19,006,263 1.14 ConocoPhillips 641,400 28,085,777 1.69 Lilly (Eli) 1,009,915 22,777,886 1.37 Merck 1,349,824 31,304,928 1.88 PDL BioPharma 3,262,000 13,067,328 0.79 Pfizer 2,796,960 31,505,655 1.90 Philip Morris International 918,609 34,603,877 2.08 Procter & Gamble 465,912 19,285,222 1.16 Reynolds American 3,274,628 68,900,687 4.14 Transocean 754,518 33,592,986 2.02 Willis 690,165 15,406,143 0.93
Brazil 3.37% (4.50%) Cia Saneamento de Minas Gerais 1,952,800 21,636,451 1.30 Tele Norte Leste Participacoes ADR 2,188,857 20,708,643 1.25 Trans Alianca de Energia Electria 1,145,830 13,567,023 0.82
Australia 2.63% (2.32%) AMP 5,052,000 17,494,277 1.05 QBE Insurance 2,214,250 26,307,542 1.58
Hong Kong 4.20% (5.80%) Hopewell Highway Infrastructure 44,999,582 22,260,194 1.34 HSBC 2,500,000 16,499,543 0.99 Link Real Estate Investment Trust 15,535,500 31,087,693 1.87
Japan 1.04% (1.01%) Mitsubishi 990,000 17,229,440 1.04
- 192 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Singapore 5.94% (6.45%) DBS 4,401,000 31,653,172 1.90 Mapletree Logistics Trust 37,775,970 18,119,318 1.09 Parkway Life 18,850,000 15,526,660 0.93 Singapore Tech Engineering 19,500,000 33,495,277 2.02
Taiwan 3.44% (4.09%) HTC 1,069,988 21,255,902 1.28 Taiwan Semiconductor Manufacturing ADS 90,905 724,804 0.04 Taiwan Semiconductor Manufacturing 22,471,310 35,255,565 2.12
Thailand 1.86% (2.23%) Advanced Info Service 17,000,000 30,872,017 1.86
South Africa 4.27% (1.58%) Gold Fields 2,774,472 32,446,708 1.95 MTN 2,973,460 38,568,376 2.32
Finland 1.03% (0.88%) Nokia 2,570,000 17,133,369 1.03
France 2.84% (2.74%) Suez Environnement 1,374,559 18,173,479 1.09 Total 847,345 29,081,101 1.75
Germany 7.68% (8.79%) Bayer 982,211 46,526,549 2.80 Deutsche Post 3,519,067 38,398,173 2.31 Deutsche Telekom 5,145,850 42,665,960 2.57
Netherlands 4.42% (4.98%) Reed Elsevier 2,105,129 16,813,851 1.01 Royal Dutch Shell 'A' 1,171,624 25,179,491 1.51 Unilever 1,565,000 31,630,533 1.90
Norway 4.00% (3.57%) DNB 3,568,715 32,260,498 1.94 Statoil 2,243,462 34,320,788 2.06
Poland 1.62% (1.73%) Telekomunikacja Polska 7,487,033 26,966,454 1.62
Switzerland 6.84% (5.02%) Novartis 724,350 27,405,083 1.65 Roche 439,264 41,434,408 2.49 Zurich Financial Services 268,835 44,830,636 2.70
- 193 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives -0.43% (0.53%)
AUD Forward Foreign Currency Contracts -0.28% (0.06%) Forward Foreign Currency Contracts 14/01/11 AUD(59,757,000) (39,117,021) (2.35) Forward Foreign Currency Contracts 14/01/11 USD53,463,270.83 34,432,454 2.07
BRL Forward Foreign Currency Contracts -0.04% (-0.09%) Forward Foreign Currency Contracts 15/06/11 BRL(96,881,000) (36,213,906) (2.18) Forward Foreign Currency Contracts 15/06/11 USD55,140,011.38 35,512,341 2.14
EUR Forward Foreign Currency Contracts -0.07% (0.42%) Forward Foreign Currency Contracts 15/02/11 EUR(86,528,000) (74,608,347) (4.49) Forward Foreign Currency Contracts 15/02/11 USD114,224,091.80 73,564,817 4.42
USD Forward Foreign Currency Contracts 0.04% (0.14%) Forward Foreign Currency Contracts 15/02/11 USD44,309,007 28,557,493 1.72 Forward Foreign Currency Contracts 15/02/11 USD(27,906,000) (27,906,000) (1.68)
ZAR Forward Foreign Currency Contracts -0.08% (0.00%) Forward Foreign Currency Contracts 15/06/11 ZAR(317,792,000) (30,088,643) (1.81) Forward Foreign Currency Contracts 15/06/11 USD44,619,257 28,736,560 1.73
Portfolio of investments 1,559,080,482 93.77
Net current assets 103,549,364 6.23
Total Net Assets 1,662,629,846 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Philippines and Italy portfolio categories, which, at 30 June 2010, represented 1.62% and 1.58% respectively of the Total Net Assets of the Fund.
ADR = American Depositary Receipt ADS = American Depositary Share
- 194 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 184,864,634 149,402,174
Revenue 25,767,387 16,492,617
Expenses (9,600,361) (5,244,537)
Net revenue before taxation 16,167,026 11,248,080
Taxation (2,176,532) (1,176,824)
Net revenue after taxation 13,990,494 10,071,256
Total return before distributions 198,855,128 159,473,430
Finance costs: Distributions (22,583,283) (14,806,298)
Change in net assets attributable to Shareholders from investment activities 176,271,845 144,667,132
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 1,101,511,532 581,371,593
Amounts receivable on issue of shares 418,158,149 203,766,914 Amounts payable on cancellation of shares (35,343,210) (35,175,218) 382,814,939 168,591,696
Dilution adjustment 252,880 74,295
Stamp Duty Reserve Tax (60,673) (29,715)
Change in net assets attributable to Shareholders from investment activities (see above) 176,271,845 144,667,132
Retained distributions on accumulation shares 1,839,323 1,327,523
Closing net assets attributable to Shareholders 1,662,629,846 896,002,524
- 195 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 1,566,862,227 1,081,556,104
Debtors 30,053,731 18,966,516
Cash and bank balances 87,630,392 29,573,560
Total other assets 117,684,123 48,540,076
Total assets 1,684,546,350 1,130,096,180
LIABILITIES
Investment liabilities (7,781,745) (942,957)
Creditors (2,001,582) (1,512,762)
Distribution payable on income shares (12,133,177) (26,128,929)
Total other liabilities (14,134,759) (27,641,691)
Total liabilities (21,916,504) (28,584,648)
Net assets attributable to Shareholders 1,662,629,846 1,101,511,532
* Gross of investment liabilities
- 196 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.1028 0.1103 0.9925 0.0000 0.9925 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.4474 0.0447 0.4027 0.5898 0.9925 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.0141 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.1559 0.1156 1.0403 0.0000 1.0403 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.6128 0.0613 0.5515 0.4888 1.0403 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.0546 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Accumulated Equalisation Accumulated
Group 1 1.4379 0.1438 1.2941 0.0000 1.2941 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.3884 0.0388 0.3496 0.9445 1.2941 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.2439 pence per share.
- 197 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Exempt Shares 2 (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.1627 0.1163 1.0464 0.0000 1.0464 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.2466 0.0247 0.2219 0.8245 1.0464 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=96.81%, U=3.19%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £8,536 which is equivalent to 0.0542 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.0609 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Accumulated Equalisation Accumulated
Group 1 1.3712 0.1371 1.2341 0.0000 1.2341 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.5533 0.0553 0.4980 0.7361 1.2341 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=75.12%, U=24.88%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £5,293 which is equivalent to 0.028 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.1732 pence per share.
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Accumulated Equalisation Accumulated
Group 1 0.8218 0.0822 0.7396 0.0000 0.7396 Group 1:Shares purchased at launch on 8 October 2010
Group 2 0.0371 0.0037 0.0334 0.7062 0.7396 Group 2:Shares purchased 9 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=81.88%, U=18.12%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
As the share class was launched in October 2010, there was no distribution for the period ended 31 December 2009. - 198 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.1366 0.1137 1.0229 0.0000 1.0229 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4999 0.0500 0.4499 0.5730 1.0229 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.1813 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.1863 0.1186 1.0677 0.0000 1.0677 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4736 0.0474 0.4262 0.6415 1.0677 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.2228 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Accumulated Equalisation Accumulated
Group 1 1.4602 0.1460 1.3142 0.0000 1.3142 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.5650 0.0565 0.5085 0.8057 1.3142 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.4265 pence per share.
- 199 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Exempt Shares 2 (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.2030 0.1203 1.0827 0.0000 1.0827 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4234 0.0423 0.3811 0.7016 1.0827 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.2324 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Accumulated Equalisation Accumulated
Group 1 1.3963 0.1396 1.2567 0.0000 1.2567 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.9771 0.0977 0.8794 0.3773 1.2567 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=96.31%, U=3.69%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 30 September 2009 was 1.3493 pence per share.
- 200 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Higher Income Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 433,268,806 236,044,478 Commissions 486,608 317,420 Taxes 393,856 79,807 Total purchase costs 880,464 397,227
Gross purchases total 434,149,270 236,441,705
Analysis of total sales proceeds:
Sales before transaction costs 143,674,330 91,863,439 Commissions (253,873) (135,574) Taxes (162,346) (16,397) Total sales costs (416,219) (151,971)
Total sales net of transaction cost 143,258,111 91,711,468
- 201 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
BNY MELLON INVESTMENT FUNDS – NEWTON GLOBAL OPPORTUNITIES FUND
Interim Report for the six months ended 31 December 2010
- 202 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Rob Hay Paul Markham
Fund Size £455.27m
Benchmark FTSE All World Index
Yield as at 31/12/10:
Sterling Income Shares 0.94% Exempt Shares 2 (Net Accumulation) 1.60% X Shares (Net Accumulation) 2.18%
Key Dates: Fund Launch 01 July 2005
Aim
To achieve long-term capital growth from a concentrated portfolio predominantly invested in the securities of companies located worldwide. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 20.24% 22.75% -31.07% 22.58% 9.18% Exempt Shares 2 (Net Accumulation) 21.21% 23.64% -30.58% 23.46% 10.05% X Shares (Net Accumulation)* 22.13% 24.47% -30.18% 24.29% N/A
FTSE All World TR GBP 16.74% 21.24% -19.36% 10.85% 7.18%
Source: Lipper as at 31 December 2010 – Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 203 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 20.37% against 18.96% for the FTSE All World Index.
Over the six-month period, the Fund generated a strong positive return in absolute terms, outperforming the market. The chief area of positive performance was the technology sector, in which HTC gathered strength in the Android phones market. The company offers exposure to new product launches at an attractive valuation, while reflecting Newton’s ‘Networked world’ theme, which focuses upon the growth in data communications across the world. The holding was reduced at several points during the period after strong performance. Meanwhile, Potash Corp of Saskatchewan’s share price rose on the back of a takeover bid by BHP Billiton. A positive performance also came from the oil and gas exploration company Transocean, whose share price recovered following the sealing of the Macondo well in the Gulf of Mexico, and which benefited from greater clarity over its legal liability. Meanwhile, stock selection in the telecom sector was weak; the holding in the US mobile telecoms operator Sprint Nextel disappointed. The US private education provider ITT Educational Services was a further detractor amid uncertainty regarding student funding regulations.
Notable activity over the quarter included adding a new position in Associated British Foods. We believe that the long-term potential for expansion of its Primark clothing chain is significant, and the company is improving efficiency in its sugar and grocery businesses. The US healthcare business Medtronic was also added towards the end of the period, following weak share price performance. This is a high return on capital business that is out of favour with investors, and is inexpensive. We can identify a number of potential catalysts that would improve the company's outlook, including new product launches, an improvement in US employment, and a shift in management strategy. Meanwhile, the manager established a position in the Brazilian oil and gas giant Petrobras. Sales over the period included the US transportation business Union Pacific. Its share price had performed well throughout 2010, and the manager took profits from the sale. Elsewhere, the position in the US pharmaceutical business Eli Lilly was disposed of following the company's decision to halt development of one of its late phase Alzheimer disease drugs. This move is likely to dent its earnings potential and limit upside in the shares.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Petroleo Brasileiro ADR Lilly (Eli) Medtronic Union Pacific Associated British Foods HTC BHP Billiton Millicom International Cellular Mosaic Devon Energy Inpex Potash Corp of Saskatchewan Pandora Nomura Petrohawk Energy Transocean Dollar General PTT GlaxoSmithKline Housing Development Finance
- 204 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Sterling Income Shares Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 138.85 111.23 0.7293
2007 158.03 124.89 0.8828
2008 160.48 91.23 1.2159
2009 132.17 95.10 2.0666
2010 154.79 124.63 1.4509
Exempt Shares 2 (Net Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 139.77 112.06 1.4953
2007 162.93 128.55 1.9249
2008 165.98 95.43 2.3159
2009 142.15 99.76 2.9612
2010 169.75 134.15 2.6939
X Shares (Net Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 (from 12 December) 132.92 129.54 N/A
2007 164.01 128.75 1.8186
2008 167.51 96.57 3.2656
2009 144.97 101.16 3.7148
2010 174.42 136.92 3.7976
*Distributions are shown in the year declared rather than paid.
- 205 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 9,241,245 142.64 6,478,750
30/06/09 5,354,533 107.86 4,964,350
30/06/10 5,711,042 127.96 4,463,096
31/12/10 6,535,547 154.04 4,242,853
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 166,384,153 148.92 111,728,135
30/06/09 139,207,032 115.37 120,660,432
30/06/10 134,455,229 139.76 96,204,730
31/12/10 114,100,921 168.93 67,542,320
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 348,780,070 150.40 231,901,686
30/06/09 306,401,327 117.22 261,397,977
30/06/10 226,627,074 143.06 158,416,661
31/12/10 334,631,829 173.58 192,782,635
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.63 1.64
Exempt Shares 2 (Net Accumulation) 0.81 0.82
X Shares (Net Accumulation) 0.06 0.07
- 206 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 12.36% (9.05%) Associated British Foods 815,000 9,641,450 2.12 BHP Billiton 341,662 8,763,630 1.92 British American Tobacco 369,285 9,134,264 2.01 Cable & Wireless Communications 6,356,916 3,083,104 0.68 Cable & Wireless Worldwide 5,985,147 3,998,078 0.88 GlaxoSmithKline 795,619 9,941,259 2.18 ICAP 1,432,957 7,630,496 1.68 Vodafone 2,444,527 4,065,248 0.89
Overseas Equities 85.14% (87.08%)
Canada 1.61% (1.72%) Potash Corp of Saskatchewan 74,614 7,329,251 1.61
United States of America 35.93% (39.20%) Accenture 354,206 11,045,698 2.43 Altria 569,649 9,025,160 1.98 Applied Materials 1,010,063 9,191,853 2.02 Cisco Systems 614,785 8,009,983 1.76 Consol Energy 289,881 9,110,706 2.00 Dollar General 218,805 4,303,668 0.95 EMC 573,359 8,456,187 1.86 Flir Systems 364,846 7,037,507 1.55 Genzyme 131,056 6,026,533 1.32 GeoEye 93,022 2,551,560 0.56 Intel 774,429 10,474,019 2.30 ITT Educational Services 130,437 5,516,711 1.21 Keefe Bruyette & Woods 160,381 2,908,694 0.64 Kroger 474,841 6,783,006 1.49 Lazard 198,255 5,035,858 1.11 Medtronic 384,000 9,192,555 2.02 Merck 334,084 7,748,029 1.70 Mosaic 134,718 6,579,292 1.45 Petrohawk Energy 400,657 4,680,826 1.03 Principal Financial 511,925 10,728,434 2.36 Sprint Nextel 3,962,163 10,615,443 2.32 Transocean 192,294 8,561,399 1.87
Brazil 7.06% (6.13%) Anhanguera Educacional 390,100 6,040,474 1.33 Hypermarcas 479,234 4,188,304 0.92 Petroleo Brasileiro ADR 454,537 9,871,184 2.17 Rossi Residencial 478,534 2,731,792 0.60 Tele Norte Leste Participacoes ADR 585,183 5,536,381 1.22 Trans Alianca de Energia 317,180 3,755,521 0.82
- 207 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Australia 4.67% (4.42%) Newcrest Mining 558,529 14,785,427 3.25 QBE Insurance 544,342 6,467,337 1.42
China 1.27% (2.16%) Camelot Information Systems ADR 136,929 2,105,922 0.46 Powerlong Real Estate 8,495,000 1,780,861 0.39 Yingde Gases 3,346,500 1,927,178 0.42
Hong Kong 1.14% (0.00%) Sands China 3,642,600 5,191,419 1.14
Japan 4.47% (4.47%) Canon 277,300 9,243,581 2.03 INPEX 2,952 11,114,122 2.44
Taiwan 2.22% (2.08%) HTC 509,777 10,127,001 2.22
Thailand 3.95% (3.99%) PTT 1,209,400 8,268,317 1.82 Siam Commercial Bank 4,397,100 9,676,108 2.13
South Africa 2.47% (1.93%) MTN 866,660 11,241,338 2.47
Denmark 1.86% (0.00%) Pandora 218,764 8,489,048 1.86
France 2.98% (3.23%) L'Oreal 131,711 9,469,816 2.08 Thales 180,064 4,075,407 0.90
Germany 4.42% (5.61%) Bayer 239,386 11,339,523 2.49 Deutsche Telekom 1,060,042 8,789,162 1.93
Spain 1.41% (0.96%) Amadeus 475,102 6,410,461 1.41
Switzerland 9.68% (10.16%) Bank Sarasin 225,298 6,561,644 1.44 Nestle 241,363 9,098,499 2.00 Roche 94,265 8,891,724 1.95 Syngenta 57,736 10,868,263 2.39 Zurich Financial Services 51,869 8,649,619 1.90
- 208 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives -0.04% (-0.01%)
BRL Forward Foreign Currency Contracts -0.04% (-0.06%) Forward Currency Contracts 15/06/11 BRL(21,258,667) (7,946,443) (1.75) Forward Currency Contracts 15/06/11 USD12,099,412 7,792,498 1.71
Portfolio of investments 443,711,389 97.46
Net current assets 11,556,908 2.54
Total Net Assets 455,268,297 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the India portfolio category, which, at 30 June 2010, represented 1.02% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt
- 209 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 69,526,183 85,622,491
Revenue 3,917,119 4,928,553
Expenses (630,683) (787,004)
Finance costs: Interest (129) (4)
Net revenue before taxation 3,286,307 4,141,545
Taxation (321,851) (377,962)
Net revenue after taxation 2,964,456 3,763,583
Total return before distributions 72,490,639 89,386,074
Finance costs: Distributions 224,219 (400,946)
Change in net assets attributable to Shareholders from investment activities 72,714,858 88,985,128
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 366,793,345 450,962,892
Amounts receivable on issue of shares 104,741,323 3,476,408 Amounts payable on cancellation of shares (89,472,510) (98,266,492) 15,268,813 (94,790,084)
Dilution adjustment 500,811 118,709
Stamp Duty Reserve Tax (9,530) (825)
Change in net assets attributable to Shareholders from investment activities (see above) 72,714,858 88,985,128
Closing net assets attributable to Shareholders 455,268,297 445,275,820
- 210 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS
Investment assets* 443,865,334 352,898,227
Debtors 1,552,221 8,846,864
Cash and bank balances 10,116,673 10,916,060
Total other assets 11,668,894 19,762,924
Total assets 455,534,228 372,661,151
LIABILITIES
Investment liabilities (153,945) (318,953)
Creditors (111,986) (5,484,098)
Distribution payable on income shares - (64,755)
Total other liabilities (111,986) (5,548,853)
Total liabilities (265,931) (5,867,806)
Net assets attributable to Shareholders 455,268,297 366,793,345
*Gross of investment liabilities.
- 211 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Global Opportunities Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 162,365,178 139,624,727 Commissions 87,282 204,688 Taxes 138,051 29,253
Total purchase costs 225,333 233,941
Gross purchases total 162,590,511 139,858,668
Analysis of total sales proceeds:
Sales before transaction costs 142,277,183 222,570,996 Commissions (137,890) (206,794) Taxes (32,104) (20,552)
Total sales costs (169,994) (227,346)
Total sales net of transaction costs 142,107,189 222,343,650
- 212 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
BNY MELLON INVESTMENT FUNDS - NEWTON GROWTH FUND
Interim Report for the six months ended 31 December 2010
- 213 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Richard Wilmot Ben Russon
Fund Size £93.85m
Sector UK All Companies
Yield as at 31/12/10:
Sterling Income Shares 0.81% Institutional Shares (Accumulation) 1.23%
Key Dates: Fund Launch 01 December 1992
Aim
To secure long-term capital growth. The Sub-Fund will invest principally in the UK with a small exposure to international equity and bond markets. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 32.78% 11.21% -18.45% 8.25% 18.11% Institutional Shares (Accumulation)* 33.64% N/A N/A N/A N/A
FTSE All Share TR GBP 14.51% 30.12% -29.93% 5.32% 16.75%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in GBP terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 214 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 28.40% against 22.01% for the FTSE All-Share Index.
The Fund’s performance was positive and attributable to good stock selection across a diverse number of sectors. The stock selection in the oil and gas sector worked well for the Fund. Africa-focused oil and gas explorer Bowleven, which made two potentially significant discoveries in Cameroon, contributed to performance as did John Wood Group and Premier Oil, which performed strongly as medium-term growth prospects were upgraded. The holding in ITV also enhanced performance as the company benefited from advertising upgrades and the franchise of its reality-show X Factor. Another positive contributor was Carphone Warehouse Group. The combination of the mobile phone retailer’s management team and the distribution network of US electrical retailer Best Buy has proved to be more successful than initial expectations.
The positioning in the blue chip stock Vodafone Group hurt performance. Shares in the mobile phone company rose amid the sale of shares in China Mobile and the prospect of a dividend from Verizon Wireless, in which it has a stake. The positions in internet-based retail distributors Ocado and eXpansys cost the Fund some performance. Both are experiencing significant growth in sales that has yet to be reflected in profits and, in turn, their share prices. The manager followed the initial public offering of Ocado with great interest but did not participate on valuation grounds. Following a poor aftermarket for the IPO, the manager started to build a position. The investment in eXpansys was by way of an equity fundraising that initially moved to a premium and then drifted back to the issue price.
The manager reopened a position in BG Group, the preferred blue chip holding in the oil and gas producers segment. Among other activity, the manager added the financial services company Prudential to the portfolio as its share price suffered weakness associated with its failed bid for AIA, the Asian business of US insurer AIG. Concerns about upcoming government budget cuts and the impact of BAE Systems’ pension deficit on its share price provided an entry point. Its UK business accounts for less than 20% of group sales but dominates investor sentiment. Elsewhere, the manager established a position in the London Stock Exchange (LSE) given the view that the stock offered good value. In recent years, LSE’s business has suffered cyclical and competitive challenges to its once dominant cash equity business. Evidence suggests that pressure is easing, and with market levels rising and stabilisation in LSE’s market share, consensus forecasts appeared to be too pessimistic. The manager sold the holding in the outsourcing company Serco Group amid concerns that the government is seeking to reduce the margins of some of its contractors.
The table below shows the top ten purchases and sales for the period:
Purchases Sales BG BNY MFM Newton UK Smaller Companies Class ‘X’ Acc HSBC BP Xstrata Vodafone Vodafone Xstrata Prudential Centrica Anglo American Antofagasta Eurasian Natural Resources Rio Tinto Rio Tinto ITV BHP Billiton Anglo American Standard Life Synergy Health
- 215 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 253.84 216.35 3.1143
2007 280.80 253.34 2.9593
2008 271.21 187.69 4.9624
2009 237.04 188.72 4.0586
2010 312.09 223.82 1.5909
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2009 (from 3 March) 241.71 188.74 4.3816
2010 323.69 229.38 3.1907
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 66,155,234 244.45 27,063,398
30/06/09 58,926,175 201.70 29,215,164
30/06/10 64,868,568 241.78 26,830,022
31/12/10 87,975,655 310.08 28,372,270
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 687,019 205.09 334,982
30/06/10 8,685,791 250.03 3,473,935
31/12/10 5,875,480 321.72 1,826,293
- 216 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Statistics
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.64 1.64
Institutional Shares (Accumulation) 1.07 1.07
- 217 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 96.00% (82.55%)
Oil & Gas Producers 5.45% (6.91%) BG 235,908 3,065,624 3.27 Bowleven 157,629 600,566 0.64 Circle Oil 1,634,000 563,730 0.60 Premier Oil 34,919 680,222 0.72 Valiant Petroleum 41,356 210,916 0.22
Oil Equipment & Distribution 1.19% (0.76%) Lamprell 146,487 474,911 0.51 Wood (John) 114,422 634,470 0.68
Chemicals 1.40% (0.68%) Johnson Matthey 35,490 728,965 0.78 Victrex 39,552 582,601 0.62
Mining 15.99% (11.77%) Anglo American 81,745 2,732,735 2.91 BHP Billiton 129,087 3,311,082 3.53 Bellzone Mining 655,032 546,952 0.58 Eurasian Natural Resources 115,540 1,221,258 1.30 Hochschild Mining 87,199 558,510 0.59 Rio Tinto 87,333 3,942,212 4.20 Xstrata 178,200 2,704,185 2.88
Aerospace & Defence 2.96% (1.94%) Chemring 13,242 381,370 0.41 Cobham 486,021 991,969 1.06 Rolls-Royce 164,023 1,030,885 1.10 Rolls-Royce 'C' Shares Entitlement (Jan 2011) 10,497,472 10,497 0.01 Ultra Electronics 21,020 357,760 0.38
Electronic & Electrical Equipment 1.11% (0.57%) Morgan Crucible 149,911 366,982 0.39 Renishaw 24,353 304,900 0.32 Xaar 158,552 375,768 0.40
Industrial Engineering 1.91% (1.76%) Halma 127,350 452,602 0.48 Rotork 21,345 387,198 0.41 Spirax-Sarco Engineering 20,433 395,379 0.42 Weir 32,063 565,271 0.60
Industrial Transportation 0.70% (0.99%) Stobart 258,319 368,363 0.39 UK Mail 89,110 296,469 0.31
Support Services 9.46% (8.75%) Aggreko 28,509 424,214 0.45 Ashtead 275,276 475,126 0.51 Bunzl 130,929 944,653 1.01 Digital Barriers 680,018 1,292,034 1.38 Electrocomponents 179,993 477,161 0.51 Experian 76,698 609,749 0.65 - 218 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Support Services (continued) Filtrona 188,366 461,308 0.49 Homeserve 115,085 512,819 0.55 Intertek 24,496 437,744 0.47 Michael Page International 113,089 624,817 0.66 Premier Farnell 159,547 456,145 0.49 RPS 286,203 658,553 0.70 SIG 464,440 593,090 0.63 Travis Perkins 85,610 897,193 0.96
Beverages 1.09% (1.19%) Barr (AG) 48,399 529,001 0.56 Britvic 105,674 499,521 0.53
Food Producers 1.53% (0.84%) Associated British Foods 88,628 1,048,469 1.12 Devro 153,917 386,024 0.41
Household Goods & Home Construction 0.48% (0.48%) Berkeley 50,379 449,381 0.48
Health Care Equipment & Services 3.13% (3.23%) Immunodiagnostic Systems 83,359 729,391 0.78 Smith & Nephew 169,226 1,158,352 1.23 Synergy Health 118,890 1,053,365 1.12
Pharmaceuticals & Biotechnology 1.97% (2.21%) Abcam 101,185 326,018 0.35 Dechra Pharmaceuticals 85,950 437,056 0.46 Genus 48,731 414,457 0.44 Hikma Pharmaceuticals 32,096 259,657 0.28 Hutchison China Meditech 83,590 413,771 0.44
Food & Drug Retailers 3.87% (3.15%) Booker 671,445 402,867 0.43 Greggs 88,445 415,868 0.44 Majestic Wine 103,196 397,511 0.42 Morrison (WM) Supermarkets 290,842 777,130 0.83 Ocado 412,277 709,116 0.76 Sainsbury 245,591 930,790 0.99
General Retailers 3.79% (4.01%) ASOS 36,880 581,229 0.62 Carphone Warehouse 173,156 683,966 0.73 Dunelm 102,890 531,427 0.57 Mothercare 102,976 629,698 0.67 Next 32,251 643,085 0.69 eXpansys 7,912,178 474,731 0.51
- 219 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Media 3.07% (3.03%) Daily Mail & General Trust 102,294 584,610 0.62 ITV 822,289 582,181 0.62 Informa 131,140 534,396 0.57 Reed Elsevier 124,829 673,452 0.72 United Business Media 73,951 510,262 0.54
Travel & Leisure 6.30% (4.07%) AVIS Europe 278,415 646,201 0.69 Betfair 32,507 315,318 0.34 Cineworld 177,453 377,088 0.40 Domino's Pizza 92,669 513,850 0.55 Easyjet 128,727 566,528 0.60 Millennium & Copthorne Hotels 137,182 793,598 0.85 Restaurant 180,898 497,831 0.53 Thomas Cook 278,490 532,473 0.57 Wetherspoon (J.D.) 229,324 1,029,894 1.10 Whitbread 34,652 624,429 0.67
Fixed Line Telecommunications 0.61% (1.02%) Cable & Wireless Communications 1,187,755 576,061 0.61
Gas, Water & Multiutilities 0.72% (1.94%) Pennon 105,466 672,346 0.72
Banks 10.28% (7.64%) Barclays 813,800 2,165,522 2.31 HSBC 328,721 2,156,738 2.30 Lloyds Banking 3,997,550 2,650,376 2.82 Standard Chartered 153,189 2,676,978 2.85
Non-Life Insurance 0.61% (0.43%) Admiral 37,863 574,382 0.61
Life Insurance 2.41% (0.86%) Prudential 208,164 1,390,536 1.48 Standard Life 404,605 874,756 0.93
Real Estate Investment Services 2.97% (1.58%) Capital & Counties Properties 416,823 625,651 0.67 Hansteen 721,073 576,858 0.61 Helical Bar 169,310 483,549 0.52 London & Stamford Property 396,775 519,775 0.55 Savills 150,355 577,664 0.62
Real Estate Investment Trusts 2.90% (3.09%) Derwent London 41,360 638,185 0.68 Hammerson 162,861 681,899 0.73 Land Securities 113,375 765,281 0.82 Shaftesbury 143,157 629,604 0.67
- 220 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Financial Services 3.74% (2.82%) Aberdeen Asset Management 297,644 603,324 0.64 Hargreaves Lansdown 99,857 584,163 0.62 ICAP 112,227 597,609 0.64 IG 104,366 528,092 0.56 Intermediate Capital 105,436 350,153 0.37 London Stock Exchange 101,376 851,558 0.91
Software & Computer Services 4.31% (3.35%) Autonomy 24,451 371,411 0.40 Aveva 34,229 549,718 0.59 Bango 185,504 289,386 0.31 CSF 440,969 299,859 0.32 Fidessa 27,073 416,653 0.44 Sage 310,325 851,842 0.91 SDL 103,117 661,496 0.70 Telecity 126,611 598,237 0.64
Technology Hardware & Equipment 2.05% (1.38%) ARM 130,746 556,978 0.59 CSR 110,885 397,412 0.42 Imagination Technologies 131,370 473,195 0.50 Spirent Communications 343,203 507,597 0.54
Collective Investment Schemes 2.00% (8.85%) BNY MFM Newton UK Smaller Companies Class ‘X’ Acc 142,955 1,875,660 2.00
Portfolio of investments 91,973,454 98.00
Net current assets 1,877,681 2.00
Total Net Assets 93,851,135 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the General Industrials, Personal Goods and Electricity portfolio categories, which, at 30 June 2010, represented 0.58%, 0.51% and 1.01% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers
- 221 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 20,275,644 9,666,315
Revenue 750,135 844,554
Expenses (684,087) (533,352) Net revenue before taxation 66,048 311,202
Taxation (9,835) (1,363)
Net revenue after taxation 56,213 309,839
Total return before distributions 20,331,857 9,976,154
Finance costs: Distributions (56,212) (309,838)
Change in net assets attributable to Shareholders from investment activities 20,275,645 9,666,316
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 73,554,359 59,613,194
Amounts receivable on issue of shares 23,518,615 2,748,814 Amounts payable on cancellation of shares (23,637,824) (4,884,251) (119,209) (2,135,437)
Dilution adjustment 176,633 11,647
Stamp Duty Reserve Tax (54,059) (11,762)
Change in net assets attributable to Shareholders from investment activities (see above) 20,275,645 9,666,316
Retained distributions on accumulation shares 17,295 5,765
Unclaimed distributions 471 462
Closing net assets attributable to Shareholders 93,851,135 67,150,185
- 222 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 91,973,454 67,230,341
Debtors 404,535 3,698,936
Cash and bank balances 1,630,345 3,270,676
Total other assets 2,034,880 6,969,612
Total assets 94,008,334 74,199,953
LIABILITIES
Creditors (126,075) (248,188)
Distribution payable on income shares (31,124) (397,406)
Total liabilities (157,199) (645,594) Net assets attributable to Shareholders 93,851,135 73,554,359
- 223 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Distribution Statement
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.1219 0.0122 0.1097 0.0000 0.1097 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.0000 0.0000 0.0000 0.1097 0.1097 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F= 100.00%, U= 0.00% The interim distribution for the period ended 31 December 2009 was 1.0424 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.0522 0.1052 0.9470 0.0000 0.9470 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.3205 0.0320 0.2885 0.6585 0.9470 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F= 100.00%, U= 0.00% The interim distribution for the period ended 31 December 2009 was 1.7135 pence per share.
- 224 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Growth Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 46,699,376 61,939,309 Commission 35,603 44,364 Taxes 211,182 267,709 Total transaction costs 246,785 312,073
Gross purchases total 46,946,161 62,251,382
Analysis of total sales proceeds:
Sales proceeds before transaction costs 42,516,857 64,206,508 Commissions (31,577) (54,636) Other Charges (111) (161) Total sales costs (31,688) (54,797)
Total sales net of transaction costs 42,485,169 64,151,711
- 225 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
BNY MELLON INVESTMENT FUNDS - NEWTON HIGHER INCOME FUND
Interim Report for the six months ended 31 December 2010
- 226 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Tineke Frikkee Simon Nichols
Fund Size £2,760.99m
Sector UK Equity Income
Yield as at 31/12/10:
Sterling Income Shares 6.97% Exempt Shares 1 (Net Accumulation) 6.67% Exempt Shares 2 (Net Accumulation) 6.68% Institutional Shares (Accumulation) 6.69% Institutional Shares (Income) 7.01% X Shares (Net Accumulation) 6.65% X Shares (Net Income) 6.74%
Key Dates: Fund Launch 01 June 1987† †Managed by Newton since November 1994
Aim To achieve increasing distributions on a calendar year basis with long-term capital growth. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
A Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 8.21% 14.08% - 20.36% -0.69% 17.69% Exempt Shares 1 (Net Accumulation) 9.38% 15.36% -19.55% 0.38% 19.01% Exempt Shares 2 (Net Accumulation) 9.09% 15.07% -19.74% 0.13% 18.71% Institutional Shares (Accumulation) 8.83% 14.79% -19.95% -0.12% 18.41% Institutional Shares (Income)* 8.84% 14.73% -19.90% -0.14% N/A X Shares (Net Accumulation)* 9.91% 15.93% -19.19% N/A N/A X Shares (Net Income)* N/A N/A N/A N/A N/A
FTSE All Share TR GBP 14.51% 30.12% -29.93% 5.32% 16.75%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 227 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 14.83% against 22.01% for the FTSE All-Share Index.
As equity markets rallied, the Fund registered a positive return but less than that of the index. The yield-influenced underweight in the mining sector hurt performance as low yielding stocks, such as Anglo America, BHP Billiton, Rio Tinto and Xstrata, reacted positively to rising commodity prices. (The Fund will only invest in stocks paying a higher dividend than the market average). Meanwhile, in the prevailing cyclically driven environment, the Fund’s overweight positions in less economically sensitive holdings suffered. Affected stocks included Cable & Wireless Worldwide (also hit by fears that lower government spending would hurt profits), Cable & Wireless Communications and Centrica. Meanwhile, shares in the specialist printing business De La Rue fell following the announcement that issues at one of its plants were likely to affect its financial results; a subsequent bid approach caused the stock to regain much of the lost ground. Elsewhere, significant positive contributions to performance came from positioning in the oil giant BP, which continued to recover in the aftermath of the Gulf of Mexico disaster. In the financial sector, the avoidance of Barclays and the underweight position in HSBC were helpful, as the former lost ground and the latter did not participate in the rally to the same extent. Conversely, the holding in Aberdeen Asset Management performed very well for the Fund. Elsewhere, the engineering group Melrose was a beneficiary of merger and acquisition speculation in the sector.
During the period, the manager added to a number of high-conviction ideas, namely British American Tobacco and Centrica, as well as buying pharmaceutical company AstraZeneca. The manager also added to Scottish and Southern Energy; the stock has been weak on concerns about power pricing and their capital structure, and the manager believes that the investment programme at the company will be more appreciated by the market as the assets begin to deliver earnings over the next two years. Imperial Tobacco was also topped up - the company is delivering on its cash flow commitments to reduce debt and this should underpin its dividend growth. Meanwhile, significant holdings that were reduced during the period included Vodafone, Royal Dutch Shell and National Grid.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
British American Tobacco Vodafone Imperial Tobacco BP Royal Dutch Shell B National Grid Vodafone Royal Dutch Shell B Centrica Tesco National Grid British American Tobacco AstraZeneca Imperial Tobacco Scottish & Southern Energy Centrica British Land GlaxoSmithKline Sainsbury (J) Scottish & Southern Energy
- 228 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 74.77 64.46 2.8832
2007 78.06 66.84 3.3804
2008 69.78 44.78 3.4619
2009 55.84 42.61 3.8238
2010 57.59 48.80 3.9736
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 221.85 186.25 8.5672
2007 236.91 208.56 10.5450
2008 223.33 149.33 11.1329
2009 206.92 146.98 13.9470
2010 227.55 192.30 15.5712
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 141.03 118.55 5.4522
2007 150.45 132.36 6.6946
2008 141.59 94.48 7.0577
2009 130.54 92.91 8.8029
2010 143.20 121.16 9.8113
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 136.39 114.81 5.2799
2007 145.36 127.82 6.4664
2008 136.60 90.97 6.8080
2009 125.32 89.38 8.4553
2010 137.14 116.17 9.4071
*Distributions are shown in the year declared rather than paid.
- 229 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued)
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2006 (from 2 May) 76.11 64.63 1.9953
2007 79.62 68.24 3.5018
2008 71.38 46.00 3.5922
2009 57.70 43.85 3.9751
2010 59.59 50.55 4.1552
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 2 July) 233.39 208.69 4.6636
2008 223.83 150.21 11.0489
2009 209.33 148.10 14.0817
2010 231.31 195.03 15.7912
Highest Lowest Net Revenue X Shares (Net Income)** Price (p) Price (p) per share (p)*
2009 (from 2 April) 199.37 157.33 9.8682
2010 (to 27 April) 206.54 186.81 3.4741
2010 (from 8 October) 105.17 98.84 1.4496
*Distributions are shown in the year declared rather than paid.
**X Shares (Net Income) Share Class was closed on 27 April 2010 and was reopened on 8 October 2010 at £1.00.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 1,985,966,345 56.80 3,496,679,074
30/06/09 1,662,959,581 46.54 3,573,354,210
30/06/10 1,928,746,588 49.54 3,893,083,527
31/12/10 2,094,968,698 55.10 3,802,154,490
- 230 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 176,882,633 188.73 93,723,941
30/06/09 156,333,630 168.62 92,711,454
30/06/10 163,890,992 195.21 83,955,065
31/12/10 163,793,119 225.32 72,694,991
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 8,696,177 119.51 7,276,492
30/06/09 9,167,434 106.51 8,606,849
30/06/10 13,411,398 123.00 10,903,443
31/12/10 16,362,957 141.78 11,540,701
Institutional Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 319,851,110 115.16 277,751,850
30/06/09 260,794,604 102.38 254,733,841
30/06/10 285,039,497 117.93 241,696,409
31/12/10 304,734,808 135.77 224,441,948
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 14,422,479 58.24 24,764,614
30/06/09 18,887,825 47.96 39,380,610
30/06/10 71,998,448 51.32 140,298,823
31/12/10 95,189,874 57.22 166,359,366
- 231 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
X Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 41,127,840 189.58 21,694,750
30/06/09 43,869,739 170.16 25,781,770
30/06/10 57,150,219 197.98 28,866,975
31/12/10 74,491,987 229.07 32,519,486
X Shares (Net Income) * Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 53,853,862 164.85 32,668,000
31/12/10 11,451,261 102.70 11,150,000
*X Shares (Net Income) Share Class was closed on 27 April 2010 and was reopened on 8 October 2010 at £1.00.
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.61 1.61
Exempt Shares 1 (Net Accumulation) 0.54 0.54
Exempt Shares 2 (Net Accumulation) 0.79 0.79
Institutional Shares (Accumulation) 1.04 1.04
Institutional Shares (Income) 1.04 1.04
X Shares (Net Accumulation) 0.04 0.04
X Shares (Net Income) 0.04 0.04
- 232 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 98.26% (100.58%)
Oil & Gas Producers 7.83% (11.50%) BP 9,500,823 44,539,858 1.61 Royal Dutch Shell B 8,074,760 171,750,145 6.22
Construction & Materials 1.54% (2.27%) Balfour Beatty 6,703,872 21,157,420 0.77 Carillion 5,518,250 21,261,817 0.77
Aerospace and Defence 1.34% (1.00%) BAE Systems 11,176,510 37,016,601 1.34
General Industrials 0.72% (1.00%) Rexam 5,968,420 19,916,618 0.72
Electronic & Electrical Equipment 0.22% (0.79%) Morgan Crucible 2,494,305 6,106,059 0.22
Industrial Engineering 0.92% (1.00%) Melrose 8,225,333 25,490,307 0.92
Industrial Transportation 1.23% (1.41%) BBA Aviation 10,455,948 23,044,909 0.83 Wincanton 6,300,000 10,911,600 0.40
Support Services 4.64% (5.37%) Atkins (WS) 4,412,287 30,952,193 1.12 Berendsen 4,913,698 21,408,982 0.78 De La Rue 2,215,664 18,157,366 0.66 Filtrona 7,188,401 17,604,394 0.64 Hays 17,448,270 22,682,751 0.82 Premier Farnell 6,011,159 17,185,904 0.62
Beverages 1.97% (1.97%) Britvic 11,480,000 54,265,960 1.97
Food Producers 4.27% (2.87%) Tate & Lyle 10,142,060 52,637,291 1.91 Unilever 3,310,000 65,240,100 2.36
Household Goods & Home Construction 0.58% (0.20%) McBride 8,600,000 16,142,200 0.58
Tobacco 7.61% (4.07%) British American Tobacco 5,176,005 128,028,484 4.64 Imperial Tobacco 4,151,504 81,867,659 2.97
Pharmaceuticals & Biotechnology 9.64% (8.59%) AstraZeneca 2,579,790 76,078,007 2.76 GlaxoSmithKline 15,196,163 189,876,057 6.88
- 233 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Food & Drug Retailers 2.95% (5.07%) Sainsbury (J) 10,964,609 41,555,868 1.51 Tesco 9,253,974 39,764,326 1.44
General Retailers 5.62% (5.06%) Brown (N) 7,661,685 22,870,130 0.83 Halfords 8,410,000 38,391,650 1.39 Marks & Spencer 8,300,000 30,701,700 1.11 Mothercare 2,523,000 15,428,145 0.56 Next 1,420,000 28,314,800 1.03 WH Smith 4,000,000 19,464,000 0.70
Media 2.03% (2.01%) Pearson 2,133,790 21,529,941 0.78 Reed Elsevier 3,776,096 20,372,038 0.74 United Business Media 2,031,617 14,018,157 0.51
Travel & Leisure 6.27% (5.13%) Firstgroup 8,870,000 35,169,550 1.27 Go-Ahead 1,055,450 13,847,504 0.50 Greene King 7,300,000 34,886,700 1.26 Marston's 30,923,000 34,881,144 1.26 Thomas Cook 9,725,339 18,594,848 0.67 TUI Travel 8,769,364 21,581,405 0.78 William Hill 8,494,940 14,500,863 0.53
Fixed Line Telecommunications 3.16% (2.39%) BT 27,911,000 50,546,821 1.83 Cable & Wireless Communications 35,713,304 17,320,952 0.63 Cable & Wireless Worldwide 29,104,366 19,441,716 0.70
Mobile Telecommunications 5.87% (7.83%) Vodafone 97,458,180 162,072,953 5.87
Electricity 2.30% (2.25%) Scottish & Southern Energy 5,150,245 63,451,018 2.30
Gas, Water and Multiutilities 9.12% (9.19%) Centrica 16,063,998 53,396,729 1.93 National Grid 11,394,246 63,238,065 2.29 Northumbrian Water 9,700,000 32,068,200 1.16 Pennon 4,320,000 27,540,000 1.00 Severn Trent 1,875,750 27,723,585 1.00 United Utilities 8,100,000 47,992,500 1.74
Banks 3.32% (4.00%) HSBC 13,974,114 91,684,162 3.32
- 234 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Nonlife Insurance 4.24% (4.72%) Admiral 1,253,894 19,021,572 0.69 Amlin 4,638,274 18,785,010 0.68 Catlin 5,124,608 19,007,171 0.69 Jardine Lloyd Thompson 3,302,689 20,575,752 0.75 RSA Insurance 31,473,378 39,593,510 1.43
Life Insurance 2.03% (0.50%) Standard Life 25,931,922 56,064,815 2.03
Real Estate Investment Trusts 1.50% (1.29%) British Land 7,904,549 41,538,405 1.50
Financial Services 6.30% (7.08%) Aberdeen Asset Management 14,025,765 28,430,226 1.03 Ashmore 5,586,195 18,842,236 0.68 Close Brothers 4,246,700 36,309,285 1.32 IG 5,520,000 27,931,200 1.01 Intermediate Capital 8,316,300 27,618,432 1.00 Provident Financial 2,307,500 20,017,563 0.73 Rathbone Brothers 1,334,765 14,495,548 0.53
Equity Investment Instruments 1.04% (1.24%) 3i Infrastructure 1,858,290 362,367 0.01 3i Infrastructure Warrants 13/3/2012 23,685,458 28,446,235 1.03
Derivatives 0.02% (-0.05%)
USD Forward Foreign Currency Contracts 0.02% (0.02%) Forward Foreign Currency Contracts 07/02/11 £8,000,000 8,000,000 0.29 Forward Foreign Currency Contracts 07/02/11 USD(11,768,192) (7,581,015) (0.27) Forward Foreign Currency Contracts 11/03/11 £4,000,000 4,000,000 0.14 Forward Foreign Currency Contracts 11/03/11 USD(5,835,924) (3,761,298) (0.14)
Portfolio of investments 2,713,369,166 98.28
Net current liabilities 47,623,538 1.72
Total Net Assets 2,760,992,704 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Mining portfolio category, which, at 30 June 2010, represented 0.78% of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
- 235 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 304,453,572 426,883,413
Revenue 90,745,194 82,679,055
Expenses (19,369,278) (18,133,246)
Finance costs: Interest (38,488) (795)
Net revenue before taxation 71,337,428 64,545,014
Taxation - -
Net revenue after taxation 71,337,428 64,545,014
Total return before distributions 375,791,000 491,428,427
Finance costs: Distributions (87,331,215) (79,339,180)
Change in net assets attributable to Shareholders from investment activities 288,459,785 412,089,247
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 2,520,237,142 2,205,866,675
Amounts receivable on issue of shares 220,403,784 352,765,433 Amounts payable on cancellation of shares (284,339,224) (160,598,557) (63,935,440) 192,166,876
Stamp Duty Reserve Tax (1,756,180) (1,221,600)
Change in net assets attributable to Shareholders from investment activities (see above) 288,459,785 412,089,247
Retained distributions on accumulation shares 17,974,522 17,616,274
Unclaimed distributions 12,875 17,141
Closing net assets attributable to Shareholders 2,760,992,704 2,826,534,613
- 236 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 2,713,369,166 2,581,531,450
Debtors 33,946,482 79,972,253
Cash and bank balances 65,858,666 20,678,704 Total other assets 99,805,148 100,650,957 Total assets 2,813,174,314 2,682,182,407
LIABILITIES Investment liabilities - (47,519,667)
Creditors (19,660,307) (61,840,740)
Distribution payable on income shares (32,521,303) (52,584,858) Total other liabilities (52,181,610) (114,425,598)
Total liabilities (52,181,610) (161,945,265)
Net assets attributable to Shareholders 2,760,992,704 2,520,237,142
* Gross of investment liabilities
- 237 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share) Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.9041 0.0904 0.8137 0.0000 0.8137 Group 1:Shares purchased prior to 1 October 2010 Group 2 0.4448 0.0445 0.4003 0.4134 0.8137 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.7428 pence per share.
Interim Distribution for Exempt Shares 1 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 3.6818 0.3682 3.3136 0.0000 3.3136 Group 1:Shares purchased prior to 1 October 2010 Group 2 1.5690 0.1569 1.4121 1.9015 3.3136 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=98.52%, U=1.48%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 2.7843 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.3176 0.2318 2.0858 0.0000 2.0858 Group 1:Shares purchased prior to 1 October 2010 Group 2 1.0990 0.1099 0.9891 1.0967 2.0858 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.7571 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.2199 0.2220 1.9979 0.0000 1.9979 Group 1:Shares purchased prior to 1 October 2010 Group 2 1.2978 0.1298 1.1680 0.8299 1.9979 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.6873 pence per share. - 238 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.9494 0.0949 0.8545 0.0000 0.8545 Group 1:Shares purchased prior to 1 October 2010 Group 2 0.4203 0.0420 0.3783 0.4762 0.8545 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.7769 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 3.7408 0.3741 3.3667 0.0000 3.3667 Group 1:Shares purchased prior to 1 October 2010 Group 2 2.9871 0.2987 2.6884 0.6783 3.3667 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=90.85%, U=9.15%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 2.8150 pence per share.
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.6107 0.1611 1.4496 0.0000 1.4496 Group 1:Shares purchased on 8 October 2010 Group 2 0.8046 0.0805 0.7241 0.7255 1.4496 Group 2:Shares purchased 9 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=88.43%, U=11.57%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 2.6809 pence per share.
- 239 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.9963 0.0996 0.8967 0.0000 0.8967 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.5098 0.0510 0.4588 0.4379 0.8967 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 0.8987 pence per share.
Interim Distribution for Exempt Shares 1 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 3.9723 0.3972 3.5751 0.0000 3.5751 Group 1:Shares purchased prior to 1 July 2010 Group 2 2.2789 0.2279 2.0510 1.5241 3.5751 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 3.2940 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.5021 0.2502 2.2519 0.0000 2.2519 Group 1:Shares purchased prior to 1 July 2010 Group 2 2.3712 0.2371 2.1341 0.1178 2.2519 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 2.0800 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.3982 0.2398 2.1584 0.0000 2.1584 Group 1:Shares purchased prior to 1 July 2010 Group 2 1.8507 0.1851 1.6656 0.4928 2.1584 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.9986 pence per share.
- 240 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Distribution Statement (continued)
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.0434 0.1043 0.9391 0.0000 0.9391 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.6673 0.0667 0.6006 0.3385 0.9391 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 0.9360 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 4.0312 0.4031 3.6281 0.0000 3.6281 Group 1:Shares purchased prior to 1 July 2010 Group 2 2.4043 0.2404 2.1639 1.4642 3.6281 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 3.3260 pence per share.
There was no distribution for the X Shares (Net Income) for the period ended 30 September 2010, as this shareclass was closed during this period.
The interim distribution for the period ended 30 September 2009 was 3.2219 pence per share.
- 241 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Higher Income Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 2,045,603,906 1,207,248,149 Commissions 1,802,192 944,502 Taxes 10,210,037 5,910,028
Total purchase costs 12,012,229 6,854,530
Gross purchases total 2,057,616,135 1,214,102,679
Analysis of total sales proceeds:
Sales before transaction costs 2,184,979,010 1,029,857,950 Commissions (1,874,638) (765,146) Taxes (1,206) (453)
Total sales costs (1,875,844) (765,599)
Total sales net of transaction costs 2,183,103,166 1,029,092,351
- 242 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
BNY MELLON INVESTMENT FUNDS - NEWTON INCOME FUND
Interim Report for the six months ended 31 December 2010
- 243 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Christopher Metcalfe Richard Wilmot
Fund Size £1,461.76m
Yield as at 31/12/10:
Sterling Income Shares 3.23% Exempt Shares 2 (Net Accumulation) 3.19% Institutional Shares (Accumulation) 3.20% Institutional Shares (Income) 3.28% X shares (Net Accumulation) 3.18%
Key Dates: Fund Launch 01 May 1985
Aim
To achieve capital growth and income from a portfolio of predominantly UK securities. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 14.66% 11.38% -17.98% 17.86% 10.28% Exempt Shares 2 (Net Accumulation) 15.60% 12.31% -17.32% 18.83% 11.21% Institutional Shares (Accumulation) 15.32% 12.02% -17.53% 18.54% 10.96% Institutional Shares (Income)* 15.31% 12.01% -17.51% 18.54% N/A X Shares (Net Accumulation)* 16.47% 13.13% N/A N/A N/A
FTSE All Share TR GBP 14.51% 30.12% -29.93% 5.32% 16.75%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 244 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 17.99% against 22.01% for the FTSE All-Share Index.
The Fund generated a solid positive return in absolute terms but underperformed the index. The underweight position in the basic materials sector was the reason for almost all of the relative underperformance. The manager continues to believe it is correct to have a low weighting in this volatile area of the market. In addition, the small amount of cash that the manager held was also a negative contributor in such a strong market. At the stock level, the defence company Cobham hurt performance. The share price suffered from some delays in the awarding of defence contracts. However, the manager believes Cobham is attractively valued and there is some prospect of corporate activity in the aerospace and defence sector.
The Fund’s performance was helped considerably by not holding Barclays and HSBC Holdings; these banks continue to be held back by weaker trading revenues. Some very positive stock selection in smaller oil and gas companies proved beneficial; Bowleven made a significant oil discovery in Cameroon and the share price almost trebled. Premier Oil rose due to the stronger oil price and a discovery in the North Sea’s Catcher field. John Wood Group outperformed as there were upgrades to profit forecasts for this oil-services company. Lastly, Tomkins rose strongly after a bid approach from Canadian investors.
There were a number of changes to the portfolio during the period under review. The manager added to certain holdings in the oil and gas sector; these included BP as he believed the share price had more than discounted the bad news surrounding its US oil spill and Circle Oil which has some exciting oil exploration prospect in North Africa. The manager also bought Tate & Lyle, which is benefiting from new management, and inter-dealer broker ICAP, whose business model is advantaged by current fixed-interest trading patterns. The manager also bought Potash Corp. of Saskatchewan, which should benefit from higher agricultural prices. Among other activity, the manager reduced the cash levels to finance some of these purchases but also sold Tomkins, BAE Systems, and took profits in some of the Premier Oil holding, following its good performance. Overall, the long-term performance of the Fund remains very strong and the manager believes the portfolio is well positioned for what he believes could be a volatile 2011.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
ICAP Tomkins Rio Tinto BAE Systems BP Barclays Lloyds Banking ETFS Physical Gold 0.00% Secured Note (GBP) Reed Elsevier Premier Oil Anglo American Newmont Mining Sainsbury (J) Vodafone BG Carnival Royal Dutch Shell B SABMiller Potash Corp of Saskatchewan Standard Chartered
- 245 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 588.25 510.28 7.9537
2007 681.21 563.86 9.2926
2008 682.16 466.75 12.5221
2009 592.50 479.21 17.1706
2010 654.88 543.76 19.7240
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 144.15 123.51 3.0438
2007 170.62 138.64 3.5709
2008 171.36 120.07 4.4086
2009 158.41 124.17 5.1901
2010 182.94 150.06 5.5126
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 128.03 109.84 2.4079
2007 151.15 123.07 2.8214
2008 151.80 106.15 3.6027
2009 139.63 109.67 4.4061
2010 160.85 132.23 4.8539
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2006 (from 23 June) 591.83 526.66 4.5217
2007 685.51 567.17 12.9554
2008 685.60 469.19 15.9692
2009 596.59 482.07 19.2217
2010 662.73 548.83 20.3251
- 246 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued) Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2008 (from 19 March) 169.40 120.53 4.3544
2009 160.37 124.96 5.7969
2010 186.61 152.03 5.5987
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 1,079,936,494 606.92 177,936,929
30/06/09 887,666,183 493.59 179,837,798
30/06/10 1,009,059,802 555.98 181,490,772
31/12/10 1,194,660,311 648.04 184,351,003
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 387,746 155.10 250,000
30/06/09 326,370 130.55 250,000
30/06/10 379,631 151.85 250,000
31/12/10 452,603 181.04 250,000
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 756,006 137.23 550,924
30/06/09 71,309,868 115.21 61,893,128
30/06/10 72,244,189 133.68 54,042,052
31/12/10 94,089,369 159.18 59,109,717
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 1,714,384 609.88 281,103
30/06/09 9,235,858 495.86 1,862,588
30/06/10 3,481,033 561.25 620,233
31/12/10 2,991,408 655.82 456,129 - 247 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 3,515,568 155.36 2,262,896
30/06/09 4,887,965 131.67 3,712,219
30/06/10 141,694,327 154.32 91,821,256
31/12/10 169,568,954 184.67 91,821,256
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.61 1.61
Exempt Shares 2 (Net Accumulation) 0.79 0.79
Institutional Shares (Accumulation) 1.04 1.04
Institutional Shares (Income) 1.04 1.04
X Shares (Net Accumulation) 0.04 0.04
- 248 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 93.25% (87.19%)
Oil & Gas Producers 16.35% (12.72%) BG 2,628,000 34,150,860 2.34 Bowleven 3,150,602 12,003,794 0.82 BP 14,600,000 68,444,800 4.68 Circle Oil 9,600,000 3,312,000 0.23 Premier Oil 669,000 13,032,120 0.89 Royal Dutch Shell B 4,960,000 105,499,200 7.22 Valiant Petroleum 480,000 2,448,000 0.17
Mining 5.62% (2.96%) Anglo American 836,000 27,947,480 1.91 Rio Tinto 1,200,000 54,168,000 3.71
Aerospace & Defence 2.97% (4.87%) Cobham 11,260,000 22,981,660 1.57 Ultra Electronics 1,200,000 20,424,000 1.40
General Industrials 2.40% (4.11%) Smiths 2,800,000 35,140,000 2.40
Industrial Engineering 0.97% (0.90%) IMI 1,500,000 14,130,000 0.97
Support Services 4.31% (4.15%) Bunzl 4,860,000 35,064,900 2.40 Experian 1,460,000 11,607,000 0.79 Filtrona 6,690,000 16,383,810 1.12
Beverages 0.66% (0.89%) SABMiller 426,000 9,674,460 0.66
Food Producers 6.33% (6.26%) Associated British Foods 3,260,000 38,565,800 2.64 Tate & Lyle 3,300,000 17,127,000 1.17 Unilever 1,869,000 36,837,990 2.52
Tobacco 3.33% (3.37%) British American Tobacco 1,969,000 48,703,215 3.33
Healthcare Equipment & Services 1.76% (1.82%) Smith & Nephew 3,769,000 25,798,805 1.76
Pharmaceuticals & Biotechnology 6.76% (8.43%) AstraZeneca 1,400,000 41,286,000 2.82 GlaxoSmithKline 4,600,000 57,477,000 3.94
Food & Drug Retailers 4.06% (4.29%) Morrison (WM) Supermarkets 9,260,000 24,742,720 1.69 Sainsbury (J) 3,750,000 14,212,500 0.97 Tesco 4,769,000 20,492,393 1.40
General Retailers 0.43% (0.20%) Carphone Warehouse 1,600,000 6,320,000 0.43 - 249 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Media 8.50% (5.71%) British Sky Broadcasting 2,000,000 14,720,000 1.01 Daily Mail & General Trust 1,926,000 11,007,090 0.75 Pearson 3,869,000 39,038,210 2.67 Reed Elsevier 6,086,000 32,833,970 2.25 United Business Media 3,860,000 26,634,000 1.82
Travel & Leisure 5.20% (5.30%) Compass 5,750,000 33,695,000 2.31 Millennium & Copthorne Hotels 4,000,000 23,140,000 1.58 National Express 1,800,000 4,415,400 0.30 Whitbread 812,000 14,632,240 1.00 William Hill 126,000 215,082 0.01
Equipment, Services & Distribution 1.24% (0.00%) Wood (John) 3,260,000 18,076,700 1.24
Mobile Telecommunications 5.62% (5.83%) Vodafone 49,360,000 82,085,680 5.62
Gas, Water & Multiutilities 4.07% (4.25%) Centrica 10,800,000 35,899,200 2.46 Pennon 3,699,000 23,581,125 1.61
Banks 3.14% (3.43%) Lloyds Banking 31,690,000 21,010,470 1.44 Standard Chartered 1,426,000 24,919,350 1.70
Nonlife Insurance 0.38% (0.74%) RSA Insurance 4,378,000 5,507,524 0.38
Life Insurance 1.48% (0.86%) Standard Life 10,000,000 21,620,000 1.48
Real Estate Investment & Services 0.38% (0.23%) Capital & Counties Properties 3,699,000 5,552,199 0.38
Financial Services 2.93% (0.67%) 3i 4,469,000 14,738,762 1.01 ICAP 5,260,000 28,009,500 1.92
Software & Computer Services 4.16% (3.94%) Logica 14,000,000 18,438,000 1.26 Sage 15,460,000 42,437,700 2.90
Technology, Hardware & Equipment 0.20% (0.18%) Imagination Technologies 800,000 2,881,600 0.20
Commodities 1.52% (2.70%) ETFS Physical Gold 0.00% Secure Note (GBP) 248,000 22,225,760 1.52
UK Suspended/Liquidated Stocks 0.00% (0.00%) Transtec 2,811,999 0 0.00
- 250 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Equities 4.70% (3.63%)
Canada 0.85% (0.00%) Potash Corp of Saskatchewan 126,000 12,434,165 0.85
United States of America 1.74% (2.12%) Barrick Gold 492,000 16,667,225 1.14 Sprint Nextel 3,260,000 8,734,205 0.60
Australia 1.27% (0.81%) Newcrest Mining 699,000 18,503,987 1.27
Switzerland 0.84% (0.70%) Novartis 326,000 12,333,895 0.84
Portfolio of investments 1,453,963,546 99.47
Net current assets 7,799,099 0.53
Total Net Assets 1,461,762,645 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Fixed Line Telecommunications portfolio category, which, at 30 June 2010, represented 1.08% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
- 251 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 215,880,026 183,873,852
Revenue 15,542,703 18,030,030
Expenses (9,468,938) (8,468,526)
Finance costs: Interest - - Net revenue before taxation 6,073,765 9,561,504
Taxation (15,128) (7,074)
Net revenue after taxation 6,058,637 9,554,430
Total return before distributions 221,938,663 193,428,282
Finance costs: Distributions (14,862,971) (16,222,470)
Change in net assets attributable to Shareholders from investment activities 207,075,692 177,205,812
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 1,226,858,982 973,426,244
Amounts receivable on issue of shares 94,923,709 43,326,350 Amounts payable on cancellation of shares (69,651,180) (61,728,208) 25,272,529 (18,401,858)
Dilution adjustment 194,596 24,484
Stamp Duty Reserve Tax (408,586) (262,731)
Change in net assets attributable to Shareholders from investment activities (see above) 207,075,692 177,205,812
Retained distributions on accumulation shares 2,756,213 953,961
Unclaimed distributions 13,219 2,317
Closing net assets attributable to Shareholders 1,461,762,645 1,132,948,229
- 252 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS
Investment assets 1,453,963,546 1,147,313,155
Debtors 4,299,607 26,133,710
Cash and bank balances 13,942,522 73,533,302 Total other assets 18,242,129 99,667,012
Total assets 1,472,205,675 1,246,980,167
LIABILITIES
Creditors (4,472,528) (7,051,868)
Distribution payable on income shares (5,970,502) (13,069,317)
Total liabilities (10,443,030) (20,121,185)
Net assets attributable to Shareholders 1,461,762,645 1,226,858,982
- 253 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distributions for Sterling Income Shares (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.5892 0.3589 3.2303 0.0000 3.2303 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.9804 0.0980 0.8824 2.3479 3.2303 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was pence 4.5019 per share.
Interim Distributions for Exempt Shares 2 (Net Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.0359 0.1036 0.9323 0.0000 0.9323 Group 1:Shares purchased prior to 1 October 2010
Group 2 1.0359 0.1036 0.9323 0.0000 0.9323 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.2291 pence per share.
Interim Distributions for Institutional Shares (Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.9112 0.0911 0.8201 0.0000 0.8201 Group 1:Shares purchased prior to 1 October 2010
Group 2 0.0878 0.0088 0.0790 0.7411 0.8201 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.0841 pence per share.
Interim Distributions for Institutional Shares (Income) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.7542 0.3754 3.3788 0.0000 3.3788 Group 1:Shares purchased prior to 1 October 2010
Group 2 1.5040 0.1504 1.3536 2.0252 3.3788 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 4.6307 pence per share.
- 254 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Distribution Statement (continued)
Interim Distributions for X Shares (Net Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.0556 0.1056 0.9500 0.0000 0.9500 Group 1:Shares purchased prior to 1 October 2010
Group 2 1.0556 0.1056 0.9500 0.0000 0.9500 Group 2:Shares purchased 1 October 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.2430 pence per share.
Interim Distributions for Sterling Income Shares (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.8314 0.3831 3.4483 0.0000 3.4483 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.7120 0.1712 1.5408 1.9075 3.4483 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 3.7427 pence per share.
Interim Distributions for Exempt Shares 2 (Net Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.0931 0.1093 0.9838 0.0000 0.9838 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.0931 0.1093 0.9838 0.0000 0.9838 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.0991 pence per share.
Interim Distributions for Institutional Shares (Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.9620 0.0962 0.8658 0.0000 0.8658 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.1326 0.0133 0.1193 0.7465 0.8658 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 0.9395 pence per share.
- 255 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Distribution Statement (continued)
Interim Distributions for Institutional Shares (Income) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.9866 0.3987 3.5879 0.0000 3.5879 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.8761 0.1876 1.6885 1.8994 3.5879 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 4.0656 pence per share
Interim Distributions for X Shares (Net Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.1119 0.1112 1.0007 0.0000 1.0007 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.1119 0.1112 1.0007 0.0000 1.0007 Group 2:Shares purchased 1 July 2010 to 30 September 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 30 September 2009 was 1.1940 pence per share
- 256 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Income Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 307,819,750 317,170,228 Commissions 278,849 283,331 Taxes 1,330,414 1,300,252
Total purchase costs 1,609,263 1,583,583
Gross purchases total 309,429,013 318,753,811
Analysis of total sales proceeds:
Sales before transaction costs 218,929,320 271,483,510 Commissions (185,660) (225,171) Taxes (519) (653)
Total sales costs (186,179) (225,824)
Total sales net of transaction costs 218,743,141 271,257,686
- 257 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
BNY MELLON INVESTMENT FUNDS - NEWTON INDEX LINKED GILT FUND
Interim Report for the six months ended 31 December 2010
- 258 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Howard Cunningham Carl Shepherd
Fund Size £103.59m
Benchmark FTSE Actuaries (Index Linked) British Govt Over 5 Years
Distribution Yield as at 31/12/10:
Exempt Shares 2 (Gross Accumulation) 1.68% Institutional Shares (Accumulation) 1.39% X Shares (Gross Accumulation) 1.87%
Key Dates: Fund Launch 24 February 1998 Converted to ICVC 02 August 2004
Aim
To maximise returns by investment in a portfolio of predominantly sterling index-linked gilts. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 2 (Gross Accumulation) 8.99% 6.08% 3.28% 8.15% 2.70% Institutional Shares (Accumulation) 8.41% 5.18% 2.31% 7.22% 2.06% X Shares (Gross Accumulation)* 9.21% 6.29% 3.55% N/A N/A
FTSE A (Index L’ed) British Govt Over 5Yrs 9.05% 5.57% 3.31% 8.56% 2.65%
Source: Lipper as at 31 December 2010 – Institutional Shares (Accumulation) - Total return including revenue net of UK tax and annual charges, but excluding initial charge. Exempt Shares 2 (Gross Accumulation) and Sterling X Shares (Gross Accumulation) - Total return including gross revenue and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Please note that the basis of calculation has been amended from that used in the 2007 report to better reflect the tax position of each share class.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 259 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Institutional Sterling Acc Share Class of the Fund returned 4.84% against 5.19% for the FTSE Actuaries Government Securities Index-Linked (over 5 years) Index.
Over the period, the Fund delivered a positive absolute return but nevertheless underperformed relative to its benchmark. Although the manager increased the Fund’s duration to almost neutral relative to the index over the period, it remained underweight in ultra long-dated index-linked bonds. This positioning boosted performance as concerns over inflation led to the positive performance of index-linked bonds. Meanwhile, with UK index-linked bonds outperforming most other Western bonds over the second half of the period, the decision to sell the off- benchmark US TIPS (2029) early in the period (and buy the 30-year index-linked Gilts) protected relative performance. However, the new position in the New South Wales State bond detracted from relative performance, as it underperformed index-linked Gilts.
Notable activity within the Fund consisted of the purchase of medium-dated treasury purchases including 2.5% Index- linked 2020 and 1.875% Index-Linked 2022, as well as the sale of US TIPS. In addition, other sales included the longer dated 4.125% Index-Linked 2030 and the 0.625% Index-Linked 2042.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Treasury 0.625% Stock 2040 Treasury 4.125% Stock 2030 Treasury 2.50% Stock 2020 Treasury 0.625% Stock 2042 Treasury 1.875% Stock 2022 Treasury 2.50% Stock 2024 Treasury 0.50% Stock 2050 Treasury 2.50% Stock 2020 Treasury 1.25% Stock 2027 Treasury 1.25% Stock 2017 Treasury 1.25% Stock 2017 Treasury 1.875% Stock 2022 Treasury 2.00% Stock 2035 Treasury 1.125% Stock 2037 Treasury 0.625% Stock 2042 Treasury 2.00% Stock 2035 Treasury 4.125% Stock 2030 Treasury 2.50% Stock 2016 Treasury 2.50% TII Bonds 2029 Treasury 1.25% Stock 2027
- 260 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Exempt Shares 2 (Gross Accumulation) Price (p) Price (p) per share (p)*
2006 190.41 175.02 3.2875
2007 201.22 179.65 5.8656
2008 219.25 187.54 6.9826
2009 226.60 192.34 6.3066
2010 241.12 211.71 3.3205
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 189.11 174.45 2.1673
2007 198.05 177.87 4.1941
2008 214.47 182.96 4.9899
2009 219.14 187.19 4.4101
2010 232.12 204.52 1.9845
Highest Lowest Net Revenue X Shares (Gross Accumulation) Price (p) Price (p) per share (p)*
2007 (from 1 October) 201.32 189.42 2.2262
2008 219.78 188.10 7.4055
2009 227.71 192.99 6.7533
2010 242.72 212.84 3.7932
*Distributions are shown in the year declared rather than paid.
- 261 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Statistics (continued)
Net Asset Value History by Share Class
Exempt Shares 2 (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 84,440,682 210.33 40,145,993
30/06/09 72,428,576 210.85 34,351,525
30/06/10 77,816,239 228.00 34,129,522
31/12/10 80,090,579 239.56 33,432,848
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 4,430,023 206.15 2,148,935
30/06/09 6,109,295 204.60 2,986,039
30/06/10 21,590,297 219.81 9,822,180
31/12/10 11,246,531 230.34 4,882,630
X Shares (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 7,765,458 210.65 3,686,428
30/06/09 9,610,288 211.70 4,539,499
30/06/10 9,958,313 229.39 4,341,252
31/12/10 12,249,328 241.25 5,077,356
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Exempt Shares 2 (Gross Accumulation) 0.26 0.26
Institutional Shares (Accumulation) 0.56 0.56
X Shares (Gross Accumulation) 0.06 0.06
- 262 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 92.16% (96.86%) Treasury 2.00% Stock 2035 £3,000,000 5,056,380 4.88 Treasury 1.125% Stock 2037 £6,720,000 8,494,750 8.20 Treasury 1.875% Stock 2022 £7,570,000 9,483,205 9.15 Treasury 0.75% Stock 2047 £4,790,500 5,621,886 5.43 Treasury 0.625% Stock 2040 £8,600,000 8,933,744 8.62 Treasury 0.50% Stock 2050 £2,700,000 2,843,255 2.74 Treasury 4.125% Stock 2030 £2,310,000 6,273,590 6.06 Treasury 2.50% Stock 2024 £2,100,000 5,947,851 5.74 Treasury 2.50% Stock 2011 £320,000 989,344 0.96 Treasury 2.50% Stock 2016 £2,275,000 7,115,654 6.87 Treasury 2.50% Stock 2020 £2,960,000 9,449,504 9.12 Treasury 1.25% Stock 2055 £5,100,000 7,893,305 7.62 Treasury 1.25% Stock 2017 £6,530,000 8,245,378 7.96 Treasury 1.25% Stock 2027 £7,200,000 9,126,997 8.81
Overseas Government Stocks 1.08% (0.00%) New South Wales Treasury 2.75% Bonds 2025 AUD1,680,000 1,117,865 1.08
Sterling Denominated Corporate Bonds 3.61% (1.92%) Dwr Cymru Financing 1.859% Stock 2048 £750,000 766,200 0.74 National Grid Electricity 2.983% Stock 2018 £979,000 1,405,286 1.36 Tesco 1.982% Stock 2036 £851,000 979,841 0.95 Thames Water Utilities Finance 3.375% Stock 2021 £400,000 584,440 0.56
Derivatives -0.06% (0.00%)
AUD Forward Foreign Currency Contracts -0.06% (0.00%) Forward Foreign Currency Contracts 10/02/2011 AUD(1,695,000) (1,105,287) (1.06) Forward Foreign Currency Contracts 10/02/2011 £1,037,981 1,037,981 1.00
Portfolio of investments 100,261,169 96.79
Net current assets 3,325,269 3.21
Total Net Assets 103,586,438 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers.
- 263 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Portfolio Statement by Credit Rating as at 31 December 2010
Total Net Total Net Market Value Assets at Assets at at 31/12/10 31/12/10 30/06/10 Standard & Poor’s Ratings: (£’000s) (%) (%)
AAA 93,749 90.50 96.86 A 3,736 3.61 1.92 Not Rated (by S&P) 2,843 2.74 - Derivatives (67) (0.06) -
Portfolio of investments 100,261 96.79 98.78
Net current assets 3,325 3.21 1.22
Total Net Assets 103,586 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows: Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In default D
- 264 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 3,966,118 2,510,127
Revenue 805,444 1,343,219
Expenses (140,058) (130,097)
Finance costs: Interest (166) - Net revenue before taxation 665,220 1,213,122
Taxation - -
Net revenue after taxation 665,220 1,213,122
Total return before distributions 4,631,338 3,723,249
Finance costs : Distributions (665,227) (1,213,127) Change in net assets attributable to Shareholders from investment activities 3,966,111 2,510,122
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 109,364,849 88,148,159
Amounts receivable on issue of shares 26,216,778 44,477,404 Amounts payable on cancellation of shares (36,780,733) (35,111,232) (10,563,955) 9,366,172
Dilution adjustment 158,408 117,171
Change in net assets attributable to Shareholders from investment activities (see above) 3,966,111 2,510,122
Retained distributions on accumulation shares 661,025 1,228,703
Closing net assets attributable to Shareholders 103,586,438 101,370,327
- 265 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 100,328,475 108,034,504
Debtors 392,541 497,297
Cash and bank balances 2,969,861 913,189 Total other assets 3,362,402 1,410,486 Total assets 103,690,877 109,444,990
LIABILITIES Investment liabilities (67,306) -
Creditors (37,133) (80,141)
Total other liabilities (37,133) (80,141)
Total liabilities (104,439) (80,141) Net assets attributable to Shareholders 103,586,438 109,364,849
- 266 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Index Linked Gilt Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share)
Gross Revenue Interest Distribution Revenue Equalisation Accumulated
Group 1 1.5719 0.0000 1.5719 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.5324 1.0395 1.5719 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.7251 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Withheld Net Revenue Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 1.1118 0.2224 0.8894 0.0000 0.8894 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.2874 0.0575 0.2299 0.6595 0.8894 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 1.8579 pence per share.
Interim Distribution for X Shares (Gross Accumulation) (in pence per share)
Gross Revenue Interest Distribution Revenue Equalisation Accumulated
Group 1 1.8133 0.0000 1.8133 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.5255 0.2878 1.8133 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.9570 pence per share
- 267 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
BNY MELLON INVESTMENT FUNDS - NEWTON INTERNATIONAL BOND FUND
Interim Report for the six months ended 31 December 2010
- 268 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Paul Brain Howard Cunningham/Jon Day
Fund Size £747.69m
Benchmark JP Morgan Global GBI TR
Distribution yield as at 31/12/10:
Sterling Income Shares 1.75% Euro Accumulation Shares 1.30% Institutional Shares (Accumulation) 2.31% Institutional Shares (Income) 2.31% Exempt Shares 2 (Gross Accumulation) 2.51%
Key Dates: Fund Launch 01 February 1991
Aim
To maximise the total return from income and capital growth in the world bond markets through investment predominantly in Government and other public securities. The Sub-Fund may also invest in deposits, derivative instruments, forward transactions and collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 10.99% -7.61% 42.07% 7.24% -7.76% Euro Accumulation Shares 10.02% -8.82% 42.68% 6.44% -7.80% Institutional Shares (Accumulation) 11.48% -7.19% 42.73% 7.74% -7.35% Institutional Shares (Income)* 11.49% -7.19% 42.71% N/A N/A Exempt Shares 2 (Gross Accumulation)* 12.38% -6.39% 44.29% N/A N/A
JP Morgan Global GBI TR Index 9.77% -9.27% 55.07% 8.95% -7.08%
Source: Lipper as at 31 December 2010 – Sterling Income; Euro Accumulation; Institutional Shares (Accumulation); Institutional Shares (Income) – Total return including revenue net of UK tax and annual charges, but excluding initial charge. Exempt Shares 2 (Gross Accumulation) - Total return including gross revenue and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Please note that the basis of calculation has been amended from that used in the 2007 report to better reflect the tax position of each share class.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 269 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 2.44% against 1.31% for the JP Morgan Global GBI.
Over the period, the Fund delivered a positive absolute return, outperforming the index. The Fund’s exposure to long- dated sovereign bonds helped performance as yields fell. Long duration/yield curve exposure to Western bond markets, most notably in the US and Germany, was the largest source of outperformance over the period. Currency allocation was also a significant source of strength. The underweight exposure to the euro was beneficial as the rising uncertainty over the single currency’s future prompted its further depreciation against the world’s other major currencies. In addition, the currency strategy was positioned away from the weakening US dollar and towards the strengthening Asian and commodity-related currencies. The short duration (a measure of a Fund’s sensitivity to interest rate changes) exposure in the periphery of Europe also added to the Fund’s relative performance.
The overall duration of the Fund was increased in the early part of the period as the benign background of low interest rates and inflation for bonds developed. At the same time, to protect the Fund from a reversal of this beneficial bond market environment, some of the US bond positions were switched into call options. The manager increased the Fund’s Gilt positions, being supported by better fiscal data and an affirmation of its sovereign debt’s AAA rating. Positions in peripheral Eurozone bonds were relatively small, and were further increased with the sale of all Spanish government bonds, including the 4.85% Spain 2020, while a proportion of our holdings in Italian and Irish bonds were also sold. With German Bunds appearing relatively expensive, and a solution to the sovereign debt crisis potentially resulting in some burden sharing by the core Eurozone countries, Eurozone duration was reduced from overweight to underweight versus the benchmark. The manager increased the duration in Scandinavian and Canadian bonds, such as the 2.5% Canada 2015. Finally, during the period, some of the bond positions were switched into US, UK and Australian index-linked securities as the possibility of quantitative easing leading to an inflation issue was highlighted by the markets. Currency allocation was moved further away from the US dollar and into a combination of commodity-based and Asian currencies. The Swiss franc was added to a broad exposure of European currencies, which included Swedish and Norwegian currencies.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Italy 4.50% BTP 2018 Germany 5.625% Bonds 2028 Canada 2.50% Bonds 2015 Germany 4.00% Bonds 2037 USA Treasury Notes 1.25% 2015 Spain 4.85% Bonds 2020 Treasury 3.75% Stock 2019 Canada 3.00% Bonds 2014 Germany 4.00% Bonds 2037 USA Treasury Notes 1.00% 2012 Spain 4.85% Bonds 2020 USA Treasury Notes 3.75% 2018 Sweden 4.50% Bonds 2015 Poland 6.25% Bonds 2015 Treasury 4.00% Stock 2016 Treasury 2.25% Stock 2014 Treasury 4.75% Stock 2030 Treasury 4.75% Stock 2030 USA Treasury Bonds 4.25% 2039 Spain 4.30% Bonds 2019
- 270 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 163.84 147.75 3.9861
2007 155.36 142.71 4.6273
2008 216.12 153.29 5.2993
2009 214.92 179.30 4.0467
2010 216.42 190.25 3.9288
Net Revenue Highest Lowest per share Euro Accumulation Shares Price (cents) Price (cents) (cents)*
2006 128.57 118.14 2.6716
2007 121.68 117.41 3.1805
2008 133.70 111.66 3.0434
2009 133.41 121.92 2.1829
2010 153.41 126.53 2.1971
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 165.85 152.12 4.8028
2007 165.64 151.03 5.5955
2008 238.83 167.12 6.6317
2009 240.72 201.73 5.5661
2010 252.13 218.69 5.6291
Highest Lowest Net Revenue Institutional Shares (Income) Price (p) Price (p) per share (p)*
2007 (from 27 April) 164.61 150.90 3.8073
2008 228.98 162.09 6.4138
2009 227.36 189.66 5.2213
2010 229.18 201.17 5.1490
- 271 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued)
Highest Lowest Gross Revenue Exempt Shares 2 (Gross Accumulation) Price (p) Price (p) per share (p)*
2007 (from 18 May) 107.46 97.89 2.9654
2008 156.61 108.40 5.6447
2009 157.95 132.74 4.8745
2010 167.89 144.67 4.9928
Highest Lowest Net Revenue X Shares (Net Accumulation)** Price (p) Price (p) per share (p)*
2009 (from 29 June to 8 October) 151.27 133.95 0.0037
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 364,480,590 155.62 234,205,190
30/06/09 551,337,312 180.22 305,918,282
30/06/10 599,034,089 204.61 292,770,779
31/12/10 642,011,116 207.74 309,039,438
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 1,598,828 112.70 1,789,635
30/06/09 1,183,599 123.74 1,122,348
30/06/10 47,699,713 149.03 39,147,620
31/12/10 1,116,834 144.57* 896,346
- 272 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 11,000,194 171.58 6,411,179
30/06/09 57,013,335 204.28 27,909,043
30/06/10 69,421,594 238.03 29,164,990
31/12/10 16,133,613 244.44 6,600,301
Institutional Shares (Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 54,458,665 164.52 33,102,443
30/06/09 6,970,690 190.56 3,658,066
30/06/10 4,200,645 216.35 1,941,569
31/12/10 80,420,263 219.67 36,609,090
Exempt Shares 2 (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 160,579 111.91 143,488
30/06/09 6,566,447 134.51 4,881,589
30/06/10 7,755,826 158.09 4,905,867
31/12/10 8,010,086 162.99 4,914,552
X Shares (Net Accumulation)** Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 929,105 134.51 690,731
* Euro/Sterling exchange rate at midday 31 December 2010: 1.160248 ** Share Class launched 29 June 2009 and closed 8 October 2009
- 273 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.13 1.13
Euro Accumulation Shares 1.63 1.62
Institutional Shares (Accumulation) 0.56 0.56
Institutional Shares (Income) 0.55 0.56
Exempt Shares 2 (Gross Accumulation) 0.36 0.36
- 274 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 11.43% (11.01%) Treasury 1.25% Index-Linked 2027 £9,370,000 11,877,772 1.59 Treasury 1.25% Index-Linked 2032 £6,400,000 7,502,820 1.00 Treasury 3.75% Stock 2019 £41,410,000 42,697,209 5.71 Treasury 4.00% Stock 2016 £21,740,000 23,439,646 3.13
USA Government Bonds 21.73% (19.23%) USA Treasury Notes 0.375% 2012 USD23,640,000 15,163,240 2.03 USA Treasury Notes 1.25% 2015 USD58,280,000 36,432,037 4.87 USA Treasury Notes 1.25% TII 2020 USD8,470,000 5,583,280 0.75 USA Treasury Notes 0.75% 2013 USD34,910,000 22,290,199 2.98 USA Treasury Notes 2.625% 2020 USD24,570,000 14,936,418 2.00 USA Treasury Notes 2.75% 2016 USD64,390,000 42,240,775 5.65 USA Treasury Bonds 4.25% 2039 USD29,640,000 18,582,268 2.49 USA Treasury Bonds 6.00% 2026 USD9,100,000 7,191,334 0.96
Australia Government Bonds 3.24% (3.52%) Australia 5.75% Bonds 2012 AUD23,900,000 15,790,943 2.11 New South Wales Treasury 2.75% Index-Linked Bonds 2025 AUD12,700,000 8,450,528 1.13
Canada Government Bonds 7.19% (5.88%) Canada 2.50% Bonds 2015 CAD64,590,000 41,945,705 5.61 Canada 3.50% Bonds 2013 CAD17,590,000 11,791,150 1.58
Croatia Government Bonds 0.74% (0.00%) Croatia 6.625% Bonds 2020 USD8,370,000 5,551,789 0.74
Czech Republic Government Bonds 3.55% (1.50%) Czech 3.40% Bonds 2015 CZK208,000,00 7,208,105 0.96 Czech 3.625% Bonds 2021 EUR9,270,000 7,502,304 1.00 Czech 5.00% Bonds 2019 CZK319,700,00 11,919,827 1.59
Finland Government Bonds 2.12% (2.83%) Finland 4.00% Bonds 2025 EUR9,230,000 8,426,465 1.13 Finland 4.25% Bonds 2015 EUR7,840,000 7,419,247 0.99
Germany Government Bonds 5.48% (9.22%) Germany 3.25% Bonds 2015 EUR12,210,000 11,188,077 1.50 Germany 4.00% Bonds 2037 EUR3,970,000 3,713,724 0.50 Germany 4.25% Bonds 2017 EUR19,570,000 18,724,156 2.50 Germany 4.25% Bonds 2018 EUR7,650,000 7,315,466 0.98
Ireland Government Bonds 0.50% (1.19%) Ireland 5.00% Treasury Bonds 2013 EUR4,460,000 3,706,007 0.50
Italy Government Bonds 5.88% (3.00%) Italy 3.125% Bonds 2015 USD10,920,000 6,856,385 0.92 Italy 4.50% BTP 2018 EUR42,820,000 37,084,541 4.96
Lithuania Government Bonds 0.87% (0.75%) Lithuania 5.125% Bonds 2017 USD3,789,000 2,404,150 0.32 Lithuania 7.375% Bonds 2020 USD5,760,000 4,108,456 0.55
- 275 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Mexico Government Bonds 3.35% (2.90%) Mexico 7.75% Bonds 2017 MXN130,000,000 7,165,247 0.96 Mexico 9.00% Bonds 2012 MXN320,350,000 17,879,841 2.39
Netherlands Government Bonds 0.90% (3.58%) Netherlands 3.50% Bonds 2020 EUR7,620,000 6,759,993 0.90
New Zealand Government Bonds 3.74% (3.07%) New Zealand 6.00% Bonds 2015 NZD53,460,000 28,004,848 3.74
Norwegian Government Bonds 2.93% (0.00%) Norway 4.50% Bonds 2019 NOK83,750,000 9,879,991 1.32 Norway 6.50% 2013 NOK100,080,000 12,061,615 1.61
Polish Government Bonds 2.91% (2.25%) Poland 5.25% Bonds 2013 PLN99,210,000 21,746,395 2.91
Qatar Government Bonds 0.96% (1.01%) Qatar 5.15% Bonds 2014 USD10,315,000 7,175,393 0.96
Swedish Government Bonds 3.05% (2.02%) Sweden 4.50% Bonds 2015 SEK145,970,000 15,100,547 2.02 Sweden 5.50% Bonds 2012 SEK75,790,000 7,734,911 1.03
Sterling Denominated Corporate Bonds 3.52% (6.44%) Barclays Bank 2.875% Bonds 2011 £6,580,000 6,696,061 0.90 European Investment Bank 4.875% Bonds 2016 £3,890,000 4,277,719 0.57 Kreditanstalt Fur Wiederaufbau 3.00% Bonds 2013 £6,490,000 6,717,360 0.90 Network Rail Infra Finance 4.875% Bonds 2015 £6,550,000 7,221,317 0.97 Temasek Financial I 5.125% Bonds 2040 £1,299,000 1,338,792 0.18
Non-Sterling Denominated Corporate Bonds 8.09% (6.51%) ABN Amro Bank 3.375% Bonds 2014 EUR8,350,000 7,510,302 1.00 European Investment Bank 3.125% Bonds 2015 EUR10,740,000 9,535,085 1.28 Hana Bank 6.50% Bonds 2012 USD3,000,000 2,035,370 0.27 Kreditanstalt Fur Wiederaufbau 6.00% Bonds 2020 AUD11,900,000 7,467,579 1.00 National Australia Bank 2.55% Bonds 2012 USD9,600,000 6,295,795 0.84 Swedbank 3.125% Bonds 2012 EUR8,570,000 7,541,394 1.01 Swedish Export Credit 5.125% Bonds 2017 USD5,326,000 3,809,254 0.51 Temasek Financial 4.30% Bonds 2019 USD10,256,000 6,745,201 0.90 Waha Aerospace 3.925% Bonds 2020 USD3,260,000 2,098,243 0.28 Yorkshire Building Society 2.25% Bonds 2012 EUR8,605,000 7,494,097 1.00
Non-Sterling Denominated Floating Rate Notes 4.55% (3.97%) Australia & New Zealand Bank FRN 2014 AUD2,700,000 1,813,819 0.24 Canada Housing Trust No1 FRN 2014 CAD10,530,000 6,868,357 0.92 Commonwealth Bank of Australia FRN 2014 USD2,148,000 1,386,634 0.19 ING Bank FRN 2015 AUD4,500,000 2,933,011 0.39 ING Bank FRN 2014 AUD5,990,000 3,942,394 0.53 Institut De Credito Oficial FRN 2013 USD10,420,000 6,384,325 0.85 NIBC Bank FRN 2014 USD4,755,000 3,057,646 0.41 Royal Bank of Scotland FRN 2012 USD11,800,000 7,648,498 1.02
- 276 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives 0.74% (0.47%)
AUD Forward Foreign Currency Contracts -0.23% (0.07%) Forward Foreign Currency Contracts 17/03/11 AUD(62,489,488) (40,474,826) (5.41) Forward Foreign Currency Contracts 17/03/11 £38,398,500 38,398,500 5.14 Forward Foreign Currency Contracts 17/03/11 AUD11,840,000 7,668,841 1.03 Forward Foreign Currency Contracts 17/03/11 £(7,385,575) (7,385,575) (0.99)
CAD Forward Foreign Currency Contracts -0.13% (0.12%) Forward Foreign Currency Contracts 17/03/11 CAD(53,433,115) (34,435,809) (4.61) Forward Foreign Currency Contracts 17/03/11 £33,466,416 33,466,416 4.48
CHF Forward Foreign Currency Contracts 0.30% (0.03%) Forward Foreign Currency Contracts 17/03/11 CHF46,563,196 32,118,840 4.30 Forward Foreign Currency Contracts 17/03/11 £(29,913,014) (29,913,014) (4.00)
CNY Forward Foreign Currency Contracts 0.13% (-0.12%) Forward Foreign Currency Contracts 17/03/11 CNY464,600,000 45,396,944 6.07 Forward Foreign Currency Contracts 17/03/11 £(44,427,444) (44,427,444) (5.94)
CZK Forward Foreign Currency Contracts -0.05% (0.00%) Forward Foreign Currency Contracts 17/03/11 CZK(365,564,204) (12,554,828) (1.68) Forward Foreign Currency Contracts 17/03/11 £12,205,303 12,205,303 1.63
EUR Forward Foreign Currency Contracts -0.11% (0.05%) Forward Foreign Currency Contracts 17/03/11 EUR(39,607,978) (7,408,152) (0.99) Forward Foreign Currency Contracts 17/03/11 £6,428,008 6,428,008 0.86 Forward Foreign Currency Contracts 17/03/11 EUR14,000,000 12,071,432 1.61 Forward Foreign Currency Contracts 17/03/11 £(11,887,988) (11,887,988) (1.59)
IDR Forward Foreign Currency Contracts 0.02% (0.00%) Forward Foreign Currency Contracts 17/03/11 IDR162,860,000,000 11,488,482 1.54 Forward Foreign Currency Contracts 17/03/11 £(11,349,129) (11,349,129) (1.52)
JPY Forward Foreign Currency Contracts 1.18% (0.03%) Forward Foreign Currency Contracts 17/03/11 JPY23,539,026,647 186,696,197 24.97 Forward Foreign Currency Contracts 17/03/11 £(177,912,044) (177,912,044) (23.79)
MXN Forward Foreign Currency Contracts -0.04% (0.02%) Forward Foreign Currency Contracts 17/03/11 MXN(216,091,081) (11,156,515) (1.49) Forward Foreign Currency Contracts 17/03/11 £10,876,183 10,876,183 1.45
NOK Forward Foreign Currency Contracts 0.05% (-0.02%) Forward Foreign Currency Contracts 17/03/11 NOK75,086,093 8,256,032 1.10 Forward Foreign Currency Contracts 17/03/11 £(7,865,601) (7,865,601) (1.05)
NZD Forward Foreign Currency Contracts -0.18% (0.03%) Forward Foreign Currency Contracts 17/03/11 NZD(56,270,000) (27,978,474) (3.74) Forward Foreign Currency Contracts 17/03/11 £26,583,218 26,583,218 3.56
PLN Forward Foreign Currency Contracts -0.15% (-0.04%) Forward Foreign Currency Contracts 17/03/11 PLN(34,520,000) (22,262,329) (2.98) Forward Foreign Currency Contracts 17/03/11 £21,145,367 21,145,367 2.83
- 277 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
SEK Forward Foreign Currency Contracts 0.01% (0.01%) Forward Foreign Currency Contracts 17/03/11 SEK34,817,555 3,334,844 0.45 Forward Foreign Currency Contracts 17/03/11 £(3,181,747) (3,181,747) (0.43) Forward Foreign Currency Contracts 17/03/11 SEK(38,730,000) (3,709,581) (0.50) Forward Foreign Currency Contracts 17/03/11 £3,658,074 3,658,074 0.49
SGD Forward Foreign Currency Contracts 0.07% (-0.04%) Forward Foreign Currency Contracts 17/03/11 SGD23,626,880 11,875,769 1.59 Forward Foreign Currency Contracts 17/03/11 £(11,386,980) (11,386,980) (1.52)
USD Forward Foreign Currency Contracts -0.13% (0.33%) Forward Foreign Currency Contracts 17/03/11 USD(106,741,000) (68,795,390) (9.20) Forward Foreign Currency Contracts 17/03/11 £67,828,740 67,828,740 9.07
Portfolio of investments 728,782,821 97.47
Net current assets 18,909,091 2.53
Total Net Assets 747,691,912 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010 the Fund disposed of its holdings in the Bahrain Government Bonds, Belgium Government Bonds, Brazil Government Bonds, Russia Government Bonds, South Africa Government Bonds, Spain Government Bonds and South Korean Won Forwward Foreign Currency portfolio categories, which, at 30 June 2010, represented 0.13%, 1.96%, 1.84%, 0.68%, 0.91%, 3.26% and 0.00% of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers.
- 278 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Portfolio Statement by Credit Rating as at 31 December 2010
Total Net Total Net Market Value Assets at Assets at at 31/12/10 31/12/10 30/06/10 Standard & Poor’s Ratings: (£’000’s) (%) (%)
AAA 369,975 49.48 47.46 AA 17,369 2.32 9.36 A 116,248 15.54 8.97 BBB - - 3.43 Not rated (by S&P) 219,779 29.39 29.44 Derivatives 5,412 0.74 0.47
Portfolio of investments 728,783 97.47 99.13
Net current assets 18,909 2.53 0.87
Total Net Assets 747,692 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows:
Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In default D
- 279 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 10,719,372 35,826,902
Revenue 12,813,077 13,072,937
Expenses (4,022,888) (3,460,990)
Finance costs: Interest - (920) Net revenue before taxation 8,790,189 9,611,027
Taxation - -
Net revenue after taxation 8,790,189 9,611,027
Total return before distributions 19,509,561 45,437,929
Finance costs: Distributions (8,790,183) (9,611,097) Change in net assets attributable to Shareholders from investment activities 10,719,378 35,826,832
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 728,111,867 624,000,488
Amounts receivable on issue of shares 153,218,861 29,390,761 Amounts payable on cancellation of shares (144,724,262) (52,909,749) 8,494,599 (23,518,988)
Dilution adjustment 49,280 -
Change in net assets attributable to Shareholders from investment activities (see above) 10,719,378 35,826,832
Retained distributions on accumulation shares 313,362 888,104
Unclaimed distributions 3,426 976
Closing net assets attributable to Shareholders 747,691,912 637,197,412
- 280 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 736,968,916 724,625,756
Debtors 16,824,289 24,165,148
Cash and bank balances 20,092,121 10,403,207
Total other assets 36,916,410 34,568,355
Total assets 773,885,326 759,194,111
LIABILITIES
Investment liabilities (8,186,095) (2,875,305)
Creditors (11,175,475) (22,248,555)
Distribution payable on income shares (6,831,844) (5,958,384)
Total other liabilities (18,007,319) (28,206,939)
Total liabilities (26,193,414) (31,082,244)
Net assets attributable to Shareholders 747,691,912 728,111,867
* Gross of investment liabilities.
- 281 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Distribution Statement
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 2.3888 0.4778 1.9110 0.0000 1.9110 Group 1:Shares purchased prior to 1 July 2010 Group 2 1.0450 0.2090 0.8360 1.0750 1.9110 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.2370 pence per share.
Interim Distribution for Euro Accumulation Shares (in cents per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 1.2868 0.2574 1.0294 0.0000 1.0294 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.6793 0.1359 0.5434 0.4860 1.0294 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 1.2170 cents per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 3.4788 0.6958 2.7830 0.0000 2.7830 Group 1: Shares purchased prior to 1 July 2010 Group 2 1.1568 0.2314 0.9254 1.8576 2.7830 Group 2: Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 3.0369 pence per share.
Interim Distribution for Institutional Shares (Income) (in pence per share)
Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Paid
Group 1 3.1621 0.6324 2.5297 0.0000 2.5297 Group 1: Shares purchased prior to 1 July 2010 Group 2 0.4996 0.0999 0.3997 2.1300 2.5297 Group 2: Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.8328 pence per share.
- 282 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Bond Fund
Distribution Statement (continued)
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 2.4768 0.0000 2.4768 Group 1: Shares purchased prior to 1 July 2010 Group 2 1.0876 1.3892 2.4768 Group 2: Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.6498 pence per share.
- 283 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
BNY MELLON INVESTMENT FUNDS – NEWTON INTERNATIONAL GROWTH FUND
Interim Report for the six months ended 31 December 2010
- 284 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Jon Bell Paul Markham
Fund Size £1,229.12m
Yield as at 31/12/10:
Sterling Income Shares 0.87% Euro Accumulation Shares 0.38% Exempt Shares 2 (Net Accumulation) 1.68% Exempt Shares 1 (Net Accumulation) 1.76% X Shares (Net Accumulation) 2.17% Exempt Shares 3 (Net Accumulation) 1.55%
Key Dates: Fund Launch 01 June 1987† †Managed by Newton since November 1994
Aim
To achieve capital growth from a portfolio of international securities. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 14.27% 21.05% -26.49% 14.67% 3.97% Euro Accumulation Shares 13.17% 19.32% -26.23% 13.74% 3.83% Exempt Shares 2 (Net Accumulation) 15.37% 22.13% -25.77% 15.69% 4.95% Exempt Shares 1 (Net Accumulation)* 15.48% 22.25% -25.74% 15.77% N/A X Shares (Net Accumulation)* 16.06% 22.79% -25.45% N/A N/A Exempt Shares 3 (Net Accumulation)* 15.20% N/A N/A N/A N/A
FTSE World TR GBP 16.28% 19.64% -18.18% 9.45% 6.54%
Source: Lipper as at 31 December 2010 – Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 285 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 16.95% against 19.25% for the FTSE World Index.
Over the period, the Fund generated a strong positive return in absolute terms although it nevertheless lost some performance relative to the market. Having been badly hurt by its involvement in the Gulf of Mexico oil spill, the oil and gas exploration company Transocean rebounded strongly over the quarter, following the capping of the Macondo well and increased transparency regarding the liabilities relating to the disaster. Elsewhere, Sands China outperformed the market as Macau gaming revenue continued to increase, while the development of the company’s next hotel and casino should significantly increase capacity. Straits Asia Resources was another notable contributor to performance over the period. Meanwhile, stock selection in the telecom sector was weak; the holding in the US mobile telecoms operator Sprint Nextel disappointed. The US private education provider ITT Educational Services also reduced returns amid uncertainty regarding student funding regulations.
Over the six-month period, the manager added a position in the diversified mining business BHP Billiton. The company boasts a strong management team, a diversified asset portfolio and a healthy balance sheet backed by the ability to generate significant cashflow. A position was also established in Toyota Motor, while Medco Health Solutions, a leading US specialty pharmacy business and mail order pharmacy was also added. The company has a good near-term growth outlook due to a wave of drug patent expiries which benefit its generic drug business and continued conversion to mail distribution. Meanwhile, notable sales over the period included the US tobacco manufacturer Philip Morris; the manager sees a more muted volume outlook for Philip Morris, while recent tax increases in Japan have also been negative for its outlook. Finally, the US retail giant Wal-Mart was sold from the Fund, and switched into the retailer Dollar General, where the scope for growth is higher.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Toyota Motor Philip Morris BHP Billiton Wal-Mart Stores Medco Health Solutions Beckman Coulter Associated British Foods Devon Energy Petroleo Brasileiro ADR Travelers Turkcell Iletisim Hizmetleri ADR Nissan Motor WorleyParsons Denbury Resources Mosaic Lilly (Eli) Yamana Gold Millicom International Cellular Petrohawk Energy Arcelor Mittal
- 286 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 76.84 63.13 0.4211
2007 82.01 67.16 0.3779
2008 83.78 49.16 0.5031
2009 72.18 51.09 0.8758
2010 80.78 67.29 0.7011
Highest Lowest Net Revenue Euro Accumulation Price (cents) Price (cents) per share (cents)*
2006 98.55 81.22 0.1071
2007 102.76 87.23 0.0064
2008 97.98 52.05 0.0591
2009 71.36 50.17 0.5615
2010 87.50 69.21 0.3936
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 146.25 120.25 1.9651
2007 160.17 130.78 1.9685
2008 164.28 97.45 2.4082
2009 146.80 101.65 2.7712
2010 167.58 137.94 2.7947
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 (from 2 February) 106.19 87.32 0.9452
2007 116.45 95.06 1.5048
2008 119.42 70.88 1.7999
2009 106.88 73.95 2.0881
2010 122.13 100.44 2.1358
- 287 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued) Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 11 September) 116.59 100.84 N/A
2008 119.75 71.19 1.9220
2009 107.91 74.39 2.4526
2010 123.92 101.46 2.6745
Highest Lowest Net Revenue Exempt Shares 3 (Net Accumulation) Price (p) Price (p) per share (p)*
2009 (from 2 February) 106.63 73.93 1.3523
2010 121.54 100.18 1.8772
*Distributions are shown in the year declared rather than paid.
Net Asset Value History By Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 446,061,144 74.42 599,345,480
30/06/09 369,008,597 57.89 637,465,116
30/06/10 441,958,684 68.71 643,218,942
31/12/10 520,905,548 80.34 648,360,130
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 3,258,765 83.15 4,944,117
30/06/09 11,895,383 60.78 22,964,417
30/06/10 12,386,529 75.59 20,041,747
31/12/10 14,384,420 83.65** 19,950,505
** Euro/Sterling exchange rate at midday 31 December 2010: 1.160248
Exempt Shares 2 (Net Accumulation) Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 12,362,235 147.08 8,404,943
30/06/09 12,453,559 117.15 10,630,112
30/06/10 14,853,086 141.85 10,471,068
31/12/10 15,760,880 166.68 9,456,038 - 288 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 177,856,784 106.94 166,310,856
30/06/09 163,759,614 85.25 192,088,771
30/06/10 184,082,757 103.33 178,155,292
31/12/10 223,740,231 121.47 184,191,213
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 92,597,826 107.28 86,314,015
30/06/09 118,624,909 85.87 138,152,342
30/06/10 242,071,180 104.58 231,470,125
31/12/10 442,493,740 123.26 359,003,055
Exempt Shares 3 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 5,659,270 85.16 6,645,163
30/06/10 9,192,930 102.95 8,929,114
31/12/10 11,839,618 120.88 9,794,283
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.63 1.63
Euro Accumulation Shares 2.13 2.13
Exempt 2 Shares (Net Accumulation) 0.66 0.66
Exempt 1 Shares (Net Accumulation) 0.56 0.56
X Shares (Net Accumulation) 0.06 0.06
Exempt 3 Shares (Net Accumulation) 0.81 0.81
- 289 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 11.93% (10.32%) Anglo American 461,194 15,417,715 1.25 Associated British Foods 961,847 11,378,650 0.93 BAE Systems 1,674,755 5,546,789 0.45 BHP Billiton 612,978 15,722,886 1.28 BP 1,553,092 7,280,895 0.59 British American Tobacco 694,488 17,178,1611.39 Cable & Wireless Communications 9,806,008 4,755,914 0.39 Cable & Wireless Worldwide 9,326,877 6,230,354 0.51 GlaxoSmithKline 1,216,187 15,196,257 1.24 ICAP 2,481,582 13,214,424 1.08 Smith & Nephew 1,458,620 9,984,254 0.81 Standard Chartered 704,524 12,311,557 1.00 Vodafone 7,465,862 12,415,729 1.01
Collective Investment Schemes 0.83% (0.78%) BNY MFM Newton Discovery Fund 'X' (Acc) 807,398 10,250,479 0.83
Overseas Equities 85.78% (87.98%)
Canada 2.86% (1.30%) Chemokine Therapeutics (Restricted) 900,000 0 0.00 Potash Corp of Saskatchewan 146,467 14,387,291 1.17 Suncor Energy 516,083 12,692,299 1.03 Yamana Gold 994,571 8,151,195 0.66
United States of America 32.79% (37.25%) Accenture 326,703 10,188,033 0.83 Align Technology 748,474 9,636,115 0.78 Altria 1,149,244 18,207,897 1.48 Applied Materials 1,359,622 12,372,937 1.01 Ariba 824,604 12,480,321 1.02 Bank of America 1,104,527 9,446,846 0.77 Barrick Gold 438,999 14,871,738 1.21 BB&T 453,312 7,707,501 0.63 Cisco Systems 789,787 10,290,070 0.84 Consol Energy 350,491 11,015,625 0.90 Denbury Resources 19,280 235,800 0.02 Dollar General 328,119 6,453,761 0.53 eBay 548,520 9,937,443 0.81 EMC 1,086,750 16,027,935 1.30 ESCO Technologies 230,256 5,758,254 0.47 Flir Systems 436,785 8,425,137 0.69 Genzyme 198,636 9,134,160 0.74 Intel 836,576 11,314,546 0.92 Interpublic 1,332,826 9,124,712 0.74 ITT Educational Services 152,835 6,464,014 0.53 Kroger 828,465 11,834,452 0.96 L3 Communications 179,919 8,191,199 0.67 Lazard 320,155 8,132,230 0.66 Medco Health Solutions 339,830 13,514,847 1.10 Medtronic 409,764 9,809,318 0.80
- 290 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
United States of America (continued) Microsoft 945,662 16,961,864 1.38 Millicom International Cellular 157,464 9,652,491 0.79 Mosaic 188,544 9,208,019 0.75 Petrohawk Energy 632,021 7,383,822 0.60 Pfizer 930,434 10,480,641 0.85 Principal Financial 544,920 11,419,912 0.93 Shaw 295,793 6,564,711 0.53 Sprint Nextel 8,598,488 23,037,103 1.87 Thermo Fisher Scientific 249,108 8,931,437 0.73 Transocean 272,150 12,116,783 0.99 Union Pacific 151,395 8,976,250 0.73 Willis 509,048 11,363,176 0.92 Wisconsin Energy 241,424 9,178,372 0.75 Yum Brands 217,793 6,916,579 0.56
Brazil 5.80% (5.16%) Anhanguera Educacional Participacoes 522,500 8,090,611 0.66 Banco Santander Brasil 828,532 7,241,051 0.59 Hypermarcas 1,300,985 11,370,062 0.93 Natura Cosmeticos 406,908 7,500,876 0.61 Petroleo Brasileiro ADR 888,068 19,286,181 1.57 Rossi Residencial 1,335,403 7,623,373 0.62 Tele Norte Leste Participacoes ADR 1,064,083 10,067,224 0.82
Australia 4.70% (3.95%) AMP 1,980,721 6,858,924 0.56 Newcrest Mining 887,633 23,497,496 1.91 QBE Insurance 770,518 9,154,537 0.74 Santos 1,276,865 10,974,549 0.89 WorleyParsons 424,415 7,428,979 0.60
China 0.56% (0.92%) GOME Electrical Appliances 29,831,000 6,921,050 0.56
Hong Kong 1.97% (0.59%) AIA 2,270,600 4,110,912 0.33 New World Development 5,914,000 7,144,716 0.58 Sands China 9,152,400 13,043,963 1.06
Japan 6.21% (6.87%) INPEX 2,792 10,511,730 0.86 Lawson 205,100 6,520,179 0.53 Mitsubishi 677,900 11,797,816 0.96 Nintendo 28,600 5,396,328 0.44 Nomura 2,598,200 10,594,686 0.86 Sawai Pharmaceutical 173,500 9,121,701 0.74 Toshiba 2,581,000 9,032,720 0.73 Toyota Motor 524,800 13,380,057 1.09
- 291 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
South Korea 0.50% (0.67%) LG Uplus 1,521,382 6,181,675 0.50
Singapore 3.32% (3.31%) DBS 1,897,800 13,649,486 1.11 Jardine Matheson 596,400 16,900,625 1.38 Straits Asia Resources 8,148,000 10,189,977 0.83
Taiwan 1.42% (0.78%) HTC 876,062 17,403,455 1.42
Thailand 2.08% (2.31%) Advanced Info Service 4,289,300 7,789,373 0.63 Bangkok Bank 5,604,500 17,841,045 1.45
South Africa 1.42% (1.73%) Gold Fields 416,007 4,865,091 0.40 MTN 970,574 12,589,193 1.02
Belgium 0.78% (0.73%) Anheuser-Busch InBev 259,798 9,561,213 0.78
Czech Republic 0.00% (0.00%) Bontonfilm (unapproved) 10,400 16,276 0.00 Bonton Pictures (unapproved) 10,400 335 0.00 Bonton (unapproved) 10,400 938 0.00 Bonton (unapproved) 10,400 938 0.00
France 4.68% (4.98%) Air Liquide 143,230 11,730,009 0.95 BNP Paribas 282,969 11,729,733 0.95 L'Oreal 136,334 9,802,203 0.80 Thales 451,116 10,210,154 0.83 Total 411,302 14,115,992 1.15
Germany 4.07% (4.53%) Bayer 329,564 15,611,183 1.27 Deutsche Telekom 1,512,942 12,544,307 1.02 Fresenius Medical Care 310,655 11,601,559 0.94 K+S 211,720 10,331,921 0.84
Norway 1.00% (0.81%) Statoil 799,804 12,235,511 1.00
Spain 0.67% (1.17%) Amadeus IT 606,971 8,189,744 0.67
- 292 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Switzerland 10.23% (10.32%) ABB 579,555 8,311,873 0.68 Actelion 312,346 11,010,850 0.90 Bank Sarasin B 332,263 9,676,923 0.79 Lonza 154,902 7,993,622 0.65 Nestle 490,661 18,496,119 1.50 Novartis 448,904 16,983,849 1.38 Roche Genusscheine 250,643 23,642,375 1.92 Syngenta 93,605 17,620,268 1.43 Zurich Financial Services 72,052 12,015,314 0.98
Turkey 0.72% (0.00%) Turkcell Iletisim Hizmetleri ADR 792,042 8,835,041 0.72
Portfolio of investments 1,211,228,791 98.54
Net current assets 17,895,646 1.46
Total Net Assets 1,229,124,437 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Netherlands and Derivatives portfolio categories, which, at 30 June 2010, represented 0.60% and 0.15% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt
- 293 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 158,134,956 166,241,081
Revenue 8,728,515 8,180,559
Expenses (4,766,384) (4,201,826)
Finance costs: Interest (5,458) (1) Net revenue before taxation 3,956,673 3,978,732
Taxation (649,273) (657,715)
Net revenue after taxation 3,307,400 3,321,017
Total return before distributions 161,442,356 169,562,098
Finance costs: Distributions 978,399 236,745
Change in net assets attributable to Shareholders from investment activities 162,420,755 169,798,843
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 904,545,166 681,401,332
Amounts receivable on issue of shares 180,128,620 121,949,653 Amounts payable on cancellation of shares (18,458,050) (41,594,121) 161,670,570 80,355,532
Dilution adjustment 501,345 21,254
Stamp Duty Reserve Tax (20,597) (22,629)
Change in net assets attributable to Shareholders from investment activities (see above) 162,420,755 169,798,843
Unclaimed distributions 7,198 1,260
Closing net assets attributable to Shareholders 1,229,124,437 931,555,592
- 294 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 1,211,228,791 897,982,643
Debtors 6,042,622 8,978,792
Cash and bank balances 15,631,017 3,811,381
Total other assets 21,673,639 12,790,173
Total assets 1,232,902,430 910,772,816
LIABILITIES
Investment liabilities - (399,210)
Creditors (3,777,993) (1,318,832)
Distribution payable on income shares - (4,509,608)
Total other liabilities (3,777,993) (5,828,440)
Total liabilities (3,777,993) (6,227,650)
Net assets attributable to Shareholders 1,229,124,437 904,545,166
* Gross of investment liabilities
- 295 - BNY Mellon Investment Funds Interim Report & Accounts – Newton International Growth Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 316,363,546 224,716,655 Commissions 238,978 190,638 Taxes 245,125 58,323
Total purchase costs 484,103 248,961
Gross purchases total 316,847,649 224,965,616
Analysis of total sales proceeds:
Sales before transaction costs 160,097,371 140,708,952 Commissions (195,537) (177,841) Taxes (7,272) (9,866)
Total sales costs (202,809) (187,707)
Total sales net of transaction costs 159,894,562 140,521,245
- 296 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
BNY MELLON INVESTMENT FUNDS - NEWTON JAPAN FUND
Interim Report for the six months ended 31 December 2010
- 297 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Paul Markham
Fund Size £3.86m
Yield as at 31/12/10:
Sterling Income Shares 0.00% Euro Accumulation Shares 0.00% Exempt Shares 1 (Net Accumulation) 0.72%
Key Dates: Fund Launch 01 June 1987† †Managed by Newton since November 1994
Aim
To achieve capital growth from a portfolio of predominantly Japanese securities. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 8.15% -10.80% -11.88% -11.45% -17.37% Euro Accumulation Shares 7.13% -12.30% -11.63% -12.10% -17.33% Exempt Shares 1 (Net Accumulation)* 9.38% -9.89% -11.06% -10.66% -16.58%
FTSE Japan TR. 19.01% -5.80% -1.12% -6.37% -7.35%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 298 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 12.11% against 12.99% for the FTSE Japan Index.
The Fund slightly underperformed its benchmark but produced a positive return in absolute terms. Exposure to the consumer goods sector made a positive contribution to performance; the power tool company Makita Corp performed well, as did Sony, the marketing company LeoPalace21 and the car manufacturers Nissan, Honda Motor and Toyota. However, the holding in the gaming console manufacturer Nintendo tempered some of the gains in this sector. We had established a holding in Nintendo in anticipation of its new 3D game and such was our disappointment at the subsequent delay of the launch that we sold the holding. However, exposure to Asahi Breweries helped to boost returns. Performance was negatively affected by the technology sector, with the holdings in Sumco, Micronics Japan and Capcom hurting returns. However, the positive contribution from Fuji Film Holdings helped somewhat to mitigate some of this trend. The overweight position in INPEX Holdings and the participation in the company’s dilutive rights issue hindered returns in the oil and gas sector. Asset allocation in the utilities sector contributed to returns, as the Fund did not hold underperforming electricity power companies, such as Tokyo Electric Power.
In addition to participating in INPEX’s equity raising on valuation grounds, we established a holding in the camera manufacturer Canon. To fund these trades, we sold our position in Micronics Japan, Capcom and Panasonic, and trimmed positions in Nomura and Daiwa Securities. We established new property holdings, namely Leopalace 21 and Mitsui Fudosan, as real estate in Japan looked attractively valued. We reduced the position in Nissan after it had outperformed strongly, and also took some profit in Asahi Breweries.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Sumitomo Mitsui Financial Nissan Toyoto Rohm Sumco Panasonic Leopalace 21 Capcom Nintendo Makita INPEX Micronics Japan Don Quijote T&D Softbank Nintendo Canon Seven & I Mitsubishi UFJ Financial Honda
- 299 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 33.25 25.53 N/A
2007 27.10 22.35 N/A
2008 24.80 14.87 0.0338
2009 20.37 15.50 0.0595
2010 21.19 16.31 N/A
Highest Lowest Net Revenue Euro Accumulation Shares Price (cents) Price (cents) per share (cents)*
2006 71.66 56.53 N/A
2007 60.15 46.66 N/A
2008 48.48 28.04 N/A
2009 32.60 25.08 N/A
2010 35.58 28.17 N/A
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 100.20 77.40 0.5663
2007 82.39 68.37 0.4432
2008 76.19 45.91 0.7359
2009 63.06 48.07 0.7235
2010 66.66 51.50 0.4493
*Distributions are shown in the year declared rather than paid.
- 300 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 4,918,597 21.38 23,001,122
30/06/09 3,336,314 16.97 19,655,022
30/06/10 3,130,333 17.54 17,846,487
31/12/10 3,250,365 19.64 16,553,660
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 1,236,657 40.06 3,894,171
30/06/09 393,130 29.58 1,559,271
30/06/10 422,409 32.12 1,608,658
31/12/10 395,758 33.59* 1,367,287
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 1,131,909 65.75 1,721,482
30/06/09 1,286,054 52.96 2,428,262
30/06/10 553,527 54.21 1,021,095
31/12/10 216,370 62.29 347,380
* Euro/Sterling exchange rate at midday 31 December 2010: 1.160248
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.89 1.80
Euro Accumulation Shares 2.39 2.30
Exempt Shares 1 (Net Accumulation) 0.82 0.73
- 301 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Japan 95.94% (95.28%)
Oil & Gas Producers 7.51% (6.51%) INPEX 77 289,901 7.51
Chemicals 1.65% (1.27%) Ube Industries 33,000 63,755 1.65
Industrial Metals & Mining 5.55% (5.48%) JFE 5,100 114,198 2.95 Tokyo Steel Manufacturing 14,300 100,318 2.60
Industrial Engineering 8.92% (8.90%) Fuji Machine Manufacturing 12,000 152,973 3.96 Okuma 39,000 191,454 4.96
Industrial Transportation 2.84% (2.80%) Yamato 12,000 109,837 2.84
Support Services 7.34% (5.76%) Mitsubishi 13,000 226,245 5.86 Secom 1,873 57,022 1.48
Automobiles & Parts 6.99% (10.99%) Toyota 10,600 270,253 6.99
Beverages 1.87% (2.88%) Asahi Breweries 5,800 72,238 1.87
Household Goods & Home Construction 9.44% (6.10%) Leopalace 21 103,000 128,040 3.31 Makita 9,000 236,586 6.13
Leisure Goods 4.98% (8.14%) Sony 8,300 192,357 4.98
Healthcare Equipment & Services 0.92% (0.00%) Sysmex 800 35,662 0.92
Pharmaceuticals & Biotechnology 2.13% (1.99%) Otsuka 900 14,252 0.37 TOWA Pharmaceuticals 1,900 67,848 1.76
Food & Drug Retailers 5.23% (2.66%) Don Quijote 3,900 76,365 1.98 Sugi 8,100 125,383 3.25
General Retailers 1.53% (3.02%) Parco 10,100 58,938 1.53
Mobile Telecommunications 1.96% (0.00%) Softbank 3,400 75,674 1.96
- 302 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Banks 8.23% (1.01%) Mitsubishi UFJ Financial 34,156 118,724 3.07 Sumitomo Mitsui Financial 8,700 199,217 5.16
Life Insurance 2.98% (4.03%) T&D 7,050 114,991 2.98
Real Estate Investment & Services 0.99% (0.00%) Mitsui Fudosan 3,000 38,457 0.99
Financial Services 4.05% (6.01%) Nomura 38,400 156,584 4.05
Technology Hardware & Equipment 10.83% (13.72%) Canon 2,600 86,669 2.24 Fuji Film 6,000 139,481 3.61 Sumco 11,900 109,298 2.83 Tokyo Ohka Kogya 6,000 83,043 2.15
Portfolio of investments 3,705,763 95.94
Net current assets 156,730 4.06
Total Net Assets 3,862,493 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Travel & Leisure, Software & Computer Services and Derivatives portfolio categories, which, at 30 June 2010, represented 0.44%, 3.57% and -0.90% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
- 303 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 414,399 357,754
Revenue 28,129 37,841
Expenses (34,523) (40,623)
Finance costs: Interest (22) (3)
Net expense before taxation (6,416) (2,785)
Taxation (1,889) (2,639)
Net expense after taxation (8,305) (5,424)
Total return before distributions 406,094 352,330
Finance costs: Distributions (141) (7)
Change in net assets attributable to Shareholders from investment activities 405,953 352,323
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £
Opening net assets attributable to Shareholders 4,106,269 5,015,498
Amounts receivable on issue of shares 170,014 177,430 Amounts payable on cancellation of shares (820,190) (247,263) (650,176) (69,833)
Dilution adjustment 447 63
Change in net assets attributable to Shareholders from investment activities (see above) 405,953 352,323
Closing net assets attributable to Shareholders 3,862,493 5,298,051
- 304 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 3,705,763 3,930,939
Debtors 2,037 513,565
Cash and bank balances 168,123 44,064 Total other assets 170,160 557,629 Total assets 3,875,923 4,488,568
LIABILITIES
Investment liabilities - (41,342) Creditors (13,430) (340,957)
Total other liabilities (13,430) (340,957)
Total liabilities (13,430) (382,299)
Net assets attributable to Shareholders 3,862,493 4,106,269
*Gross of investment liabilities.
- 305 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Japan Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 1,155,822 1,823,789 Commissions 896 1,633
Total purchase costs 896 1,633
Gross purchases total 1,156,718 1,825,422
Analysis of total sales proceeds:
Sales before transaction costs 1,792,740 1,971,241 Commissions (1,279) (1,777)
Total sales costs (1,279) (1,777)
Total sales net of transaction costs 1,791,461 1,969,464
- 306 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
BNY MELLON INVESTMENT FUNDS - NEWTON LONG CORPORATE BOND FUND
Interim Report for the six months ended 31 December 2010
- 307 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Howard Cunningham Jon Day
Fund Size £200.76m
Distribution Yield as at 31/12/10:
Exempt Shares 1 (Gross Accumulation) 4.51% Exempt Shares 2 (Gross Accumulation) 4.42% Institutional Shares (Accumulation) 4.25% X Shares (Gross Accumulation) 4.71%
Key Dates: Fund Launch 29 June 2000 Converted to ICVC 02 August 2004
Aim
To maximise returns through investment in predominantly sterling denominated fixed interest securities excluding gilts. The Sub-Fund may also invest in deposits, derivative instruments, forward transactions and collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 1 (Gross Accumulation) 9.98% 12.87% -6.34% -1.04% -0.40% Exempt Shares 2 (Gross Accumulation) 9.88% 12.75% -6.13% -1.16% -0.50% Institutional Shares (Accumulation)* 8.38% 11.30% -7.67% -2.33% N/A X Shares (Gross Accumulation)* 10.20% 13.10% -6.16% N/A N/A
BofA Merrill Lynch Non-Gilt Over 10Yr 9.92% 13.03% -6.23% -0.31% -0.12% Investment Grade TR
Source: Lipper as at 31 December 2010 – Institutional Shares (Accumulation) - Total return including revenue net of UK tax and annual charges, but excluding initial charge. Exempt Shares 1 (Gross Accumulation); Exempt Shares 2 (Gross Accumulation) and Sterling X Shares (Gross Accumulation) - Total return including gross revenue and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Please note that the basis of calculation has been amended from that used in the 2007 report to better reflect the tax position of each share class.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 308 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Institutional Sterling Net Acc Share Class of the Fund returned 0.90% against 2.45% for the BofA Merrill Lynch Non-Gilt (over 10 year) Investment Grade Index.
Having enjoyed 18 months of strong returns it was a disappointing final quarter as corporate bonds lost some ground towards the end of the year. Against this backdrop, the Fund registered a positive return, but nevertheless underperformed its index. In particular, the banking sector struggled as a result of renewed concerns about exposure to debt in the Eurozone periphery (corporate and sovereign) and about the implications of new bank resolutions for bondholders. While the manager reduced the Fund’s exposure to the sector over the period, holdings in AIB and the Bank of Ireland subordinated debt led to underperformance. The Fund’s overall short duration (a measure of a Fund’s sensitivity to interest rate changes) position and holding of under 10-year bonds, while beneficial, was insufficient to offset this.
Early in the period, the manager reduced the Fund’s exposure to the quasi-government sector, selling positions in Kreditanstalt Fur Wiederaufbau, KFW International Finance and European Investment, although a position was added in the Singapore government’s investment vehicle Temasek Financial. Meanwhile, exposure was added in the utility sector, including Severn Trent, while Network Rail Infra Finance was another new addition to the Fund. In the final three months of 2010, the Fund increased in size by around a third, and this inflow presented a timely opportunity to reduce some of the Fund’s exposure to the banking sector (from over 19% at the end of September to around 15% at year end).
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Temasek Financial 5.125% Bonds 2040 KFW International Finance 5.125% Bonds 2011 Kreditanstalt Fur Wiederaufbau 5.00% Bonds 2036 Network Rail Infra Finance 4.75% Bonds 2035 KFW International Finance 5.125% Bonds 2011 KFW International Finance 5.00% Bonds 2036 European Investment Bank 4.50% Bonds 2044 European Investment Bank 5.625% Bonds 2032 Severn Trent Water Utilities 6.00% Bonds 2018 Credit Suisse Finance Guernsey 6.875% Bonds 2049 Allstate Life Funding 6.375% EMTN 2011 Longstone Finance 4.791% Bonds 2030 DNB Nor Bank 4.875% FRN 2049 Kreditanstalt Fur Wiederaufbau 5.00% Bonds 2024 European Bank for Rec & Dev 5.625% EMTN 2028 Marks & Spencer 6.125% Bonds 2019 Lloyds TSB Bank 6.50% Bonds 2040 Barclays Bank 6.00% Bonds 2049 Vodafone 5.375% Bonds 2017 Broadgate Financing 4.949% Bonds 2029
- 309 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Exempt Shares 1 (Gross Accumulation) Price (p) Price (p) per share (p)*
2006 166.68 156.00 7.9148
2007 163.45 152.76 8.3688
2008 160.91 138.08 8.8812
2009 173.41 139.03 8.9788
2010 195.31 168.15 9.1059
Highest Lowest Net Revenue Exempt Shares 2 (Gross Accumulation) Price (p) Price (p) per share(p)*
2006 112.67 105.40 5.2389
2007 110.36 103.11 5.5418
2008 108.53 93.35 5.8878
2009 117.13 93.98 5.9612
2010 131.79 113.53 6.0237
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 (from 24 October) 102.47 99.93 0.6943
2007 101.43 94.36 3.9137
2008 98.72 83.74 4.1034
2009 103.75 83.92 4.0911
2010 115.60 100.13 4.0581
Highest Lowest Net Revenue X Shares (Gross Accumulation) Price (p) Price (p) per share (p)*
2007 (from 2 April) 159.70 152.85 6.5750
2008 161.05 138.44 9.2015
2009 174.18 139.46 9.3258
2010 196.52 169.02 9.5240
*Distributions are shown in the year declared rather than paid.
- 310 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Statistics (continued)
Net Asset Value History by Share Class
Exempt Shares 1 (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 53,505,116 150.14 35,637,998
30/06/09 60,118,040 152.11 39,522,843
30/06/10 71,446,135 181.07 39,457,003
31/12/10 70,313,580 184.48 38,115,221
Exempt Shares 2 (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 4,541,423 101.21 4,486,996
30/06/09 667,712 102.77 649,727
30/06/10 1,193,287 122.21 976,387
31/12/10 1,270,325 124.45 1,020,761
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 22,053 91.51 24,100
30/06/09 608,677 91.34 666,400
30/06/10 19,764,630 107.41 18,401,561
31/12/10 29,448 108.46 27,151
X Shares (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 57,757,098 150.41 38,398,961
30/06/09 74,517,985 152.70 48,800,622
30/06/10 72,055,207 182.14 39,560,855
31/12/10 129,141,710 185.75 69,524,805
- 311 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class %%
Exempt Shares 1 (Gross Accumulation) 0.26 0.26
Exempt Shares 2 (Gross Accumulation) 0.36 0.36
Institutional Shares (Accumulation) 0.56 0.55
X Shares (Gross Accumulation) 0.06 0.06
- 312 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Sterling Denominated Corporate Bonds 96.69% (95.66%) 3i 5.75% Notes 2032 £2,365,000 2,031,118 1.01 Aegon 6.625% Bonds 2039 £1,900,000 1,841,203 0.92 Alliance & Leicester 5.25% MTN 2023 £1,600,000 1,466,576 0.73 Allied Irish Banks 12.50% Bonds 2019 £1,600,000 430,560 0.21 Allstate Life Funding 6.375% EMTN 2011 £2,828,000 2,831,903 1.41 AMP 6.875% Bonds 2022 £1,239,000 1,177,546 0.59 Anglian Water 5.837% Bonds 2022 'A1' £1,870,000 1,978,329 0.99 Annington Repackaging 5.3236% Notes 2023 £2,000,000 1,979,135 0.99 Arsenal Securities 5.1418% Bonds 2029 £2,542,000 1,991,634 0.99 Artesian Finance 6.00% Bonds 2033 £1,000,000 1,061,570 0.53 Aspire Defence Finance 'B' 4.674% Bonds 2040 £2,320,000 2,033,270 1.01 Bank of Ireland 9.25% FRN 2020 £1,100,000 550,000 0.27 Bank Nederlandse Gemeenten 5.20% Bonds 2028 £2,100,000 2,266,395 1.13 Barclays Bank 6.00% Bonds 2049 £750,000 601,863 0.30 BAT International Finance 5.75% Bonds 2040 £2,156,000 2,211,479 1.10 BG Energy Capital 5.125% Bonds 2025 £1,447,000 1,443,172 0.72 Birmingham Airport Finance 6.25% Bonds 2021 £1,147,000 1,155,683 0.58 BNP Paribas 5.945% 2049 £1,500,000 1,294,637 0.64 BUPA Finance 6.125% 2049 £1,816,000 1,545,986 0.77 Canary Wharf Finance 5.952% 2035 £2,095,000 2,247,935 1.12 Centrica 7.00% Bonds 2033 £1,700,000 2,054,468 1.02 Coventry Building Society 5.875% Bonds 2022 £2,090,000 1,992,525 0.99 Credit Suisse 7.00% Bonds 2020 £1,500,000 1,637,301 0.82 Delamare Finance 6.067% Bonds 2029 £1,510,000 1,505,470 0.75 DNB Nor Bank 4.875% FRN 2049 £2,581,000 2,561,643 1.28 Dwr Cymru Financing 4.473% EMTN 2057 £3,050,000 2,659,295 1.32 Electricite de France 6.125% Bonds 2034 £1,850,000 2,036,876 1.01 ENW Finance 6.125% Bonds 2021 £1,260,000 1,377,189 0.69 E.ON International Finance 6.375% EMTN 2032 £1,873,000 2,150,728 1.07 European Investment Bank 5.625% Bonds 2032 £3,500,000 4,040,384 2.01 European Investment Bank 0.00% Bonds 2028 £4,106,000 1,821,463 0.91 European Bank for Rec & Dev 5.625% EMTN 2028 £3,000,000 3,449,625 1.72 European Investment Bank 4.50% Bonds 2044 £6,040,000 6,149,122 3.07 Exchequer Partnership 5.396% 2036 £2,300,000 2,225,638 1.11 F&C Commercial Property 5.23% FRN 2017 £1,676,000 1,701,090 0.85 Firstgroup 8.75% Bonds 2021 £1,600,000 1,966,075 0.98 France Telecom 7.25% MTN 2020 £2,050,000 2,437,533 1.21 France Telecom 7.50% (9.00%) Bonds 2011 £1,600,000 1,619,440 0.81 Freshwater Finance 5.182% Bonds 2035 £1,643,000 1,547,874 0.77 GDF Suez 6.125% Bonds 2021 £2,100,000 2,335,378 1.16 General Electric Capital 6.44% Bonds 2022 £3,755,000 1,995,154 0.99 GlaxoSmithKline Capital 6.375% Bonds 2039 £1,890,000 2,209,878 1.10 Glencore Finance Europe 6.50% EMTN 2019 £1,700,000 1,734,533 0.86 Granite Master Issuer 5.60% FRN 2054 £700,000 359,380 0.18 Harbour Funding 5.28% Bonds 2044 £1,537,000 1,550,835 0.77 HBOS Treasury Services 4.875% EMTN 2024 £1,150,000 1,082,495 0.54 Housing Finance 5.125% Bonds 2037 £1,650,000 1,609,844 0.80 HSBC Bank 5.844% Perp 2049 £1,725,000 1,480,930 0.74 HSBC Bank 5.375% Bonds 2030 £2,000,000 1,831,620 0.91 HSBC Holdings 6.75% Unsub Notes 2028 £1,250,000 1,306,073 0.65 HSBC Holdings 6.50% Bonds 2024 £700,000 765,539 0.38 Imperial Tobacco Finance 8.125% Notes 2024 £1,665,000 2,050,519 1.02 International Bank Rec & Dev 4.875% Bonds 2028 £2,900,000 3,133,652 1.56 Johnson & Johnson 5.50% Bonds 2024 £2,250,000 2,447,031 1.22 - 313 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Sterling Denominated Corporate Bonds (continued) Juneau Investments 5.90% EMTN 2021 £1,501,000 1,251,084 0.62 Juturna 5.0636% Bonds 2033 £3,074,000 3,008,600 1.50 Koninklijke 5.75% Bonds 2029 £2,600,000 2,670,854 1.33 Kreditanstalt Fur Wiederaufbau 5.00% Bonds 2036 £5,615,000 6,116,039 3.05 LCR Finance 4.50% Bonds 2028 £4,082,000 4,159,718 2.07 Lloyds TSB Bank 5.75% Bonds 2025 £1,500,000 1,299,233 0.65 Lloyds TSB Bank 6.50% Bonds 2040 £2,125,000 1,965,009 0.98 London & Quadrant Housing 5.50% Bonds 2040 £1,600,000 1,663,476 0.83 Motability Operations 5.375% Bonds 2022 £2,300,000 2,342,849 1.17 National Australia Bank 5.125% Bonds 2021 £1,400,000 1,407,377 0.70 National Grid Electricity 5.875% Bonds 2024 £1,941,000 2,090,834 1.04 National Westminster Bank 6.50% Bonds 2021 £1,610,000 1,471,057 0.73 Network Rail Infra Finance 4.75% Bonds 2035 £2,950,000 3,064,785 1.53 New South Wales Treasury 5.00% Bonds 2039 £1,350,000 1,421,923 0.71 North British Housing 5.09% Bonds 2043 £1,773,000 1,783,620 0.89 Northern Gas Networks 4.875% Bonds 2027 £2,143,000 2,025,911 1.01 Pfizer 6.50% Bonds 2038 £1,750,000 2,078,418 1.04 Prudential 5.875% Notes 2029 £2,000,000 1,951,717 0.97 Punch Taverns Finance 5.943% 2024 £2,465,000 1,833,278 0.91 Royal Bank of Scotland 6.875% Bonds 2025 £1,972,000 1,908,698 0.95 RWE Finance 5.50% Bonds 2022 £1,600,000 1,659,405 0.83 Sceptre Funding 5.253% Bonds 2027 £2,100,000 2,187,679 1.09 Scottish & Southern Energy 6.25% 2038 £2,000,000 2,239,490 1.12 Severn Trent Water Utilities 6.00% Bonds 2018 £1,950,000 2,149,098 1.07 SNCB Holdings 5.70% EMTN 2032 £2,450,000 2,588,683 1.29 Southern Gas Network 4.875% EMTN 2029 £2,550,000 2,390,367 1.19 Southern Electric Power 4.625% Bonds 2037 £2,000,000 1,790,205 0.89 Standard Chartered Bank 7.75% Var EMTN 2049 £2,000,000 2,077,807 1.03 Standard Chartered Bank 5.375% 2049 £1,794,000 1,613,178 0.80 Sunderland (SHG) Finance 6.38% Bonds 2042 £2,194,000 2,528,977 1.26 Telefonica Emisiones 5.289% Bonds 2022 £1,950,000 1,855,129 0.92 Temasek Financial 5.125% Bonds 2040 £4,900,000 5,050,101 2.52 Tesco Property Finance 5.744% Bonds 2040 £2,415,000 2,493,442 1.24 Tesco Property Finance 6.0517% Bonds 2039 £1,500,000 1,597,091 0.80 Unique Pub Finance 5.659% Bonds 2027 £2,130,000 1,646,668 0.82 United Utilities Water 5.75% Bonds 2022 £2,220,000 2,338,332 1.16 Vodafone 5.375% Bonds 2017 £2,000,000 2,140,756 1.07 Wal-Mart Stores 4.875% Bonds 2039 £3,000,000 2,904,189 1.45 Wellcome Trust Finance 4.75% Bonds 2021 £1,378,000 1,439,318 0.72 Yorkshire Power Finance 7.25% Bonds 2028 £1,700,000 2,014,490 1.00 Yorkshire Building Society 2.25% Bonds 2011 £921,000 922,372 0.46
Portfolio of investments 194,107,851 96.69
Net current assets 6,647,212 3.31
Total Net Assets 200,755,063 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers. - 314 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Portfolio Statement by Credit Rating as at 31 December 2010
Total Net Total Net Market Value Assets at Assets at at 31/12/10 31/12/10 30/06/10 Standard & Poor’s Ratings: (£’000’s) (%) (%)
AAA 48,090 23.98 29.75 AA 29,562 14.73 12.08 A 56,870 28.32 25.30 BBB 37,222 18.52 17.46 BB - - 0.42 CCC 431 0.21 - D 550 0.27 - Not rated (by S&P) 21,383 10.66 10.65
Portfolio of investments 194,108 96.69 95.66
Net current assets 6,647 3.31 4.34
Total Net Assets 200,755 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows: Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In default D
- 315 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital (losses)/gains (737,917) 10,737,744
Revenue 4,249,628 4,051,145
Expenses (148,105) (121,993)
Finance costs: Interest (36) (3)
Net revenue before taxation 4,101,487 3,929,149
Taxation - -
Net revenue after taxation 4,101,487 3,929,149
Total return before distributions 3,363,570 14,666,893
Finance costs: Distributions (4,101,528) (3,929,153) Change in net assets attributable to Shareholders from investment activities (737,958) 10,737,740
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010 31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 164,459,259 135,912,414
Amounts receivable on issue of shares 82,115,831 20,663,497 Amounts payable on cancellation of shares (50,934,270) (33,182,086) 31,181,561 (12,518,589)
Dilution adjustment 663,811 142,135
Change in net assets attributable to Shareholders from investment activities (see above) (737,958) 10,737,740
Retained distributions on accumulation shares 5,188,390 3,624,085
Closing net assets attributable to Shareholders 200,755,063 137,897,785
- 316 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 194,107,851 157,325,845
Debtors 4,626,623 3,245,040
Cash and bank balances 2,086,381 6,461,434
Total other assets 6,713,004 9,706,474
Total assets 200,820,855 167,032,319
LIABILITIES
Creditors (65,792) (2,573,060)
Total liabilities (65,792) (2,573,060)
Net assets attributable to Shareholders 200,755,063 164,459,259
- 317 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Corporate Bond Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 1 (Gross Accumulation) (in pence per share) Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 4.6485 0.0000 4.6485 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.4254 3.2231 4.6485 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 4.3242 pence per share.
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share) Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 3.0730 0.0000 3.0730 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.3552 1.7178 3.0730 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.8642 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share) Gross Tax Withheld Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 2.5756 0.5151 2.0605 0.0000 2.0605 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.8468 0.3694 1.4774 0.5831 2.0605 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 1.9504 pence per share.
Interim Distribution for X Shares (Gross Accumulation) (in pence per share) Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 4.8683 0.0000 4.8683 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.8003 4.0680 4.8683 Group 2:Shares purchased 1 July 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 4.5114 pence per share.
- 318 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
BNY MELLON INVESTMENT FUNDS - NEWTON LONG GILT FUND
Interim Report for the six months ended 31 December 2010
- 319 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Howard Cunningham Carl Shepherd
Fund Size £94.06m
Distribution Yield as at 31/12/10:
Exempt Shares 2 (Gross Accumulation) 3.63% Institutional Shares (Accumulation) 3.34% X Shares (Gross Accumulation) 3.82%
Key Dates: Fund Launch 1 March 1979 Converted to ICVC 2 August 2004
Aim
To maximise returns through investment in securities issued or guaranteed by the UK Government or the Governments of foreign countries or corporate bodies. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 2 (Gross Accumulation) 8.91% -4.03% 12.81% 2.28% 0.19% Institutional Shares (Accumulation) 7.77% -5.03% 11.58% 1.14% -0.80% X Shares (Gross Accumulation)* 9.13% -3.83% 13.04% N/A N/A
FTSE A British Govt Over 15 Years TR 8.78% -4.84% 13.65% 2.67% 0.03%
Source: Lipper as at 31 December 2010 – Institutional Shares (Accumulation) - Total return including revenue net of UK tax and annual charges, but excluding initial charge. Exempt Shares 2 (Gross Accumulation) and Sterling X Shares (Gross Accumulation) - Total return including gross revenue and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Please note that the basis of calculation has been amended from that used in the 2007 report to better reflect the tax position of each share class.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 320 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Institutional Sterling Acc Share Class of the Fund returned 1.84% against 2.09% for the FTSE Actuaries British Government over 15 years TR Index.
Over the period, the Fund delivered a positive return in absolute terms but marginally underperformed its index. Off- benchmark corporate bond holdings hurt relative performance as they underperformed government bonds, as a result of renewed concerns about exposure to peripheral Eurozone debt (corporate and sovereign) and over the implications of new bank resolutions for bondholders. Meanwhile, the Fund’s short duration (a measure of a Fund’s sensitivity to interest rate changes) positioning, relative to the index, helped performance during the second half of the period, in particular.
New additions to the Fund over the period included the 0.625% index-linked gilt, maturing in 2040, and the 4.25% Treasury 2040. On the corporate bond front, positions were added in the water company Dwr Cymru and the Singapore government’s investment vehicle Temasek Financial. Meanwhile, the manager reduced the Fund’s corporate bond exposure, taking profits after 18 months of very strong returns. Sales included Tesco, Danske, Scottish & Southern, Lloyds Banking Group and Aspire.
The table below shows the top ten purchases and sales for the period:
Purchases Sales
Treasury 4.75% Stock 2038 Treasury 4.75% Stock 2038 Treasury 4.75% Stock 2030 Treasury 6.00% Stock 2028 Treasury 6.00% Stock 2028 Treasury 4.50% Stock 2034 Treasury 4.25% Stock 2040 Treasury 4.75% Stock 2030 Treasury 4.25% Stock 2027 Treasury 4.50% Stock 2042 Treasury 4.50% Stock 2019 Treasury 4.25% Stock 2027 Treasury 4.25% Stock 2032 Treasury 4.25% Stock 2055 Treasury 4.50% Stock 2034 Treasury 4.25% Stock 2036 Treasury 4.25% Stock 2046 Treasury 4.00% Stock 2060 Treasury 4.25% Stock 2055 Treasury 4.25% Stock 2046
- 321 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Exempt Shares 2 (Gross Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 266.15 242.02 10.1831
2007 260.74 235.17 10.8744
2008 294.15 248.24 11.1836
2009 299.20 258.91 11.3964
2010 322.70 273.26 11.6324
Institutional Shares (Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 265.69 240.50 7.5627
2007 254.91 231.32 7.9769
2008 284.42 241.48 8.0894
2009 286.98 250.16 8.1223
2010 306.56 261.05 8.1821
X Shares (Gross Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2007 (from 2 April) 261.13 234.81 8.5621
2008 295.17 248.82 11.7336
2009 300.71 259.85 12.0116
2010 324.92 274.84 12.3038
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Exempt Shares 2 (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 90,952,738 250.50 36,308,887
30/06/09 89,593,808 277.80 32,251,675
30/06/10 81,282,930 300.52 27,047,617
31/12/10 74,979,675 307.21 24,406,961
- 322 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 4,049,277 243.55 1,662,583
30/06/09 3,576,868 267.19 1,338,674
30/06/10 15,319,516 286.03 5,355,981
31/12/10 3,016,378 290.87 1,037,028
X Shares (Gross Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 21,371,949 251.11 8,510,846
30/06/09 14,486,445 279.04 5,191,558
30/06/10 6,460,101 302.48 2,135,741
31/12/10 16,066,744 309.52 5,190,782
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Exempt Shares 2 (Gross Accumulation) 0.26 0.26
Institutional Shares (Accumulation) 0.55 0.56
X Shares (Gross Accumulation) 0.06 0.06
- 323 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 94.93% (95.39%) Treasury 4.25% Stock 2036 £8,950,000 9,005,298 9.57 Treasury 4.50% Stock 2019 £2,300,000 2,511,481 2.67 Treasury 4.50% Stock 2034 £8,880,000 9,260,459 9.84 Treasury 4.00% Stock 2060 £6,030,000 5,889,515 6.26 Treasury 4.25% Stock 2040 £3,530,000 3,546,309 3.77 Treasury 0.625% Stock 2040 £1,350,000 1,402,390 1.49 Treasury 6.00% Stock 2028 £3,550,000 4,439,386 4.72 Treasury 4.25% Stock 2032 £7,000,000 7,084,405 7.53 Treasury 4.75% Stock 2038 £5,610,000 6,133,643 6.52 Treasury 4.25% Stock 2055 £7,560,000 7,785,127 8.28 Treasury 4.25% Stock 2046 £8,740,000 8,882,757 9.44 Treasury 4.25% Stock 2027 £8,415,000 8,638,557 9.18 Treasury 4.50% Stock 2042 £6,630,000 6,996,518 7.44 Treasury 4.75% Stock 2030 £7,138,327 7,730,746 8.22
Sterling Denominated Corporate Bonds 1.98% (3.25%) Dwr Cymru Financing 4.473% EMTN 2057 £500,000 435,950 0.46 Lloyds TSB Bank 5.75% Bonds 2025 £604,000 523,158 0.56 Temasek Financial 5.125% Bonds 2040 £874,000 900,773 0.96
Derivatives -0.02% (0.00%)
USD Forward Foreign Currency Contracts -0.02% (0.00%) Forward Currency Contracts 10/02/2011 USD(1,420,000) (914,757) (0.97) Forward Currency Contracts 10/02/2011 £880,365 880,365 0.94 Forward Currency Contracts 10/02/2011 USD1,420,000 914,757 0.97 Forward Currency Contracts 10/02/2011 £(905,751) (905,751) (0.96)
Portfolio of investments 91,141,086 96.89
Net current assets 2,921,711 3.11
Total Net Assets 94,062,797 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent debt securities issued by the relevant companies or issuers.
- 324 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Portfolio Statement by Credit Rating as at 31 December 2010 Total Net Total Net Market Value Assets at Assets at at 31/12/10 31/12/10 30/06/10 Standard & Poor’s Ratings: (£’000’s) (%) (%)
AAA 77,400 82.28 83.05 AA - - - A 436 0.46 0.44 BBB 523 0.56 2.00 Not rated (by S&P) 12,807 13.61 13.15 Derivatives (25) (0.02) -
Portfolio of investments 91,141 96.89 98.64
Net current assets 2,922 3.11 1.36
Total Net Assets 94,063 100.00 100.00
Standard & Poor’s (S&P) are one of the best-known and most influential credit rating agencies. Their role is to assess the risk of certain bonds through the study of all information provided to the public and to assign to the issue and issuing company grades that accurately reflect the company’s ability to meet the promised principal and interest payments.
While S&P warns investors that a credit rating is not a recommendation to purchase, sell or hold a particular security, their initial ratings and revised downgrades and upgrades greatly affect the attractiveness of the issuance in the eyes of both issuers and holders. Bonds with higher ratings offer lower yields and easier money for the issuer. A lower rating usually results in a lower price on the bond – a less expensive purchase for the investor, but a riskier investment.
S&P’s ratings range is as follows:
Highest quality AAA High quality AA Upper medium quality A Medium grade BBB Somewhat speculative BB Low grade, speculative B Low grade, default possible CCC Low grade, partial recovery possible CC Default, recovery unlikely C In default D
- 325 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 265,550 298,552
Revenue 1,792,177 2,135,554
Expenses (116,985) (127,577)
Finance costs: Interest (412) (926) Net revenue before taxation 1,674,780 2,007,051
Taxation - - Net revenue after taxation 1,674,780 2,007,051
Total return before distributions 1,940,330 2,305,603
Finance costs: Distributions (1,674,779) (2,007,073) Change in net assets attributable to Shareholders from investment activities 265,551 298,530
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 103,062,547 107,657,121
Amounts receivable on issue of shares 21,301,078 4,428,529 Amounts payable on cancellation of shares (32,312,975) (29,325,841) (11,011,897) (24,897,312)
Dilution adjustment 30,372 (6,917)
Change in net assets attributable to Shareholders from investment activities (see above) 265,551 298,530
Retained distributions on accumulation shares 1,716,224 1,851,793
Closing net assets attributable to Shareholders 94,062,797 84,903,215
- 326 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 91,175,478 101,660,722
Debtors 639,475 1,290,459
Cash and bank balances 2,325,760 194,844 Total other assets 2,965,235 1,485,303 Total assets 94,140,713 103,146,025
LIABILITIES Investment liabilities (34,392) -
Creditors (43,524) (83,478)
Total other liabilities (43,524) (83,478)
Total liabilities (77,916) (83,478)
Net assets attributable to Shareholders 94,062,797 103,062,547
* Gross of investment liabilities
- 327 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 2.9019 0.0000 2.9019 Group 1:Shares purchased prior to 1 October 2010 Group 2 0.9501 1.9518 2.9019 Group 2:Shares purchased 1 October 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.9322 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 2.5319 0.5064 2.0255 0.0000 2.0255 Group 1:Shares purchased prior to 1 October 2010 Group 2 2.5319 0.5064 2.0255 0.0000 2.0255 Group 2:Shares purchased 1 October 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 2.0801 pence per share.
Interim Distribution for X Shares (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 3.0785 0.0000 3.0785 Group 1:Shares purchased prior to 1 October 2010 Group 2 0.7968 2.2817 3.0785 Group 2:Shares purchased 1 October 2010 to 31 December 2010
The interim distribution for the period ended 31 December 2009 was 3.0945 pence per share.
- 328 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Long Gilt Fund
Distribution Statement (continued)
Interim Distribution for Exempt Shares 2 (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 2.9764 0.0000 2.9764 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.8581 2.1183 2.9764 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 2.8449 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Interest Distribution Revenue @ 20% Revenue Equalisation Accumulated
Group 1 2.6090 0.5218 2.0872 0.0000 2.0872 Group 1:Shares purchased prior to 1 July 2010 Group 2 0.5585 0.1117 0.4468 1.6404 2.0872 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 2.0217 pence per share.
Interim Distributions for X Shares (Gross Accumulation) (in pence per share)
Gross Amount Interest Distribution Revenue Equalisation Accumulated
Group 1 3.1521 0.0000 3.1521 Group 1:Shares purchased prior to 1 July 2010 Group 2 1.7729 1.3792 3.1521 Group 2:Shares purchased 1 July 2010 to 30 September 2010
The interim distribution for the period ended 30 September 2009 was 3.0018 pence per share.
- 329 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
BNY MELLON INVESTMENT FUNDS - NEWTON MANAGED FUND
Interim Report for the six months ended 31 December 2010
- 330 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Nick Clay Rob Stewart
Fund Size £1,490.41m
Benchmark FTSE World Index
Yield as at 31/12/10:
Sterling Income Shares 1.56% Institutional Shares (Accumulation) 2.02%
Key Dates: Fund Launch 02 April 1990
Aim
To achieve capital growth and income from a portfolio of UK, EC and international securities. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 13.39% 17.09% -26.47% 16.24% 11.54% Institutional Shares (Accumulation)* 14.04% 17.70% -26.07% 16.90% N/A
IMA Active Managed 14.59% 23.81% -26.05% 6.16% 9.79% WM Private Client Indicator Growth TR Net 13.99% 22.01% -22.05% 6.94% 12.09% FTSE World TR GBP 16.28% 19.64% -18.18% 9.45% 6.54%
Source: Lipper as at 31 December 2010 - Total return including income net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 331 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 18.55% against 16.79% for the IMA Active Managed Sector.
The Fund generated an attractive positive return, outperforming the peer group sector average. Within the equity allocation, the holdings in mining companies BHP Billiton, Anglo American and Xstrata, the beneficiaries of rising commodity prices, contributed to performance. A notable performance contributor was also Carphone Warehouse Group, with the mobile phone retailer producing strong figures. The holdings exposed to fertiliser production and crop protection – such as K+S and Mosaic – also boosted performance. Strong crop prices are resulting in farmers having more to spend on fertilisers to increase the yield of their acreage. Latterly, the Fund’s low weighting in the industrial sector – implemented because of the highly cyclical nature of some holdings – cost some performance as the sector performed strongly. Also later in the review period, bond markets performed less well at which point the Fund was only exposed to corporate bonds.
Among the new holdings was a position in Toyota Motor, which the manager established as its valuation appeared to be attractive compared to its historic levels and to those of its peers. Toyota’s valuation is largely the consequence of the recall of its cars because of brake and fuel pump defects. The car maker is also benefiting from a weakening yen. In the financials sector, the manager purchased the advisory and asset management company Lazard, judging it to be a clear beneficiary of merger and acquisition and restructuring activity, particularly in the banking sector. Other new holdings included a position in Turkey’s leading mobile operator, Turkcell Iletisim Hizmetleri, as the manager has identified further signs of market stabilisation, which bode well for profitability. The manager established a holding in Camelot Information Systems, which is a leading provider of business solutions and IT services to business corporations and financial institutions in mainland China, Taiwan and Hong Kong. In the manager’s view, Camelot is well positioned to benefit from the growth in this nascent market in China. Among the disposals, the manager sold the holding in Yum! Brands, the owner of the KFC restaurant chain and Pizza Hut. Although the stock has significant exposure to the fast growing Chinese market, the manager took the view that food-price inflation in China was likely to have a negative effect on the company’s margin and operating profits, prompting the decision to take profits.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Lloyds Banking Genzyme Serco BP ETFS Physical Gold 0.00% Secured Note GBP National Grid Siemens Bank of America Toyota Motor Vodafone Carnival Parkway Medco Health Solutions Belle International Ericsson Smiths Apple Yum Brands Cable & Wireless ArcelorMittal
- 332 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Statistics
Price and Revenue Record by Share Class Calendar Year Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 472.88 410.55 3.2412
2007 543.90 457.51 4.3501
2008 544.98 334.39 6.9691
2009 455.45 341.32 8.0467
2010 504.99 416.22 6.9122
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 (from 12 June) 477.85 410.56 2.4312
2007 557.29 463.67 7.3238
2008 559.62 347.78 9.8092
2009 487.28 358.32 10.6716
2010 553.32 454.77 10.3184
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 1,326,789,240 486.74 272,584,437
30/06/09 1,111,161,239 375.04 296,281,793
30/06/10 1,221,608,944 423.63 288,368,045
31/12/10 1,409,284,538 500.64 281,499,359
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 59,529,558 506.89 11,744,002
30/06/09 63,566,155 400.10 15,887,682
30/06/10 70,748,082 462.84 15,285,727
31/12/10 81,127,991 550.20 14,745,244
- 333 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.62 1.62
Institutional Shares (Accumulation) 1.05 1.05
- 334 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Sterling Denominated Corporate Bonds 2.09% (2.34%) BUPA Finance 7.50% Bonds 2016 £3,300,000 3,649,930 0.24 Firstgroup 8.75% Bonds 2021 £2,095,000 2,574,330 0.17 HSBC Bank Cap Fund 5.844% Bonds 2049 £7,941,000 6,817,431 0.46 John Lewis 8.375% Bonds 2019 £3,690,000 4,411,432 0.30 QBE Insurance 6.125% Bonds 2015 £3,183,000 3,359,166 0.23 Thomas Cook 7.75% Bonds 2017 £4,285,000 4,252,863 0.29 TUI Travel 6.00% Conv Bonds 2014 £3,400,000 3,473,780 0.23 Virgin Media Finance 8.875% Bonds 2019 £2,250,000 2,553,975 0.17
Non-Sterling Denominated Corporate Bonds 2.63% (2.85%) Abengoa 8.50% Bonds 2016 EUR5,700,000 4,656,355 0.31 Campofrio Food 8.25% Bonds 2016 EUR5,600,000 4,947,220 0.33 Cemex Finance 9.50% Bonds 2016 USD2,400,000 1,598,640 0.11 Cemex Finance 9.625% Bonds 2017 EUR3,010,000 2,556,657 0.17 ERC Ireland Finance FRN 2016 EUR4,000,000 1,551,738 0.10 HeidelbergCement 8.50% Bonds 2019 EUR4,000,000 3,788,019 0.25 HeidelbergCement 7.50% Bonds 2020 EUR2,550,000 2,271,939 0.15 LBI Escrow 8.00% Bonds 2017 EUR3,809,000 3,198,385 0.21 Nextel Communications 6.875% Bonds 2013 USD5,500,000 3,543,190 0.24 Royal Bank of Scotland 4.625% FRN 2021 EUR649,000 455,881 0.03 Santos Finance 8.25% Bonds 2070 EUR8,300,000 7,027,444 0.47 Wind Acquisition Finance 11.75% Bonds 2017 EUR4,000,000 3,827,115 0.26
United Kingdom 43.17% (41.67%)
Oil & Gas Producers 6.06% (6.79%) BG 2,534,942 32,941,571 2.21 BP 3,864,222 18,115,473 1.22 Cairn Energy 2,827,982 11,900,148 0.80 Royal Dutch Shell B 1,284,062 27,311,999 1.83
Mining 6.20% (3.54%) Anglo American 813,772 27,204,398 1.83 BHP Billiton 1,436,846 36,855,100 2.47 Eurasian Natural Resources 771,000 8,149,470 0.55 Xstrata 1,324,251 20,095,509 1.35
Aerospace & Defence 0.39% (0.86%) Cobham 2,845,000 5,806,645 0.39
Support Services 3.22% (2.15%) Bunzl 1,507,706 10,878,099 0.73 Capita 852,905 5,983,129 0.40 Experian 1,376,355 10,942,022 0.73 Hays 3,285,957 4,271,744 0.29 Serco 2,835,313 16,019,518 1.07
Food Producers & Processors 0.88% (0.45%) Associated British Foods 1,108,030 13,107,995 0.88
Tobacco 2.20% (1.96%) British American Tobacco 1,325,929 32,796,854 2.20
Health Care Equipment & Services 0.81% (1.11%) Smith & Nephew 1,750,680 11,983,405 0.81 - 335 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Pharmaceuticals & Biotechnology 3.22% (4.13%) GlaxoSmithKline 3,052,507 38,141,075 2.56 Hikma Pharmaceuticals 1,212,886 9,812,248 0.66
Food & Drug Retailers 1.07% (1.52%) Tesco 3,700,158 15,899,579 1.07
General Retailers 0.75% (0.64%) Carphone Warehouse 2,840,429 11,219,695 0.75
Media 2.93% (2.93%) British Sky Broadcasting 1,695,978 12,482,398 0.84 ITV 14,101,869 9,984,123 0.67 Informa 3,001,481 12,231,035 0.82 Reed Elsevier 1,653,592 8,921,129 0.60
Travel & Leisure 2.10% (1.59%) TUI Travel 3,160,661 7,778,387 0.52 Carnival 405,552 12,073,283 0.81 Whitbread 640,832 11,547,793 0.77
Fixed Line Telecommunications 1.53% (1.69%) Cable & Wireless Communications 30,191,001 14,642,635 0.98 Cable & Wireless Worldwide 12,334,053 8,239,147 0.55
Mobile Telecommunications 2.04% (2.56%) Vodafone 18,327,553 30,478,721 2.04
Electricity 0.62% (0.65%) Scottish & Southern Energy 746,822 9,200,847 0.62
Gas, Water & Multiutilities 1.05% (2.11%) Centrica 4,710,354 15,657,217 1.05
Banks 5.19% (3.95%) HSBC 3,911,029 25,660,261 1.72 Lloyds Banking 30,569,244 20,267,409 1.36 Standard Chartered 1,798,837 31,434,677 2.11
Non Life Insurance 0.63% (0.69%) RSA Insurance 7,521,499 9,462,046 0.63
Life Insurance 0.52% (0.00%) Prudential 1,154,691 7,713,336 0.52
Real Estate 0.49% (0.48%) Workspace 31,378,551 7,279,824 0.49
General Financial 1.12% (0.95%) ICAP 1,451,723 7,730,425 0.52 Man 3,023,127 8,948,456 0.60
Technology Hardware & Equipment 0.15% (0.00%) Imagination Technologies 589,805 2,197,393 0.15
- 336 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Investment Trusts 0.46% (0.59%) Impax Environmental Markets 5,290,035 6,824,145 0.46 Thompson Clive Investments 3,491 698 0.00
Collective Investment Schemes 2.29% (2.09%) BNY MFM Newton UK Smaller Companies Class 'X' Acc 2,257,955 29,625,720 1.99 Impax Funds Environmental Markets 'A' 2,323,222 4,537,253 0.30
Commodities 1.94% (1.05%) ETFS Physical Gold 0.00% Secured Note (GBP) 322,801 28,929,426 1.94
Overseas Equities 47.08% (48.39%)
United States of America 12.43% (15.28%) Accenture 155,095 4,836,543 0.32 Apple 39,068 8,143,213 0.55 Barrick Gold 205,100 6,948,065 0.47 Cisco Systems 1,055,653 13,754,016 0.92 Consol Energy 246,571 7,749,510 0.52 eBay 534,393 9,681,506 0.65 Halliburton 437,997 11,568,401 0.78 Interpublic 1,659,044 11,358,046 0.76 L3 Communications 97,136 4,422,325 0.30 Lazard 255,270 6,484,091 0.44 Medco Health Solutions 272,396 10,833,035 0.73 Millicom International Cellular 118,994 7,294,293 0.49 Monsanto 116,347 5,222,015 0.35 Mosaic 145,336 7,097,848 0.48 Principal Financial 548,210 11,488,860 0.77 Sprint Nextel 7,878,776 21,108,848 1.42 Transocean 307,950 13,710,687 0.92 Union Pacific 83,087 4,926,251 0.33 Wal-Mart Stores 247,956 8,631,430 0.58 Wisconsin Energy 256,299 9,743,885 0.65
Australia 2.16% (2.35%) AMP 1,917,110 6,638,649 0.45 Newcrest Mining 341,487 9,039,873 0.61 QBE Insurance 632,307 7,512,450 0.50 Santos 652,459 5,607,831 0.38 Woodside Petroleum 120,192 3,348,530 0.22
Brazil 2.96% (2.94%) Hypermarcas 953,290 8,331,354 0.56 Natura Cosmeticos 464,841 8,568,804 0.57 Petroleo Brasileiro ADR 581,084 12,619,407 0.85 Rossi Residencial 1,233,732 7,042,967 0.47 Tele Norte Leste Participacoes ADR 808,866 7,652,632 0.51
Canada 1.63% (1.14%) Potash Corp of Saskatchewan 56,655 5,590,934 0.38 Suncor Energy 382,326 9,402,743 0.63 Yamana Gold 1,129,193 9,254,516 0.62
- 337 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
China 2.57% (1.78%) Camelot Information Systems ADR 343,780 5,287,220 0.35 China Growth Opportunities 4,998,093 374,857 0.03 China Growth Opportunities Warrants 2011 982,744 983 0.00 China Yurun Food 2,285,826 4,820,333 0.32 GOME Electrical Appliances 46,069,000 10,688,406 0.72 Mindray Medical International ADR 363,800 6,267,566 0.42 Renhe Commercial 43,328,000 4,846,727 0.33 Yingde Gases 10,438,000 6,011,021 0.40
Denmark 0.54% (0.00%) Pandora 209,019 8,110,897 0.54
Hong Kong 2.05% (1.13%) AIA 3,030,800 5,487,251 0.37 Belle International 4,323,000 4,713,975 0.32 Huabao International 7,905,000 8,226,927 0.55 Sands China 8,457,600 12,053,737 0.81
India 0.55% (0.25%) Rei Agro 21,113,850 8,258,356 0.55
Japan 3.27% (3.10%) INPEX 2,245 8,452,305 0.57 Mitsubishi 446,000 7,761,950 0.52 Mitsubishi UFJ Financial 1,837,000 6,385,310 0.43 Nomura 1,821,000 7,425,496 0.50 Toshiba 2,328,000 8,147,297 0.55 Toyota Motor 411,900 10,501,611 0.70
South Korea 0.92% (2.37%) Samsung Electronics GDR 51,031 13,767,557 0.92
Singapore 1.79% (2.43%) DBS 1,725,000 12,406,662 0.83 Noble 6,441,000 7,019,980 0.47 Straits Asia Resources 5,821,000 7,279,806 0.49
Taiwan 1.35% (1.02%) HTC 639,450 12,703,027 0.85 Taiwan Semiconductor Manufacturing ADS 929,315 7,409,622 0.50
Thailand 1.60% (1.74%) Advanced Info Service 2,617,300 4,753,019 0.32 Bangkok Bank 3,602,800 11,468,948 0.77 Siam Commercial Bank 3,457,000 7,607,356 0.51
South Africa 0.77% (0.36%) MTN 887,337 11,509,537 0.77
France 1.65% (2.28%) Air Liquide 93,833 7,684,577 0.52 L'Oreal 144,320 10,376,384 0.70 Thales 286,731 6,489,611 0.43
- 338 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Germany 2.86% (2.50%) Bayer 260,067 12,319,166 0.83 Deutsche Telekom 883,710 7,327,135 0.49 K+S 182,125 8,887,687 0.60 Siemens 174,099 13,956,459 0.94
Norway 0.41% (0.00%) Statoil 396,868 6,071,341 0.41
Spain 0.59% (1.25%) Amadeus IT 656,709 8,860,850 0.59
Poland 0.62% (0.55%) Telekomunikacja Polska 2,547,824 9,176,636 0.62
Sweden 0.59% (0.00%) Ericsson 1,175,450 8,821,976 0.59
Switzerland 5.38% (5.58%) Actelion 206,722 7,287,383 0.49 Bank Sarasin & Cie 197,970 5,765,735 0.39 Lonza Group 145,830 7,525,467 0.50 Novartis 486,937 18,422,791 1.23 Roche 184,717 17,423,780 1.17 Syngenta 51,513 9,696,842 0.65 Zurich Financial Services 85,342 14,231,540 0.95
Turkey 0.39% (0.00%) Turkcell Iletisim Hizmetleri ADR 518,061 5,778,848 0.39
Derivatives 0.06% (0.33%)
Futures & Options 0.06% (0.00%) FTSE 100 Index January 2011 5550 (Put Option) £2,735 341,875 0.02 FTSE 100 Index February 2011 5550 (Put Option) £1,391 660,725 0.04
Portfolio of investments 1,486,267,055 99.72
Net current assets 4,145,474 0.28
Total Net Assets 1,490,412,529 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Oil Equipment, Services & Distribution, General Industrials, Netherlands and Euro Forward Foreign Currency portfolio categories, which, at 30 June 2010, represented 0.37%, 0.55%, 0.34% and 0.33% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt
- 339 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Statement of Total Return For the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 232,437,082 232,487,005
Revenue 16,410,053 19,045,133
Expenses (11,200,146) (10,607,294)
Net revenue before taxation 5,209,907 8,437,839
Taxation (433,298) (505,740)
Net revenue after taxation 4,776,609 7,932,099
Total return before distributions 237,213,691 240,419,104
Finance costs: Distributions (4,776,557) (7,932,023)
Change in net assets attributable to Shareholders from investment activities 232,437,134 232,487,081
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 1,292,357,026 1,174,727,394
Amounts receivable on issue of shares 24,542,638 33,677,625 Amounts payable on cancellation of shares (59,275,359) (21,070,254) (34,732,721) 12,607,371
Stamp Duty Reserve Tax (108,118) (99,150)
Change in net assets attributable to 232,437,134 232,487,081 Shareholders from investment activities (see above)
Retained distributions on accumulation shares 457,294 614,605
Unclaimed distributions 1,914 1,443 Closing net assets attributable to Shareholders 1,490,412,529 1,420,338,744
- 340 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 1,486,267,055 1,283,418,834
Debtors 5,185,342 9,365,359
Cash and bank balances 6,281,962 19,571,185
Total other assets 11,467,304 28,936,544
Total assets 1,497,734,359 1,312,355,378
LIABILITIES
Creditors (3,093,428) (4,397,352)
Distribution payable on income shares (4,228,402) (15,601,000)
Total other liabilities (7,321,830) (19,998,352)
Net assets attributable to Shareholders 1,490,412,529 1,292,357,026
- 341 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Withheld Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.6690 0.1669 1.5021 0.0000 1.5021 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.3330 0.0333 0.2997 1.2024 1.5021 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 2.4424 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax Withheld Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 3.4459 0.3446 3.1013 0.0000 3.1013 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.7633 0.1763 1.5870 1.5143 3.1013 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 3.8921 pence per share.
- 342 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Managed Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 307,461,041 387,569,023 Commissions 451,286 374,688 Taxes 577,930 464,729 Total purchase costs 1,029,216 839,417
Gross purchases total 308,490,257 388,408,440
Analysis of total sales proceeds:
Sales before transaction costs 335,296,216 361,421,699 Commissions (458,170) (294,906) Taxes (82,907) (27,607) Total sales costs (541,077) (322,513)
Total sales net of transaction costs 334,755,139 361,099,186
- 343 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
BNY MELLON INVESTMENT FUNDS - NEWTON ORIENTAL FUND
Interim Report for the six months ended 31 December 2010
- 344 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Jason Pidcock
Fund Size £1,183.41m
Yield as at 31/12/10:
Sterling Income Shares 0.55% Euro Accumulation Shares 0.15% Exempt Shares 1 (Net Accumulation) 1.31% Institutional Shares (Accumulation) 0.96% X Shares (Net Accumulation) 1.68%
Key Dates: Fund Launch 30 November 1990† †Managed by Newton since November 1994
Aim
To achieve capital growth by investing in securities predominantly in Asian and Pacific markets including Australia and New Zealand but excluding Japan. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 30.93% 48.04% -29.27% 34.67% 18.54% Euro Accumulation Shares 29.64% 46.06% -29.08% 33.51% 18.52% Exempt Shares 1 (Net Accumulation) 32.33% 49.47% -28.69% 35.88% 19.57% Institutional Shares (Accumulation)* 31.65% 48.81% -28.96% N/A N/A X Shares (Net Accumulation)* 32.99% 50.15% -28.39% N/A N/A
FTSE AW Asia Pacific ex Japan TR GBP 23.88% 55.54% -33.05% 37.15% 17.15%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4% (7% in the case of some Exempt Classes), can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 345 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 26.34% against 21.95% for the FTSE AW Asia Pacific Ex Japan Index.
The Fund generated a strong return in absolute and relative terms. Stock selection in the technology sector was the greatest contributor to performance; HTC made the most significant contribution as its shipments of smartphones increased and the brand gained market share. Performance was also enhanced by the holding in the Chinese IT company, Camelot Information Systems, which provides high-end IT services to domestic companies. Exposure to the oil and gas sector also boosted the Fund’s returns; a notable contributor to performance was Australia’s Oil Search. Stock choices within the basic materials sector also helped, as commodity prices were strong. The diversified mining company, BHP Billiton, made a strong contribution. Other holdings that were beneficial in performance terms included the Australian stem cell company Mesoblast, the diversified commodities trading company Noble Group and Belle International, the retailer of ladies footwear.
The manager participated in a selection of initial public offerings, including those of Camelot Information Systems, the children’s clothing company Boshiwa International, Indofoods, Sihuan Pharmaceutical, Coal India, the insurance company AIA Group and the premium baby nutrients company Biostime International Holdings. The manager increased the Fund’s weighting in India with the introduction into the portfolio of a holding in Dabur India, a manufacturer of consumer products, and Fortis Healthcare. Other new additions included Macarthur Coal, the Indonesian coal company Adaro Energy, Woodside Petroleum and Overseas Chinese Banking Corp, a Singaporean bank. The manager also sold the VIP-orientated casino operator, Wynn Macau, as he prefers to focus on the mass- market segment. In addition, the general offer from Kazanah for healthcare firm Parkway Holdings was accepted.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Boshiwa International Parkway AIA CNOOC Samsung Electronics QBE Insurance Macarthur Coal Belle International Overseas Chinese Banking Philippine Long Distance Telecom Housing Development & Infrastructure Prudential Noble HTC Woodside Petroleum Hengan International GOME Electrical Appliances China Yurun Food Adaro Energy Wynn Macau
- 346 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Statistics
Price and Revenue Record by Share Class Calendar Year Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 325.97 272.27 2.8872
2007 451.12 314.40 3.3687
2008 446.23 218.83 2.9765
2009 446.56 270.54 5.1053
2010 577.02 408.27 3.1483
Highest Lowest Net Revenue Euro Accumulation Shares Price (cents) Price (cents) per share (cents)*
2006 174.62 142.77 0.8815
2007 234.82 166.94 0.9532
2008 212.27 98.37 0.4337
2009 183.14 110.03 1.6478
2010 247.46 171.79 0.4619
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 209.53 173.32 3.3135
2007 296.22 203.12 4.0194
2008 294.37 145.68 4.2006
2009 305.74 181.07 5.1979
2010 402.07 279.83 5.2950
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2007 (from 29 January) 142.04 98.01 0.8212
2008 140.83 69.58 1.5119
2009 145.28 86.36 2.0827
2010 190.07 132.90 1.8225
- 347 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued) Calendar Year
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 3 July) 296.56 213.65 N/A
2008 295.35 146.43 5.2797
2009 308.94 182.26 6.0665
2010 408.30 282.90 6.8667
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 354,231,534 379.34 93,380,470
30/06/09 342,074,307 345.36 99,048,599
30/06/10 430,924,470 455.03 94,703,225
31/12/10 575,473,072 574.75 100,125,368
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 23,727,134 174.62 17,141,987
30/06/09 19,734,194 149.29 15,510,424
30/06/10 22,483,897 205.43 13,386,723
31/12/10 39,843,775 245.51** 18,829,487
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 3,367,161 252.66 1,332,701
30/06/09 10,459,560 235.22 4,446,623
30/06/10 8,586,389 315.37 2,722,665
31/12/10 10,715,772 400.51 2,675,547
**Euro/Sterling exchange rate at midday 31 December 2010: 1.160248
- 348 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 151,430,315 120.82 125,337,598
30/06/09 248,995,245 112.05 222,227,741
30/06/10 351,678,062 149.48 235,268,466
31/12/10 550,135,681 189.33 290,569,845
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 5,031,245 253.62 1,983,748
30/06/09 5,019,920 237.08 2,117,419
30/06/10 5,693,493 319.46 1,782,214
31/12/10 7,241,473 406.71 1,780,488
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.65 1.65
Euro Accumulation Shares 2.15 2.15
Exempt 1 Shares (Net Accumulation) 0.58 0.58
Institutional Shares (Accumulation) 1.08 1.08
X Shares (Net Accumulation) 0.08 0.08
- 349 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 10.29% (10.86%) BHP Billiton 2,500,000 64,125,000 5.42 Standard Chartered 3,300,000 57,667,500 4.87
Australia 24.51% (20.63%) AMP 5,300,000 18,353,062 1.55 Energy World 35,000,000 12,830,189 1.08 Macarthur Coal 2,700,000 22,534,656 1.90 Mesoblast 3,143,750 9,548,672 0.81 Newcrest Mining 2,100,000 55,591,377 4.70 Oil Search 8,200,000 37,735,157 3.19 Santos 5,901,382 50,721,892 4.29 Silex Systems 7,390,406 27,865,560 2.35 White Energy 7,000,000 15,487,871 1.31 Woodside Petroleum 600,000 16,715,904 1.41 WorleyParsons 1,300,000 22,755,257 1.92
China 9.84% (9.72%) Boshiwa International 43,000,000 21,413,569 1.81 Camelot Information Systems ADR 1,300,000 19,993,560 1.69 China Pacific Insurance 6,000,000 16,008,596 1.35 China Yurun Food 4,600,000 9,700,447 0.82 GOME Electrical Appliances 60,000,000 13,920,518 1.18 Shandong Weigao Medical 7,400,000 13,428,329 1.13 Shenguan 15,000,000 12,652,757 1.07 Sihuan Pharmaceutical 4,000,000 1,882,584 0.16 Yingde Gases 13,000,000 7,486,422 0.63
Hong Kong 15.22% (17.57%) AIA 13,700,000 24,803,795 2.10 Belle International 37,000,000 40,346,303 3.41 Biostime International 5,947,368 5,420,803 0.46 China Taiping Insurance 10,600,000 20,947,895 1.77 Hengan International 5,300,000 29,445,625 2.49 Hongkong Land 3,000,000 13,949,894 1.18 Man Wah 14,500,000 15,162,593 1.28 Sands China 21,000,000 29,929,115 2.53
India 6.26% (4.62%) Apollo Hospitals 1,030,000 6,739,744 0.57 Coal India 1,200,000 5,426,614 0.46 Dabur India 4,000,000 5,791,384 0.49 Fortis Healthcare 2,700,000 5,694,573 0.48 Housing Development & Infrastructure 5,000,000 14,017,455 1.18 Housing Development Finance 1,500,000 15,709,130 1.33 Rei Agro 34,000,000 13,298,575 1.12 Rei Agro GDR 9,000,000 3,419,849 0.29 Rei Six Ten Retail 4,300,000 4,042,084 0.34
Indonesia 2.19% (0.00%) Adaro Energy 82,000,000 14,653,505 1.24 Indofood CBP Sukses Makmur 34,000,000 11,301,069 0.95
- 350 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Phillipines 1.33% (2.56%) First Gen 90,000,000 15,770,954 1.33
Singapore 10.53% (13.33%) DBS 2,900,000 20,857,578 1.76 Noble 77,000,000 83,921,514 7.09 Overseas Chinese Banking 4,000,000 19,849,053 1.68
South Korea 5.23% (3.80%) Samsung Electronics 67,000 36,044,416 3.05 Yuhan 262,500 25,770,940 2.18
Taiwan 10.38% (10.39%) HTC 2,100,026 41,718,175 3.53 Taiwan Mobile 17,000,201 26,183,504 2.21 Taiwan Semiconductor Manufacturing 35,000,338 54,912,539 4.64
Thailand 3.09% (2.28%) Advanced Info Service 8,000,000 14,528,008 1.23 Siam Commercial Bank 10,000,000 22,005,659 1.86
Portfolio of investments 1,170,081,224 98.87
Net current assets 13,328,549 1.13
Total Net Assets 1,183,409,773 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt GDR=Global Depositary Receipt
- 351 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Statement of Total Return for the year ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 226,128,666 166,427,202
Revenue 13,103,653 9,978,459
Expenses (7,033,390) (4,970,663)
Finance costs: Interest (3) (37) Net revenue before taxation 6,070,260 5,007,759
Taxation (1,260,826) (507,069)
Net revenue after taxation 4,809,434 4,500,690
Total return before distributions 230,938,100 170,927,892
Finance costs: Distributions 918,268 (243,950)
Change in net assets attributable to Shareholders from investment activities 231,856,368 170,683,942
Statement of Change in Net Assets Attributable to Shareholders for the year ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 819,366,311 626,283,226
Amounts receivable on issue of shares 216,818,425 43,578,364 Amounts payable on cancellation of shares (85,502,683) (79,952,990) 131,315,742 (36,374,626)
Dilution adjustment 909,754 82,040
Stamp Duty Reserve Tax (39,396) (24,192)
Change in net assets attributable to Shareholders from investment activities (see above) 231,856,368 170,683,942
Unclaimed distributions 994 597
Closing net assets attributable to Shareholders 1,183,409,773 760,650,987
- 352 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 1,170,081,224 784,613,792
Debtors 2,134,023 36,213,202
Cash and bank balances 13,301,422 17,542,561
Total other assets 15,435,445 53,755,763
Total assets 1,185,516,669 838,369,555
LIABILITIES
Creditors (1,977,181) (15,926,207)
Bank overdraft (129,715) (95,495)
Distribution payable on income shares - (2,981,542)
Total liabilities (2,106,896) (19,003,244)
Net assets attributable to Shareholders 1,183,409,773 819,366,311
- 353 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Oriental Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 379,768,260 121,425,528 Commissions 941,559 429,074 Taxes 224,027 48,317 Total purchase costs 1,165,586 477,391
Gross purchases total 380,933,846 121,902,919
Analysis of total sales proceeds:
Sales before transaction costs 223,924,947 149,631,676 Commissions (295,600) (262,252) Taxes (223,229) (92,835) Total sales costs (518,829) (355,087)
Total sales net of transaction costs 223,406,118 149,276,589
- 354 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
BNY MELLON INVESTMENT FUNDS - NEWTON OVERSEAS EQUITY FUND
Interim Report for the six months ended 31 December 2010
- 355 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Robert Marshall-Lee James Harries
Fund Size £356.30m
Benchmark 33.33% FTSE AW North America Index/ 33.33% FTSE AW Europe (ex UK) Index/ 33.33% FTSE AW Asia Pacific Index
Yield as at 31/12/10:
Exempt Shares 1 (Net Accumulation) 1.18% Exempt Shares 2 (Net Accumulation) 1.10% Exempt Shares 3 (Net Accumulation) 0.98% X Shares (Net Accumulation) 1.58%
Key Dates: Fund Launch 31 March 1996 Converted to ICVC 02 August 2004
Aim
To achieve long term growth by investing in stocks and shares quoted on major stock markets of the world, excluding the UK. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 1 (Net Accumulation) 19.08% 24.84% -22.63% 13.75% 4.18% Exempt Shares 2 (Net Accumulation) 18.96% 24.73% -22.69% 13.65% 4.10% Exempt Shares 3 (Net Accumulation)# * 18.79% N/A N/A N/A N/A X Shares (Net Accumulation) * 19.68% 25.40% -22.32% N/A N/A
Index** 15.65% 20.53% -19.90% 12.09% 7.99%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 7%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
**Index 33.33% FTSE AW North America Index/ 33.33% FTSE AW Europe (ex UK) Index/ 33.33% FTSE AW Asia Pacific Index.
#The Exempt Shares 3 (Net Accumulation) Share Class was launched on 04 April 2005, closed on 03 October 2007 and re-opened at 139.07 pence on 22 September 2009.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 356 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Exempt 1 Net Sterling Acc Share Class of the Fund returned 20.14% against 18.56% for the Composite Index.
Over the period, the Fund delivered a significant absolute return, outperforming its benchmark. The main contributor to the Fund performance came from basic materials, such as commodities, where both stock selection and asset allocation were beneficial. In particular, the holdings in Straits Asia Resources, Mosaic, Potash Corp of Saskatchewan and Arch Coal all performed strongly. More specifically, Potash Corp of Saskatchewan’s share price rose following a bid approach from the mining giant BHP Billiton. Anhanguera Educacional Participacoes, a Brazilian private education company, also performed strongly as it expanded capacity and benefited from a strong Brazilian economy. The holding in the US mobile telecoms operator Sprint Nextel weakened, reversing some of its strong gains in the first six months of 2010. The US private education providers, Corinthian Colleges and ITT Educational Services, both declined amid uncertainty regarding student funding regulations.
Notable activity over the period included the purchase of Toyota Motor. Toyota's valuation has fallen to historically low levels due to product recalls, yen strength and low margin expectations, but the manager believes the worst is behind it and the valuation is currently attractive. A position was established in the Turkish telecoms provider Turkcell. The company has experienced a difficult couple of years due to fierce competition, price changes enforced by the regulator and a difficult economic backdrop. However, the manager believes that the shares have been oversold and now offer value as the Turkish economy has returned to strong growth, and the regulatory outlook is improving. The fertiliser producer Mosaic was also added to the Fund, bolstering already significant exposure to the agriculture industry. The company looks well placed to benefit from increasing demand for fertiliser as a result of the rise in crop prices seen in 2010. Meanwhile, notable sales included the German telecoms provider Deutsche Telekom, and the US and Asian casino operator, Las Vegas Sands, following strong performance.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Toyota Motor Deutsche Telekom Mosaic ETFS Gold Bullion Securities 0.00% Secured Note (EUR) Turkcell Iletisim Hizmetleri Las Vegas Sands Petroleo Brasileiro ADR Genzyme Telefonica Barrick Gold Housing Development & Infrastructure Advanced Info Service Indofood CBP Sukses Makmur Unitech Equinox Minerals Yum Brands BHP Billiton China Yurun Food China Yurun Food Wisconsin Energy
- 357 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 300.61 244.37 3.8932
2007 319.96 263.68 3.8252
2008 335.03 197.39 4.2108
2009 312.87 216.05 4.9442
2010 366.89 291.08 5.2351
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 142.76 116.03 1.7442
2007 151.74 125.08 1.7095
2008 158.83 93.54 1.8820
2009 148.12 102.36 2.2490
2010 173.52 137.79 2.2581
Highest Lowest Net Revenue Exempt Shares 3 (Net Accumulation) ** Price (p) Price (p) per share (p)*
2006 300.86 244.62 4.1435
2007 (to 3 October) 307.82 264.28 4.1299
2008 N/A N/A N/A
2009 (from 22 September) 148.06 132.29 N/A
2010 173.19 137.71 1.8029
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 16 April) 320.84 264.03 2.4130
2008 336.47 198.59 5.4493
2009 316.39 217.67 5.9806
2010 372.89 294.50 7.6693
*Distributions are shown in the year declared rather than paid.
**The Exempt Shares 3 (Net Accumulation) Share Class was launched on 04 April 2005, closed on 03 October 2007 and re-opened at 139.07 pence on 22 September 2009. - 358 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Statistics (continued)
Net Asset Value History by Share Class
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 222,376,475 302.90 73,415,867
30/06/09 198,336,961 248.38 79,851,462
30/06/10 211,062,077 304.99 69,203,202
31/12/10 228,591,771 366.43 62,383,876
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 13,588,982 143.58 9,464,125
30/06/09 11,456,772 117.65 9,738,226
30/06/10 13,347,054 144.32 9,248,535
31/12/10 18,197,796 173.30 10,500,617
Exempt Shares 3 (Net Accumulation) ** Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 N/A N/A N/A
30/06/09 N/A N/A N/A
30/06/10 1,991 144.17 1,381
31/12/10 8,201 172.98 4,741
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 114,756,322 304.34 37,707,134
30/06/09 91,102,420 250.56 36,359,409
30/06/10 90,690,533 309.19 29,331,441
31/12/10 109,500,759 372.41 29,402,928
**The Exempt Shares 3 (Net Accumulation) Share Class was launched on 04 April 2005, closed on 03 October 2007 and re-opened at 139.07 pence on 22 September 2009.
- 359 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Exempt Shares 1 (Net Accumulation) 0.57 0.57
Exempt Shares 2 (Net Accumulation) 0.68 0.67
Exempt Shares 3 (Net Accumulation)** 0.83 0.82
X Shares (Net Accumulation) 0.07 0.07
**The Exempt Shares 3 (Net Accumulation) Share Class was launched on 04 April 2005, closed on 03 October 2007 and re-opened at 139.07 pence on 22 September 2009.
- 360 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Collective Investment Schemes 1.34% (1.27%) BNY MFM Newton Discovery Fund 'X' Acc 375,659 4,769,258 1.34
Commodities 1.99% (3.79%) ETFS Gold Bullion Securities 0.00% Secured Note (EUR) 80,091 7,089,302 1.99
Overseas Equities 94.64% (93.31%)
Canada 5.22% (2.86%) Chemokine Therapeutics (Restricted) 420,000 0.00 0.00 Equinox Minerals 704,130 2,721,833 0.76 Osisko Mining 167,173 1,537,315 0.43 Potash Corp of Saskatchewan 50,650 4,975,293 1.40 Research In Motion 60,995 2,284,958 0.64 Suncor Energy 92,635 2,275,455 0.64 Yamana Gold 585,518 4,798,724 1.35
United States of America 26.17% (28.46%) Align Technology 166,859 2,148,201 0.60 Amgen 53,269 1,905,086 0.53 Apple 17,758 3,701,423 1.04 Arch Coal 247,880 5,629,065 1.58 Ariba 92,033 1,392,913 0.39 Bank of America 216,407 1,850,895 0.52 Barrick Gold 205,414 6,958,702 1.95 BB&T 67,541 1,148,375 0.32 Carnival 102,151 3,021,043 0.85 Cliffs Natural Resources 48,628 2,454,732 0.69 Consol Energy 87,297 2,743,668 0.77 Corinthian Colleges 445,761 1,484,243 0.42 Deere 29,984 1,608,596 0.45 Denbury Resources 3,224 39,431 0.01 eBay 82,522 1,495,037 0.42 Freeport-McMoran Copper & Gold 32,858 2,516,990 0.71 Halliburton 83,911 2,216,262 0.62 Interpublic 212,438 1,454,380 0.41 ITT Educational Services 59,054 2,497,634 0.70 L3 Communications 29,522 1,344,052 0.38 Lazard 47,186 1,198,568 0.34 Medco Health Solutions 41,962 1,668,805 0.47 Millicom International Cellular 21,821 1,337,620 0.38 Mosaic 182,497 8,912,699 2.50 Mylan 163,639 2,231,106 0.63 Petrohawk Energy 120,455 1,407,261 0.39 Pfizer 308,627 3,476,451 0.98 Philip Morris 145,856 5,494,376 1.54 Principal Financial 86,494 1,812,658 0.51 Shaw 145,706 3,233,740 0.91 Sprint Nextel 3,002,731 8,044,929 2.26 Transocean 59,912 2,667,429 0.75 Wisconsin Energy 54,901 2,087,207 0.59 Yum Brands 62,794 1,994,186 0.56
- 361 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Brazil 8.82% (8.39%) Anhanguera Educacional 281,930 4,365,524 1.23 Brookfield Incorporacoes 973,400 3,267,605 0.92 Duratex 280,147 1,936,297 0.54 Hypermarcas 341,664 2,986,000 0.84 Natura Cosmeticos 111,129 2,048,534 0.57 Petroleo Brasileiro ADR 384,651 8,353,469 2.34 Rossi Residencial 740,257 4,225,882 1.19 Tele Norte Leste Participacoes ADR 224,645 2,125,353 0.60 Vale ADR 94,999 2,094,298 0.59
Australia 3.22% (1.61%) BHP Billiton 97,109 2,876,438 0.81 Newcrest Mining 108,133 2,862,506 0.80 Santos 418,116 3,593,673 1.01 WorleyParsons 121,960 2,134,793 0.60
China 2.79% (4.73%) Camelot Information Systems 118,625 1,824,412 0.51 Fufeng 2,277,238 1,284,996 0.36 GOME Electrical Appliances 4,544,000 1,054,247 0.30 Powerlong Real Estate 10,498,000 2,200,763 0.62 Renhe Commercial 6,104,000 682,801 0.19 Shandong Weigao Group Medical 532,000 965,388 0.27 Tencent 137,313 1,928,535 0.54
Hong Kong 8.39% (9.43%) Agile Property 2,980,000 2,839,620 0.80 Belle International 3,031,000 3,305,126 0.93 China Taiping Insurance 834,000 1,648,165 0.46 Hengan International 546,000 3,033,455 0.85 Hopson Development 2,044,000 1,412,515 0.40 Huabao International 4,561,000 4,746,744 1.33 New World Development 1,577,000 1,905,177 0.53 Sands China 3,493,204 4,978,500 1.40 Shanghai Industrial 1,159,000 3,217,173 0.90 Standard Chartered 161,408 2,830,003 0.79
India 3.77% (3.80%) Anant Raj Industries 1,107,445 1,703,922 0.48 Housing Development & Infrastructure 788,326 2,210,065 0.62 Housing Development Finance 396,338 4,150,750 1.16 ITC 1,196,941 3,006,430 0.84 Yes Bank 533,201 2,400,476 0.67
Indonesia 1.51% (0.70%) Bumi Resources 14,987,000 3,213,835 0.90 Indofood CBP Sukses Makmur 6,490,500 2,157,341 0.61
Japan 6.43% (4.83%) Canon 137,700 4,590,123 1.29 INPEX 774 2,914,069 0.82 Mitsubishi 242,000 4,211,641 1.18 Nomura 266,800 1,087,931 0.31 Sawai Pharmaceutical 45,300 2,381,631 0.67 - 362 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Japan (continued) Sumco 123,000 1,129,721 0.32 Toshiba 659,000 2,306,301 0.65 Toyota Motor 166,700 4,250,106 1.19
South Korea 0.59% (1.12%) Lotte Shopping 7,837 2,103,613 0.59
Malaysia 0.48% (0.41%) AMMB 1,165,200 1,701,164 0.48
Singapore 3.97% (3.72%) DBS 394,000 2,833,754 0.80 Jardine Matheson 127,200 3,604,560 1.01 Straits Asia Resources 6,157,000 7,700,011 2.16
Taiwan 0.47% (0.45%) HTC 83,950 1,667,713 0.47
Thailand 2.22% (2.06%) Bangkok Bank 801,500 2,551,449 0.72 PTT 467,000 3,192,743 0.90 Siam Commercial Bank 978,200 2,152,594 0.60
South Africa 1.69% (1.60%) Gold Fields 220,629 2,580,197 0.72 MTN 265,749 3,446,997 0.97
Denmark 0.53% (0.00%) Pandora 49,047 1,903,249 0.53
France 1.06% (2.60%) Air Liquide 17,735 1,452,431 0.41 L'Oreal 18,624 1,339,037 0.38 Thales 42,347 958,444 0.27
Germany 4.69% (5.78%) Bayer 163,767 7,757,512 2.18 Fresenius Medical Care 49,712 1,856,518 0.52 K+S 110,568 5,395,711 1.51 Metro 36,727 1,713,772 0.48
Norway 1.49% (1.06%) DNB 286,148 2,586,723 0.73 Subsea 163,094 2,718,255 0.76
Russia 1.02% (0.98%) OAO Gazprom ADR 131,646 2,138,283 0.60 Pharmstandard GDR 81,485 1,496,192 0.42
Spain 0.98% (0.51%) Amadeus IT 142,712 1,925,586 0.54 Telefonica 107,901 1,577,715 0.44
- 363 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Switzerland 8.04% (7.22%) Actelion 90,290 3,182,912 0.89 Bank Sarasin 86,559 2,520,969 0.71 Lonza 26,254 1,354,821 0.38 Nestle 94,234 3,552,276 1.00 Novartis 154,857 5,858,865 1.64 Roche 53,207 5,018,851 1.41 Syngenta 37,984 7,150,134 2.01
Turkey 1.09%(0.00%) Turkcell Iletisim Hizmetleri 866,309 3,867,159 1.09
Derivatives 0.50% (-1.11%)
KRW Forward Foreign Currency Contracts -0.06% (-0.68%) Forward Foreign Currency Contracts 15/04/11 KRW12,952,350,000 7,350,272 2.06 Forward Foreign Currency Contracts 15/04/11 JPY(948,542,658) (7,539,926) (2.12)
JPY Forward Foreign Currency Contracts 0.43% (-0.69%) Forward Foreign Currency Contracts 14/01/11 JPY(2,033,200,000) (16,098,610) (4.52) Forward Foreign Currency Contracts 14/01/11 NOK151,941,113 16,770,677 4.71 Forward Foreign Currency Contracts 14/01/11 JPY1,981,588,000 15,689,953 4.40 Forward Foreign Currency Contracts 14/01/11 USD(23,000,000) (14,812,907) (4.16)
EUR Forward Foreign Currency Contracts 0.09% (0.12%) Forward Foreign Currency Contracts 15/06/11 EUR28,585,041 24,637,031 6.91 Forward Foreign Currency Contracts 15/06/11 USD(37,738,000) (24,281,868) (6.82)
USD Forward Foreign Currency Contracts 0.04% (0.14%) Forward Foreign Currency Contracts 15/2/11 USD12,616,619 8,131,509 2.28 Forward Foreign Currency Contracts 15/2/11 £(7,946,000) (7,946,000) (2.23)
Portfolio of investments 350,832,576 98.47
Net current assets 5,465,951 1.53
Total Net Assets 356,298,527 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Chile and Netherlands portfolio categories, which, at 30 June 2010, represented 0.51% and 0.48% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt GDR = Global Depositary Receipt
- 364 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 60,988,334 69,319,786
Revenue 2,050,517 2,535,095
Expenses (736,777) (717,251)
Finance costs: Interest (381) (24) Net revenue before taxation 1,313,359 1,817,820
Taxation (153,142) (178,777) Net revenue after taxation 1,160,217 1,639,043
Total return before distributions 62,148,551 70,958,829
Finance costs: Distributions (1,160,196) (1,639,064) Change in net assets attributable to Shareholders from investment activities 60,988,355 69,319,765
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £
Opening net assets attributable to Shareholders 315,101,655 300,896,153
Amounts receivable on issue of shares 10,366,038 11,052,657 Amounts payable on cancellation of shares (31,374,611) (32,979,648) (21,008,573) (21,926,991)
Dilution adjustment 91,673 31,318
Stamp Duty Reserve Tax (221) (156)
Change in net assets attributable to Shareholders from investment activities (see above) 60,988,355 69,319,765
Retained distributions on accumulation shares 1,125,638 1,541,033
Closing net assets attributable to Shareholders 356,298,527 349,861,122
- 365 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 351,022,230 310,851,636
Debtors 1,798,073 9,089,493
Cash and bank balances 4,395,462 7,215,104
Total other assets 6,193,535 16,304,597
Total assets 357,215,765 327,156,233
LIABILITIES
Investment liabilities (189,654) (4,374,087)
Creditors (727,584) (7,680,491)
Total other liabilities (727,584) (7,680,491)
Total liabilities (917,238) (12,054,578)
Net assets attributable to Shareholders 356,298,527 315,101,655
* Gross of investment liabilities
- 366 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 1 (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.0090 0.1009 0.9081 0.0000 0.9081 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4281 0.0428 0.3853 0.5228 0.9081 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.1746 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.3910 0.0391 0.3519 0.0000 0.3519 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.0582 0.0058 0.0524 0.2995 0.3519 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.4886 pence per share.
Interim Distribution for Exempt Shares 3 (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.2576 0.0258 0.2318 0.0000 0.2318 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.0009 0.0001 0.0008 0.2310 0.2318 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.2613 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.9732 0.1973 1.7759 0.0000 1.7759 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.5581 0.0558 0.5023 1.2736 1.7759 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.8946 pence per share. - 367 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Overseas Equity Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 88,536,271 82,216,213 Commissions 142,489 129,848 Taxes 18,626 11,006
Total purchase costs 161,115 140,854
Gross purchases total 88,697,386 82,357,067
Analysis of total sales proceeds:
Sales before transaction costs 108,008,485 90,738,562 Commissions (137,261) (102,981) Taxes (39,707) (17,670)
Total sales costs (176,968) (120,651)
Total sales net of transaction costs 107,831,517 90,617,911
- 368 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
BNY MELLON INVESTMENT FUNDS - NEWTON PAN EUROPEAN FUND
Interim Report for the six months ended 31 December 2010
- 369 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Tom Beevers Raj Shant
Fund Size £19.22m
Benchmark FTSE Euro First 300
Yield as at 31/12/10:
Sterling Income Shares 1.65% Euro Accumulation Shares 0.54%
Key Dates: Fund Launch 04 February 1999
Aim
To provide capital growth from a portfolio of predominantly European securities, including the UK and Eastern Europe with a bias towards larger, blue chip companies. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
A Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 2.72% 18.09% -19.08% 15.15% 16.44% Euro Accumulation Shares 1.71% 16.58% -18.84% 14.36% 16.27%
FTSE Eurofirst 300 TR 7.07% 20.34% -24.36% 14.10% 17.54%
Source: Lipper as at 31 December 2010 - Total return including income net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 370 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 18.02% against 19.23% for the FTSE Eurofirst 300 Index.
The Fund generated a strong return in absolute terms, but nevertheless lost some performance relative to the market during the strong equity market rally seen in the second half of 2010. In particular, stock selection in the telecoms sector hurt performance as the Fund’s holdings in the diversified telecoms provider Cable & Wireless Worldwide and the Spanish telecoms provider Telefonica both lost ground over the period. The holding in the Swiss pharmaceutical giant Roche also hurt performance after the US Food and Drug Administration (FDA) announced the withdrawal of Roche’s cancer drug Avastin for use in breast cancer treatment. Elsewhere, the holding in the Spanish infrastructure and construction company Acciona also reduced performance. On the positive front, the Belgium-based materials technology business Umicore performed strongly, while the German fertilizer company K+S benefited from rising commodity prices. Elsewhere, the Switzerland-listed oil and gas exploration company Transocean performed well as its share price recovered following the Macondo disaster in the Gulf of Mexico.
During the six-month period the manager participated in two initial public offerings which led to new positions in the Russian supermarket O’Key and Danish jewellery company Pandora. O’Key is expanding its footprint in the Russian hypermarket space, benefiting from an increasing demand for fresh produce. Pandora has a very good growth profile due to the global popularity of its charm bracelets and charms, and industry-leading margins given its Thai production facilities. Other purchases included the Luxembourg satellite operator SES and German chemicals distribution company Brenntag. During the period, sales included the Anglo-Dutch publishing company Reed Elsevier. The manager also sold the Fund’s position in BAE Systems given the UK defence company’s exposure to government spending cuts in the UK and the US. Other notable sales included Deutsche Telekom and the German reinsurer Munich Re.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Intesa Sanpaolo Deutsche Telekom Syngenta Vodafone Telefonica BAE Systems Metro ENI Daimler Reed Elsevier BHP Billiton Alstom Infineon Technologies Muenchener Rueckverischerungs Nokia ArcelorMittal O’Key Vinci Anglo American Bank of Ireland
- 371 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 163.30 140.68 1.1200
2007 187.66 158.54 1.6774
2008 196.09 116.93 2.2482
2009 174.97 121.22 2.8713
2010 178.80 144.05 2.8566
Highest Price Lowest Price Net Revenue per Euro Accumulation Shares (cents) (cents) share (cents)*
2006 96.20 81.06 0.1205
2007 107.65 91.95 0.3799
2008 100.76 58.07 0.9496
2009 79.00 53.44 0.6677
2010 84.72 71.05 0.5483
*Distributions are shown in the year declared rather than paid.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 21,798,397 178.64 12,202,285
30/06/09 17,580,410 139.49 12,603,332
30/06/10 17,360,306 146.77 11,828,858
31/12/10 19,145,366 173.13 11,058,509
Euro Accumulation Shares Net Asset Cents Shares as at Value (£) per share in issue
30/06/08 1,207,509 88.74 1,716,560
30/06/09 191,545 66.89 335,960
30/06/10 87,105 74.41 143,170
31/12/10 78,437 83.06** 109,566
** Euro/Sterling exchange rate at midday 31 December 2010: 1.160248
- 372 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.70 1.69
Euro Accumulation Shares 2.20 2.19
- 373 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 25.27% (26.14%)
Oil & Gas Producers 6.11% (5.03%) BG 477,186 555,276 2.89 BP 697,159 618,296 3.22
Oil Equipment & Services 1.06% (0.00%) Lamprell 202,367 204,441 1.06
Mining 5.09% (0.00%) Anglo American 293,093 330,322 1.72 BHP Billiton 376,501 434,075 2.26 Eurasian Natural Resources 190,002 212,774 1.11
Health Care Equipment & Services 1.44% (1.57%) Smith & Nephew 204,756 277,305 1.44
Food & Drug Retailers 2.01% (2.14%) Tesco 347,373 385,841 2.01
Fixed Line Telecommunications 1.91% (2.82%) Cable & Wireless Communications 177,010 155,557 0.81 Cable & Wireless Worldwide 284,630 211,901 1.10
Mobile Telecommunications 1.46% (5.73%) Vodafone 238,347 281,326 1.46
General Financial 1.70% (2.03%) ICAP 189,972 326,481 1.70
Gas, Water & Multiutilities 1.81% (2.51%) Centrica 267,510 347,541 1.81
Life Insurance 2.68% (1.40%) Prudential 429,789 514,788 2.68
Overseas Equities 74.52% (71.73%)
Belgium 3.41% (3.00%) Ageas 416,044 240,110 1.25 Umicore 256,151 415,071 2.16
- 374 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Denmark 2.13% (0.00%) Pandora 274,822 409,854 2.13
Finland 1.93% (0.00%) Nokia 361,865 370,554 1.93
France 14.38% (15.03%) BNP Paribas 462,120 457,137 2.38 EADS 187,311 175,671 0.91 L'Oreal 360,597 385,376 2.00 Renault 273,708 293,705 1.53 SES 'A' 243,767 241,845 1.26 Thales 408,306 329,810 1.72 Total 595,361 592,093 3.08 Vivendi 278,864 287,944 1.50
Germany 21.12% (24.09%) Allianz 318,901 365,710 1.90 Bayer 380,100 586,668 3.05 Bilfinger Berger 167,987 262,670 1.37 Brennt 180,955 223,752 1.16 Daimler 386,268 405,012 2.11 Fresenius Medical Care 153,695 237,965 1.24 Infineon Technologies 377,866 392,185 2.04 K+S 413,290 541,533 2.82 Metro 300,369 338,909 1.76 Qiagen 371,695 468,038 2.40 Rhoen-Klinikum 234,478 243,821 1.27
Italy 1.49% (2.66%) Intesa Sanpaolo 304,480 285,779 1.49
Norway 2.91% (2.48%) DNB 414,649 558,995 2.91
Russia 1.68% (0.00%) O'Key GDR 257,461 322,164 1.68
Spain 4.39% (3.45%) Acciona 415,964 260,969 1.36 Amadeus IT 214,541 294,872 1.53 Telefonica 298,405 287,408 1.50
Sweden 1.01% (0.00%) TeliaSonera 190,867 193,374 1.01
- 375 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Switzerland 20.07% (15.29%) Actelion 308,234 379,207 1.97 Julius Baer 156,582 161,568 0.84 Lonza 201,617 205,282 1.07 Novartis 412,343 527,860 2.75 Roche 654,396 708,961 3.69 Sulzer 267,241 325,790 1.69 Swiss Life 201,603 209,912 1.09 Syngenta 544,268 634,559 3.30 Transocean 482,344 420,886 2.19 UBS 286,046 285,187 1.48
Portfolio of investments 19,184,130 99.79
Net current assets 39,673 0.21
Total Net Assets 19,223,803 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010 the Fund disposed of its holdings in the Aerospace & Defence, Ireland and Netherlands portfolio categories, which, at 30 June 2010, represented 2.91%, 1.78% and 3.95% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
GDR = Global Depositary Receipt
- 376 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 3,091,872 4,164,992
Revenue 122,315 180,276
Expenses (159,354) (175,162)
Finance costs: Interest - (1) Net (expense)/revenue before taxation (37,039) 5,113
Taxation (8,810) (8,952)
Net expense after taxation (45,849) (3,839)
Total return before distributions 3,046,023 4,161,153
Finance costs: Distributions 1 9
Change in net assets attributable to Shareholders from investment activities 3,046,024 4,161,162
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 17,447,411 17,771,955
Amounts receivable on issue of shares 297,026 962,020 Amounts payable on cancellation of shares (1,566,554) (617,881) (1,269,528) 344,139
Dilution Adjustment - 596
Stamp Duty Reserve Tax (576) (1,178)
Change in net assets attributable to Shareholders from investment activities (see above) 3,046,024 4,161,162
Unclaimed distributions 472 154
Closing net assets attributable to Shareholders 19,223,803 22,276,828
- 377 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 19,184,130 17,074,973
Debtors 65,939 324,170
Cash and bank balances 63,380 423,695
Total other assets 129,319 747,865
Total assets 19,313,449 17,822,838
LIABILITIES
Creditors (89,646) (37,552)
Distribution payable on income shares - (337,875)
Total liabilities (89,646) (375,427)
Net assets attributable to Shareholders 19,223,803 17,447,411
- 378 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Pan-European Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 7,727,397 3,365,107 Commission 6,306 3,039 Taxes 5,994 2,409 Total purchase costs 12,300 5,448
Gross purchases total 7,739,697 3,370,555
Analysis of total sales proceeds:
Sales before transaction costs 8,747,440 3,395,573 Commission (8,366) (3,165) Taxes (25) (4) Total sales costs (8,391) (3,169)
Total sales net of transaction costs 8,739,049 3,392,404
- 379 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
BNY MELLON INVESTMENT FUNDS - NEWTON PHOENIX MULTI-ASSET FUND
Interim Report for the six months ended 31 December 2010
- 380 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Phil Collins Charles Insley/Sam Townsley
Fund Size £162.51m
Yields as at 31/12/10:
Sterling Income Shares 1.36% Sterling Accumulation Shares 1.35% Exempt Shares 2 (Net Accumulation) 1.91%
Key Dates: Fund Launch 27 November 2006
Aim To achieve long-term capital growth in excess of cash* returns from a balanced portfolio diversified across a range of assets. The Sub-Fund may invest in equities, fixed interest securities, collective investment schemes, warrants, derivative instruments, deposits and money market instruments. The Manager does not intend to have an interest in any immovable property or tangible movable property.
* “cash” being LIBOR GBP 1 Month.
Fund Ratings
A rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares** 11.58% 18.44% -21.22% 4.16% 6.55% Sterling Accumulation Shares** 11.58% 18.44% -21.23% 4.16% 6.56% Exempt Shares 2 (Net Accumulation)*** 12.32% 19.23% N/A N/A N/A
LIBOR GBP 1 Month + 2% 2.56% 2.91% 7.54% 7.98% 6.86%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
** Performance prior to 27 November 2006 relates to the Newton Phoenix Fund, an authorised unit trust launched on 11 April 2003. Newton Phoenix Multi-Asset Fund (the Sub-Fund) was launched on 27 November 2006 when Class A Units of the Newton Phoenix Fund were converted into the Sub-Fund.
*** Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 381 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 9.29% against 1.27% for LIBOR GBP 1 Month + 2%.
The Fund generated a positive return, outperforming its cash benchmark. The Fund’s equity portion was the biggest contributor to performance, while commodities were also strong. Holdings in UK government bonds, investment grade corporate bonds and hedge funds were more muted, but nevertheless positive. The manager’s move earlier in the year to increase the Fund’s equity exposure made a positive contribution to performance. Meanwhile, the period saw increased investor risk appetite and greater market fluctuations, and in order to counter this, the manager maintained some option protection over the Fund’s equity portion.
Over the period, the manager increased the Fund’s equity exposure slightly. One such example is Syngenta, which produces crop protection products. The bond portion of the Fund also saw some activity; over the period, the manager sold five investment grade bonds yielding less than 5%, and bought four bonds issued by UK banks yielding between 5% and 8%. These included the 7.5% Royal Bank of Scotland 2024. Meanwhile, the manager switched some of the Fund’s government bond positions, selling the 6% Treasury 2028 and the 8% Treasury 2013, and adding the 4.75% Treasury 2030 and the 5% Treasury 2025. Importantly, given the news flow from Europe, no bonds issued by governments of peripheral European countries were owned. Elsewhere, the Fund’s hedge fund exposure was trimmed. Meanwhile, towards the end of the period, the Fund’s exposure to gold was reduced.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Treasury 4.75% Stock 2030 ETFS Physical Gold 0.00% Secured Note (AUD) Treasury 5.00% Stock 2025 Treasury 6.00% Stock 2028 ETFS Physical Gold 0.00% Secured Note (USD) Treasury 8.00% Stock 2013 Royal Bank of Scotland 7.50% Bonds 2024 Merrill Lynch Investment Solutions MW Tops John Laing Infrastructure Fund Treasury Gilt 5.25% Stock 2012 Royal Bank of Scotland FTSE GBP Autocall Certs Marshall Wace Nationwide Building Society 5.625% Bonds 2019 Phoenix Natural Gas Finance 5.50% Bonds 2017 Lloyds TSB Bank 6.50% Bonds 2040 Imperial Tobacco Finance 7.75% Bonds 2019 Source Physical Markets Secured Gold Linked Note (USD) Commonwealth Bank of Australia 4.875% Bonds 2023 Co-Operative Bank 5.75% Bonds 2024 Firstgroup 8.125% Bonds 2018
- 382 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Sterling Income Shares Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 (from 27 November) 123.34 121.16 N/A
2007 129.43 121.94 1.5431
2008 127.77 95.70 1.8714
2009 115.42 95.42 1.7651
2010 126.31 113.46 1.5934
Sterling Accumulation Shares Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2006 (from 27 November) 132.62 130.28 N/A
2007 139.41 132.02 1.6640
2008 139.05 105.07 2.0446
2009 129.17 105.63 1.9619
2010 143.47 127.70 1.7986
Exempt Shares 2 (Net Accumulation) Highest Lowest Net Revenue Price (p) Price (p) per share (p)*
2008 (from 3 February) 141.22 107.07 2.8261
2009 132.59 107.84 2.7878
2010 148.24 131.17 2.7652
*Distributions are shown in the year declared rather than paid.
- 383 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 33,704,597 120.68 27,928,673
30/06/09 26,552,128 100.52 26,413,609
30/06/10 26,956,733 115.17 23,405,874
31/12/10 26,838,370 125.31 21,417,693
Sterling Accumulation Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 111,965,669 131.34 85,248,498
30/06/09 96,976,581 112.44 86,248,327
30/06/10 107,412,976 130.82 82,104,751
31/12/10 106,864,100 142.94 74,760,718
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 8,145,496 133.49 6,101,757
30/06/09 17,348,052 115.04 15,080,264
30/06/10 23,882,372 134.73 17,726,424
31/12/10 28,807,175 147.70 19,504,431
Total Expense Ratio 31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.64 1.64
Sterling Accumulation Shares 1.64 1.64
Exempt Shares 2 (Net Accumulation) 0.82 0.82
- 384 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
UK Government Stocks 6.91% (8.26%) Treasury 2.25% Stock 2014 £1,550,000 1,582,140 0.97 Treasury 5.00% Stock 2025 £2,053,904 2,302,437 1.42 Treasury 4.75% Stock 2020 £2,820,030 3,117,615 1.92 Treasury 4.75% Stock 2030 £2,445,000 2,647,914 1.63 Treasury 1.25% Index Linked 2017 £1,254,100 1,583,542 0.97
Overseas Government Stocks 0.95% (0.79%) Lithuania 5.125% Bonds 2017 USD500,000 317,254 0.20 USA Treasury Notes 1.875% TII 2013 USD1,490,300 1,218,276 0.75
Sterling Denominated Corporate Bonds 10.12% (11.92%) Anglian Water Services Finance 4.125% Index Linked Notes 2020 £983,000 1,595,950 0.98 Cable & Wireless 5.75% Bonds 2014 £500,000 517,750 0.32 Co-Operative Bank 5.75% Bonds 2024 £1,485,000 1,202,169 0.74 Imperial Tobacco Finance 8.125% Notes 2024 £815,000 1,003,708 0.62 Lloyds TSB Bank 6.50% Bonds 2040 £1,640,000 1,516,524 0.93 National Grid Gas 4.1875% Index-Linked Notes 2022 £973,000 1,629,337 1.00 Nationwide Building Society 5.625% Bonds 2019 £1,500,000 1,491,229 0.92 Royal Bank of Scotland 7.50% Bonds 2024 £1,500,000 1,547,873 0.95 Standard Chartered Bank 8.103% Step Perp 2049 £855,000 889,525 0.55 Tesco 4.00% Index Linked Notes 2016 £814,000 1,262,319 0.78 Tesco Property Finance 5.744% Bonds 2040 £660,000 681,438 0.42 Tullett Prebon 7.04% Bonds 2016 £821,000 803,595 0.49 Unique Pub Finance 5.659% Bonds 2027 £1,809,000 1,398,508 0.86 Virgin Media Finance 8.875% Bonds 2019 £806,000 914,891 0.56
Non-Sterling Denominated Corporate Bonds 7.49% (6.82%) Abengoa 8.50% Bonds 2016 EUR650,000 530,988 0.33 Breeze Finance 6.708% Bonds 2027 EUR700,000 354,299 0.22 Campofrio Food 8.25% Bonds 2016 EUR900,000 795,089 0.49 CEDC Finance Corp Intenational 8.875% Bonds 2016 EUR644,000 580,026 0.36 Cemex Finance 9.625% Bonds 2017 EUR800,000 679,510 0.42 Conti-Gummi Finance 7.125% Bonds 2018 EUR949,000 836,332 0.51 CRC Breeze Finance 5.29% Bonds 2026 EUR1,050,000 486,517 0.30 Edcon VAR FRN 2015 EUR645,000 461,521 0.28 HeidelbergCement 8.50% Bonds 2019 EUR850,000 804,954 0.50 Ineos Finance 9.25% Bonds 2015 EUR850,000 781,892 0.48 Interpublic Group of Companies 4.25% Bonds 2023 USD647,000 461,416 0.28 LBI Escrow 8.00% Bonds 2017 EUR616,000 517,250 0.32 Phoenix PIB Finance 9.625% Bonds 2014 EUR680,000 637,422 0.39 Renhe Commercial 13.00% Bonds 2016 USD1,250,000 839,667 0.52 Smurfit Kappa Acquisition 7.25% Bonds 2017 EUR690,000 615,515 0.38 Stena 6.125% Bonds 2017 EUR631,000 519,376 0.32 Sunrise Communications International 7.00% Bonds 2017 CHF493,000 357,293 0.22 UPC Germany GmbH 8.125% Bonds 2017 EUR600,000 548,064 0.34 Wind Acquisition Finance 11.75% Bonds 2017 EUR800,000 765,423 0.47 Ziggo Bond 8.00% Bonds 2018 EUR650,000 578,489 0.36
- 385 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 12.84% (10.88%) Associated British Foods 36,961 437,249 0.27 BG 54,446 707,526 0.44 BHP Billiton 45,129 1,157,559 0.71 Biotech Growth Trust 264,500 443,038 0.27 BP 156,215 732,336 0.45 British American Tobacco 41,309 1,021,7780.63 Britvic 135,488 640,452 0.39 Bunzl 68,791 496,327 0.31 Cable & Wireless Communications 1,857,813 901,039 0.55 Centrica 371,635 1,235,315 0.76 Cobham 289,913 591,712 0.36 Filtrona 483,434 1,183,930 0.73 GlaxoSmithKline 116,971 1,461,553 0.90 HSBC 71,616 469,873 0.29 ICAP 219,924 1,171,095 0.72 Imagination Technologies 190,752 687,089 0.42 Jardine Lloyd Thompson 107,892 672,167 0.41 Lloyds Banking 1,370,107 908,381 0.56 Oakley Capital Investments 631,500 903,045 0.56 Scottish & Southern Energy 81,544 1,004,622 0.62 Standard Chartered 72,736 1,271,062 0.78 Tesco 258,377 1,110,246 0.68 Valiant Petroleum 54,412 277,501 0.17 Vodafone 835,652 1,389,689 0.86
Hedge Funds 12.05% (15.71%) Absolute Return Trust Reg Ptg Pref 1,432,076 1,611,086 0.99 BH Global 352,454 3,827,650 2.36 BH Macro 180,367 2,976,056 1.83 Bluecrest Allblue Fund 2,009,179 3,381,448 2.08 Dexion Alpha Strategies (Assent to Cash 2011) 684,491 6,845 0.00 Dexion Trading 2,788,558 3,276,556 2.02 F&C Event Driven 1,796,426 36,467 0.02 FRM Credit Alpha Pref 3,507,086 2,595,244 1.60 Signet Global Fixed Income Strategies 2,311,086 1,866,202 1.15
Investment Trusts 14.74% (9.27%) Ashmore Global Opportunities 283,523 2,211,479 1.35 Barclays Bank 0.00% Protect Agric 2014 1,865,000 2,311,668 1.41 CQS Diversified Fund 1,200,000 1,194,000 0.73 Elders (Merrill Lynch Intl) Japan Cap Protected III 17B 1,676,180 1,537,895 0.95 Elders (Merrill Lynch Intl) Japan High Income Shs 17A 161,000 82,915 0.05 Elders (Merrill Lynch Intl) 9.00% High Yield Shs Cls 24A 2,453,586 1,110,248 0.68 Elders (Merrill Lynch Intl) Floating Rate Income Shs 24C 953,024 683,795 0.42 F&C Commercial Property Trust 625,000 650,000 0.40 Goldman Sachs International Quanto GBP Cert Euro Stoxx 50 740,989 870,662 0.54 Goldman Sachs International Phoenix Autocall Cert FTSE 100 726,182 808,967 0.50 Harewood Structured Invest PCC BNP Paribas Agrinvest Prf Shs 702,606 906,362 0.56 HSBC Bank 0.00% FTSE AutoCall 26/5/2015 1,598,669 1,705,620 1.05 HSBC Infrastructure 1,372,286 1,609,691 0.99 HSBC Infrastructure C Shares 171,535 177,539 0.11 International Public Partnership 1,400,491 1,641,375 1.01 John Laing Infrastructure Fund 1,265,000 1,340,900 0.83 Morgan Stanley 0.00% FTSE S/A Bonus 18/07/16 710,369 752,139 0.46 - 386 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Investment Trusts (continued) NB Distressed Debt 1,621,727 1,091,457 0.67 Royal Bank of Scotland FTSE GBP Inc Autocall Certs 16,890 1,670,421 1.03 UK Commercial Property Trust 1,977,564 1,621,602 1.00
Collective Investment Schemes 0.55% (1.01%) Capita Financial Managers Morant Wright Japan B (Acc) 420,987 894,472 0.55
Commodities 5.89% (6.85%) Ceres Agriculture Fund 587,032 0 0.00 ETFS Physical Platinum 0.00% Secured Note (USD) 14,380 1,583,773 0.97 ETFS Physical Gold 0.00% Secured Note (USD) 58,374 5,232,118 3.22 Source Physical Markets Secured Gold Linked Note (USD) 30,496 2,760,294 1.70
Overseas Equities 26.02% (24.45%)
United States of America 5.91% (6.60%) Accenture 25,528 796,075 0.49 Align Technology 39,061 502,885 0.31 Altria 72,249 1,144,668 0.70 Ariba 54,361 822,750 0.51 Barrick Gold 16,600 562,349 0.35 Cisco Systems 47,430 617,962 0.38 Corinthian Colleges 128,374 427,445 0.26 eBay 41,825 757,736 0.47 Genzyme 10,697 491,895 0.30 HeartWare International 7,309 416,171 0.26 Kroger 40,649 580,663 0.36 Reynolds American 40,928 861,157 0.53 Sprint Nextel 315,485 845,249 0.52 Transocean 17,079 760,399 0.47
Brazil 3.84% (3.09%) Anhanguera Educacional Participacoes 57,000 882,6120.54 Banco Santander Brasil ADR 59,934 523,800 0.32 Hypermarcas 95,088 831,029 0.51 Multiplan Empreendimentos 25,015 358,219 0.22 Natura Cosmeticos 43,945 810,075 0.50 Petroleo Brasileiro Spon ADR 71,587 1,554,656 0.96 Rossi Residencial 81,576 465,690 0.29 Tele Norte Leste Participacoes ADR 86,018 813,811 0.50
Australia 1.70% (1.62%) Newcrest Mining 61,523 1,628,642 1.00 Oil Search 103,103 474,464 0.29 QBE Insurance 55,621 660,834 0.41
China 1.65% (2.02%) Camelot Information Systems ADR 27,974 430,231 0.26 Powerlong Real Estate 3,046,000 638,552 0.39 Shenguan 1,112,000 937,991 0.58 Yingde Gases 1,177,500 678,097 0.42
- 387 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%) Hong Kong 2.23% (1.05%) Belle International 330,000 359,845 0.22 Hongkong Land 197,000 916,043 0.56 Huabao International 460,000 478,733 0.29 Link Real Estate Investment Trust 163,000 326,175 0.20 Man Wah 682,400 713,583 0.44 Sands China 593,000 845,141 0.52
Japan 0.72% (0.00%) INPEX 150 564,742 0.35 Otsuka 38,000 601,758 0.37
South Korea 0.26% (0.26%) LG Uplus 103,691 421,317 0.26
Singapore 2.33% (2.63%) DBS 202,500 1,456,434 0.90 Mapletree Logistics Trust 3,079,530 1,477,103 0.91 Noble 775,545 845,259 0.52
Taiwan 0.44% (0.51%) Taiwan Semiconductor Manufacturing ADS 89,465 713,323 0.44
Thailand 0.39% (0.00%) Bangkok Bank 197,600 629,029 0.39
South Africa 0.48% (0.28%) MTN 59,791 775,542 0.48
France 0.49% (0.72%) L'Oreal 10,987 789,948 0.49
Germany 1.96% (2.64%) Bayer 32,409 1,535,188 0.94 Bilfinger Berger 16,886 913,396 0.56 Fresenius Medical Care 19,822 740,262 0.46
Norway 0.74% (0.19%) Opera Software 132,496 424,108 0.26 Statoil 50,461 771,959 0.48
Poland 0.46% (0.00%) Telekomunikacja Polska 207,941 748,952 0.46
Switzerland 2.42% (1.56%) Actelion 23,938 843,865 0.52 Novartis 38,452 1,454,794 0.90 Roche 13,103 1,235,965 0.76 Syngenta 2,113 397,753 0.24
- 388 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Derivatives -0.15% (0.99%)
Futures & Options 0.11% (0.41%) FTSE 100 Index February 2011 5600 (Put Option) £371 239,295 0.15 FTSE 100 Index February 2011 5200 (Put Option) £(371) (74,200) (0.05) FTSE 100 Index January 2011 5400 (Put Option) £282 23,970 0.01
EUR Forward Foreign Currency Contracts -0.25% (0.55%) Forward Foreign Currency Contracts 15/03/2011 EUR(10,024,221) (8,639,727) (5.32) Forward Foreign Currency Contracts 15/03/2011 £8,254,646 8,251,040 5.08 Forward Foreign Currency Contracts 15/03/2011 EUR(2,677,862) (2,308,013) (1.42) Forward Foreign Currency Contracts 15/03/2011 £2,300,000 2,299,037 1.41
USD Forward Foreign Currency Contracts -0.01% (0.03%) Forward Foreign Currency Contracts 15/06/2011 USD(2,275,592) (1,465,571) (0.90) Forward Foreign Currency Contracts 15/06/2011 £1,445,297 1,442,755 0.89 Forward Foreign Currency Contracts 15/06/2011 USD(1,540,318) (992,026) (0.61) Forward Foreign Currency Contracts 15/06/2011 £1,000,000 998,280 0.61
Portfolio of investments 158,307,731 97.41 Net current assets 4,201,914 2.59 Total Net Assets 162,509,645 100.00 Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Chile and Spain portfolio categories, which, at 30 June 2010, represented 0.64% and 0.64% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt ADS = American Depositary Share
- 389 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 13,691,483 18,345,161
Revenue 2,081,271 2,221,843
Expenses (1,246,114) (1,157,952)
Finance costs: Interest (260) (142)
Net revenue before taxation 834,897 1,063,749
Taxation (21,488) (91,017)
Net revenue after taxation 813,409 972,732
Total return before distributions 14,504,892 19,317,893
Finance costs: Distributions (813,390) (972,739)
Change in Net Assets attributable to Shareholders from investment activities 13,691,502 18,345,154
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 158,252,081 140,876,761
Amounts receivable on issue of shares 8,247,537 5,868,543 Amounts payable on cancellation of shares (18,376,072) (11,590,392) (10,128,535) (5,721,849)
Stamp duty reserve tax (8,530) (5,925)
Dilution Adjustment 37,849 -
Change in Net Assets attributable to Shareholders from investment activities (see above) 13,691,502 18,345,154
Retained distribution on accumulation shares 665,278 788,657 Closing net assets attributable to Shareholders 162,509,645 154,282,798
- 390 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 158,802,410 153,567,066
Debtors 6,144,815 1,918,208
Cash and bank balances 1,247,678 4,103,582
Total other assets 7,392,493 6,021,790
Total assets 166,194,903 159,588,856
LIABILITIES
Investment liabilities (494,679) (146,200)
Creditors (3,076,615) (942,168)
Distribution payable on income shares (113,964) (248,407)
Total other liabilities (3,190,579) (1,190,575)
Total liabilities (3,685,258) (1,336,775)
Net assets attributable to Shareholders 162,509,645 158,252,081
* Gross of investment liabilities
- 391 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 0.5912 0.0591 0.5321 0.0000 0.5321 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.3028 0.0303 0.2725 0.2596 0.5321 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.6560 pence per share.
Interim Distribution for Sterling Accumulation Shares (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.6713 0.0671 0.6042 0.0000 0.6042 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.2787 0.0279 0.2508 0.3534 0.6042 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.7341 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share) Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.2167 0.1217 1.0950 0.0000 1.0950 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.5186 0.0519 0.4667 0.6283 1.0950 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=60.95%, U=39.05%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has not utilised any foreign tax.
The interim distribution for the period ended 31 December 2009 was 1.1662 pence per share.
- 392 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Phoenix Multi-Asset Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 54,716,991 47,172,032 Commissions 35,922 52,599 Taxes 34,000 15,351
Total purchase costs 69,922 67,950 Gross purchases total 54,786,913 47,239,982
Analysis of total sales proceeds:
Sales before transaction costs 62,653,890 48,001,903 Commissions (36,264) (24,764) Taxes (4,671) (1,390)
Total sales costs (40,935) (26,154) Total sales net of transaction costs 62,612,955 47,975,749
- 393 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
BNY MELLON INVESTMENT FUNDS – NEWTON REAL RETURN FUND
Interim Report for the six months ended 31 December 2010
- 394 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Iain Stewart James Harries
Fund Size £2,960.09m
Benchmark LIBOR GBP 1 Month +4%
The Newton Absolute Intrepid Fund changed it’s name to the Newton Real Return Fund on the 1st July 2009
Yield as at 31/12/10:
Sterling Income Shares 3.41% Sterling Income A Shares 3.51% Exempt Shares 2 (Net Accumulation) 3.30% X Shares (Net Accumulation) 3.17% Institutional Shares (Accumulation) 3.36% X Shares (Net Income) 3.24% Exempt Shares 2 (Net Income) 3.71%
Key Dates: Fund Launch 01 September 1993
Aim
To achieve significant real rates of return in sterling terms predominantly from a portfolio of UK and international securities. The Sub-Fund may also invest in deposits, approved money market instruments, derivative instruments, forward transactions and collective investment schemes.
Fund Ratings
AAA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 9.73% 10.58% 4.40% 14.88% 7.95% Sterling Income A Shares 9.29% 10.14% 3.98% 14.43% 7.51% Exempt Shares 2 (Net Accumulation) 10.00% 10.88% 4.65% 15.17% 8.28% X Shares (Net Accumulation)* 10.67% 11.55% 5.28% 15.87% N/A Institutional Shares (Accumulation)* 9.76% N/A N/A N/A N/A X Shares (Net Income)* 10.68% N/A N/A N/A N/A Exempt Shares 2 (Net Income)* 9.99% N/A N/A N/A N/A
LIBOR GBP 1 Month +4% 4.58% 4.95% 9.77% 10.21% 9.05%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
* Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. - 395 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income A Share Class of the Fund returned 9.26% against 2.24% for LIBOR GBP 1-month +4%.
Over the period, the Fund delivered a significant absolute return, outperforming its benchmark. The second half of 2010 saw almost all asset groups within the Fund deliver a positive return. Within the Fund, equity holdings generated the lion’s share of the performance, with Vodafone the greatest contributor to performance, on the back of progress towards a settlement with its North American asset, Verizon Wireless. Rising commodity prices were an important driver of the total return, with holdings in Newcrest Mining, Minas Buenaventura and ETFS Physical Gold benefiting from the rising price of gold. ETFS Agriculture, a basket of agricultural commodities also generated a positive return amid poor global harvests. The oil producers BP and Royal Dutch Shell benefited from the rising oil price. One of the few holdings to produce a negative return was exposure to US index-linked Treasury bonds, which declined in price, in tandem with the conventional government bond sector. Another notable contributor, the crop chemical and pharmaceuticals company Bayer, experienced a strong rise in its share price following positive results for Xarelto, an alternative drug to Warfarin for the prevention of blood clots.
Key activity included the sale of Genzyme, following a bid by Sanofi Aventis which pushed the shares beyond the manager’s price target; profits were taken from the sale. A new holding was introduced in MTN, the South African- based mobile telecommunications operator. MTN offers attractive exposure to growth in mobile telecommunications across Africa, where penetration rates are considerably lower than the developed-world average. Yamana Gold was introduced and Gold Fields was sold, as the manager sees greater upside in Yamana’s South American assets, which are significantly undervalued relative to its peers. The Fund sold its holding in Acciona which, despite its strong management team, is likely to face a considerable headwind from the impact of Spanish government budget cuts upon the wind energy industry. The duration (a measure of a Fund’s sensitivity to interest rate changes) of the Fund’s securities in Norwegian government bonds was increased, switching 6.5% Kingdom of Norway 2013 into 3.75% Kingdom of Norway 2021. A number of new corporate bond purchases were introduced, including Continental Tires, which offers an attractive yield and a stable business, and Geoeye, where new satellite imaging contracts provide greater visibility on cash flows. The manager also sold some corporate bond after their strong performance, including Rhodia, the French chemicals business, and Grohe, the German faucet manufacturer.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Norway 4.50% Bonds 2019 Norway 6.50% Bonds 2013 Norway 3.75% Bonds 2021 Gold Fields Yamana Gold Genzyme MTN BP Capital Markets 5.75% EMTN 2010 GlaxoSmithKline FTSE 100 Index March 2011 5000 (Put Option) INPEX ETFS Physical Gold 0.00% Secured Note (AUD) Vodafone Acciona British American Tobacco FTSE 100 Index March 2011 4800 (Put Option) Smith & Nephew FTSE 100 Index March 2011 5300 (Put Option) FTSE 100 Index March 2011 5300 (Put Option) Vodafone
- 396 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Statistics
Price and Revenue Record by Share Class Calendar Year Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 231.45 212.22 6.6836
2007 254.95 223.26 7.2769
2008 257.41 209.11 7.9390
2009 276.14 236.01 8.9659
2010 291.07 262.21 9.7938
Highest Lowest Net Revenue Sterling Income A Shares Price (p) Price (p) per share (p)*
2006 98.17 89.90 2.9255
2007 107.27 94.34 3.1688
2008 108.23 87.61 3.4330
2009 115.02 98.49 3.8507
2010 120.63 108.88 4.1778
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 134.75 123.63 3.9078
2007 154.74 133.13 4.3862
2008 161.64 131.37 4.9428
2009 180.34 151.17 5.7806
2010 197.68 173.86 6.5421
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2006 (from 27 February) 104.52 95.63 2.5999
2007 120.76 103.30 3.2460
2008 126.92 103.02 3.6918
2009 142.45 118.82 4.3608
2010 157.09 137.41 4.9675
- 397 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Statistics (continued)
Price and Revenue Record by Share Class (continued) Calendar Year
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2009 (from 30 June) 115.25 98.48 1.6267
2010 126.06 111.09 4.2354
Highest Lowest Net Revenue X Shares (Net Income) Price (p) Price (p) per share (p)*
2009 (from 15 July) 116.71 100.00 1.3568
2010 124.37 111.26 3.9960
Highest Lowest Net Revenue Exempt Shares 2 (Net Income) Price (p) Price (p) per share (p)*
2009 (from 14 August) 180.35 160.82 1.7768
2010 191.24 172.06 6.4042
Highest Lowest Net Revenue Sterling Accumulation P Shares** Price (p) Price (p) per share (p)*
2010 (from 26 February to 15 March) 102.12 100.00 N/A
*Distributions are shown in the year declared rather than paid. ** The Sterling Accumulation P Share Class was launched on 26 February 2010 and was closed on 15 March 2010.
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 26,549,749 243.13 10,920,066
30/06/09 93,884,404 239.16 39,256,062
30/06/10 228,917,320 264.94 86,402,035
31/12/10 353,178,458 286.48 123,280,876
Sterling Income A Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 7,820,693 101.98 7,668,641
30/06/09 23,857,049 99.82 23,900,951
30/06/10 138,698,685 110.02 126,066,070
31/12/10 345,139,622 118.67 290,850,533
- 398 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Statistics (continued)
Net Asset Value History by Share Class (continued)
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 229,260,621 152.63 150,207,182
30/06/09 297,863,415 155.97 190,969,923
30/06/10 789,577,200 179.72 439,348,838
31/12/10 1,135,303,643 196.98 576,355,841
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 114,534,368 119.48 95,862,340
30/06/09 171,116,257 122.94 139,186,637
30/06/10 524,159,008 142.39 368,125,850
31/12/10 860,011,445 156.54 549,397,582
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/09 129,991 99.78 130,275
30/06/10 17,066,496 114.73 14,875,959
31/12/10 44,904,789 125.61 35,748,447
X Shares (Net Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/10 49,138,190 112.73 43,590,770
31/12/10 55,589,218 122.51 45,376,563
Exempt Shares 2 (Net Income) Net Asset Pence Shares as at Value (£) per share in issue
30/06/10 137,818,811 173.85 79,274,323
31/12/10 165,960,035 188.22 88,172,312
- 399 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.11 1.12
Sterling Income A Shares 1.62 1.62
Exempt Shares 2 (Net Accumulation) 0.79 0.80
X Shares (Net Accumulation) 0.04 0.05
Institutional Shares (Accumulation) 1.04 1.05
X Shares (Net Income) 0.04 0.05
Exempt Shares 2 (Net Income) 0.79 0.79
- 400 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Government Stocks 7.04% (4.38%) Croatia 6.625% Bonds 2020 USD10,100,000 6,699,292 0.23 Lithuania 7.375% Bonds 2020 USD5,910,000 4,215,447 0.14 Norway 4.50% Bonds 2019 NOK715,780,000 84,440,599 2.85 Norway 3.75% Bonds 2021 NOK510,910,000 56,521,989 1.91 USA Treasury Bonds 2.50% TII 2029 USD76,459,000 56,618,655 1.91
Sterling Denominated Corporate Bonds 3.18% (5.42%) AES Drax Energy 11.25% Bonds 2010 £1,150,000 1,150 0.00 Anglian Water Services Finance 4.125% Index Linked Notes 2020 £4,227,000 6,862,746 0.23 British Telecommunications 3.50% Index Linked 2025 £4,428,000 6,212,617 0.21 BUPA Finance 7.50% Bonds 2016 £4,621,000 5,111,008 0.17 Cable & Wireless 5.75% Cnv Bonds 2014 £5,100,000 5,281,050 0.18 Cable & Wireless International Finance 8.625% Bonds 2019 £4,110,000 4,195,159 0.14 Co-Operative Bank 5.625% EMTN 2021 £7,266,000 6,406,440 0.22 EDF Energy Networks 3.125% Index Linked 2032 £60,000 91,578 0.00 Firstgroup 8.75% Bonds 2021 £5,101,000 6,268,093 0.21 HSBC 6.375% FRN MTN 2022 £5,800,000 6,064,610 0.20 Imperial Tobacco Finance 8.125% Notes 2024 £3,808,000 4,689,716 0.16 Iron Mountain 7.25% Bonds 2014 £5,163,000 5,249,222 0.18 John Lewis 8.375% Bonds 2019 £5,038,000 6,022,979 0.20 LBG Capital No.1 7.869% Bonds 2020 £3,360,000 2,918,832 0.10 Matalan Finance 9.625% Bonds 2017 £6,874,000 7,320,673 0.25 National Grid Gas 4.1875% Index Linked 2022 £2,900,000 4,856,195 0.16 Nationwide Building Society 5.625% Bonds 2019 £1,786,000 1,775,557 0.06 QBE Insurance 6.125% Bonds 2015 £3,494,000 3,687,379 0.12 Standard Chartered Bank 6.00% FRN MTN 2018 £3,400,000 3,523,503 0.12 TUI Travel 6.00% Cnv Bonds 2014 £5,500,000 5,619,350 0.19 Virgin Media Finance 8.875% Bonds 2019 £2,180,000 2,474,518 0.08
Non-Sterling Denominated Corporate Bonds 10.19% (9.51%) Altria 10.20% Bonds 2039 USD11,362,000 10,271,169 0.35 Ardagh Glass Finance 7.125% Bonds 2017 EUR7,550,000 6,201,624 0.21 Bombardier 6.125% Bonds 2021 EUR8,950,000 7,521,024 0.25 BP Capital Markets 5.25% Bonds 2013 USD33,940,000 23,602,721 0.80 Campofrio Food 8.25% Bonds 2016 EUR8,735,000 7,716,779 0.26 Cemex Finance 9.625% Bonds 2017 EUR6,653,000 5,650,976 0.19 Chesapeake Energy 6.25% Bonds 2017 EUR7,760,000 6,741,149 0.23 Clearwire Comm/Finance 12.00% Bonds 2015 USD6,946,000 4,831,378 0.16 Consol Energy 8.00% Bonds 2017 USD15,200,000 10,425,710 0.35 Conti-Gummi Finance 7.125% Bonds 2018 EUR7,290,000 6,424,513 0.22 Crown Euro 7.125% Bonds 2018 EUR7,512,000 6,767,013 0.23 Enercoal Resources 9.25% Cnv Bonds 2014 USD2,000,000 1,496,181 0.05 ERC Ireland Preferred FRN 2017 EUR7,332,807 442,403 0.01 FMC Finance III 6.875% Bonds 2017 USD10,820,000 7,386,617 0.25 Fresenius Finance 5.625% Cnv Bonds 2011 EUR11,050,000 11,654,787 0.39 GeoEye 9.625% Bonds 2015 USD12,050,000 8,769,563 0.30 Heidelberg Cement 8.50% Bonds 2019 EUR3,721,000 3,523,804 0.12 Heidelberg Cement 8.00% Bonds 2017 EUR6,400,000 5,888,509 0.20 Ineos Finance 9.25% Bonds 2015 EUR8,305,000 7,639,539 0.26 International Personal Finance 11.50% Notes 2015 EUR4,613,000 4,244,644 0.14 Kabel Deutschland 10.625% Notes 2014 USD2,303,561 1,539,799 0.05 LBI Escrow 8.00% Bonds 2017 EUR3,126,000 2,624,876 0.09 Lecta FRN 2014 EUR7,095,000 5,732,882 0.19
- 401 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Non-Sterling Denominated Corporate Bonds (continued) Lottomatica 8.25% Bonds 2066 EUR7,903,000 6,607,132 0.22 Nextel Communications 6.875% Bonds 2013 USD19,828,000 12,773,520 0.43 Nextel Communications 7.375% Bonds 2015 USD7,880,000 5,066,385 0.17 Offshore Group Investment 11.50% Bonds 2015 USD4,710,000 3,263,309 0.11 OI European 6.75% Bonds 2020 EUR8,752,000 7,624,600 0.26 Owens-Brockway Glass 6.75% Bonds 2014 EUR7,115,000 6,269,476 0.21 Petroleos de Venezuela 8.00% Bonds 2013 USD6,035,625 3,186,241 0.11 Petroleos de Venezuela 0.00% Bonds 2011 USD5,365,000 3,294,528 0.11 Phoenix PIB Finance 9.625% Bonds 2014 EUR8,990,000 8,427,101 0.29 Prudential 11.75% FRN 2049 USD8,850,000 6,597,460 0.22 PTS Acquisition 9.75% Bonds 2017 EUR6,380,000 5,416,344 0.18 Renhe Commercial 13.00% Bonds 2016 USD8,500,000 5,709,735 0.19 Rexel 8.25% Bonds 2016 EUR6,750,000 6,371,571 0.22 Santos Finance 8.25% Bonds 2070 EUR8,850,000 7,493,118 0.25 Smiths 7.20% Bonds 2019 USD3,341,000 2,404,091 0.08 Smurfit Kappa Acquisition 7.25% Bonds 2017 EUR6,844,000 6,105,197 0.21 Sunrise Communications International 7.00% Bonds 2017 EUR152,000 137,202 0.00 Sunrise Communications International 7.00% Bonds 2017 CHF4,743,000 3,437,411 0.12 Telemovil Finance 8.00% Bonds 2017 USD9,410,000 6,234,740 0.21 UPC Germany 8.125% Bonds 2017 EUR9,747,000 8,903,301 0.30 US Bank 4.375% Bonds 2017 EUR3,250,000 2,744,544 0.09 Versatel FRN 2014 EUR7,827,000 6,076,368 0.21 Virgin Media Finance 9.50% Bonds 2016 USD6,855,000 4,981,112 0.17 Wind Acquisition Finance 11.75% Bonds 2017 EUR9,089,000 8,696,161 0.29 Ziggo Bond 8.00% Bonds 2018 EUR7,850,000 6,986,362 0.24
United Kingdom 22.64% (20.75%) BAE Systems 8,470,372 28,053,872 0.95 Biotech Growth Trust 4,153,749 6,957,530 0.24 BP 9,470,424 44,397,348 1.50 British American Tobacco 1,177,727 29,131,077 0.98 Cable & Wireless Communications 21,370,471 10,364,678 0.35 Cable & Wireless Worldwide 11,881,306 7,936,712 0.27 Centrica 9,719,008 32,305,983 1.09 GlaxoSmithKline 9,359,879 116,951,712 3.95 Morrison (WM) Supermarkets 10,399,175 27,786,596 0.94 Royal Dutch Shell B 1,348,111 28,674,321 0.97 RSA Insurance 23,642,358 29,742,086 1.00 Scottish & Southern Energy 3,696,467 45,540,473 1.54 Severn Trent 2,225,987 32,900,088 1.11 Smith & Nephew 10,883,473 74,497,373 2.52 Tesco 10,375,192 44,582,200 1.51 Vodafone 66,228,611 110,138,180 3.72
Collective Investment Schemes 1.90% (1.95%) RWC Partners Global Convertibles Fund 'B' 96,052 56,339,433 1.90
Commodities 5.49% (5.66%) ETFS Agriculture DJ-AIGSM 0.00% Secured Note (USD) 13,747,639 80,748,675 2.73 ETFS Agriculture DJ-AIGCISM 0.00% Secured Note (GBP) 359,805 2,115,653 0.07 ETFS Physical Gold 0.00% Secured Note (AUD) 62,917 5,529,162 0.19 ETFS Physical Gold 0.00% Secured Note (USD) 549,693 49,269,514 1.67 Source Physical Markets Secured Gold Linked Note (USD) 271,158 24,543,405 0.83
- 402 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Overseas Equities 37.92% (37.17%)
Canada 1.71% (0.00%) Yamana Gold 6,193,856 50,762,923 1.71
United States of America 8.47% (10.49%) Barrick Gold 1,441,938 48,847,774 1.65 Kroger 1,780,814 25,438,562 0.86 Medtronic 1,208,358 28,926,816 0.98 Millicom International Cellular 557,780 34,191,731 1.16 Newmont Mining 829,199 32,618,970 1.10 PDL BioPharma 5,345,260 21,412,712 0.72 Reynolds American 1,596,767 33,597,204 1.14 Sprint Nextel 9,450,871 25,320,811 0.86
Brazil 2.00% (1.97%) Petroleo Brasileiro ADR 1,556,610 33,804,914 1.14 Tele Norte Leste Participacoes ADR 2,698,967 25,534,762 0.86
Peru 0.84% (1.11%) Minas Buenaventura ADR 793,866 24,720,436 0.84
Australia 2.61% (2.51%) Newcrest Mining 2,923,931 77,402,548 2.61
Japan 1.85% (0.73%) INPEX 8,749 32,939,516 1.11 Nomura 5,368,800 21,892,368 0.74
South Korea 0.27% (0.43%) LG Uplus 1,933,453 7,856,000 0.27
Thailand 0.87% (1.15%) Advanced Info Service 14,125,500 25,651,922 0.87
South Africa 1.66% (1.41%) MTN 3,799,270 49,279,853 1.66
Czech Republic 0.00% (0.00%) Bontonfilm (unapproved) 23,400 36,621 0.00 Bonton Pictures (unapproved) 23,400 754 0.00 Bonton (unapproved) 23,400 2,110 0.00 Bonton (unapproved) 23,400 2,110 0.00
France 1.80% (1.86%) Thales 1,089,181 24,651,543 0.83 Total 833,951 28,621,416 0.97
Germany 4.01% (3.75%) Bayer 1,436,885 68,064,092 2.30 Deutsche Telekom 6,116,618 50,714,921 1.71
Netherlands 1.60% (1.88%) Koninklijke 2,482,606 23,387,149 0.79 Reed Elsevier 2,997,255 23,939,340 0.81 - 403 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Norway 1.41% (0.98%) Statoil 2,724,025 41,672,506 1.41
Poland 0.80% (0.98%) Telekomunikacja Polska 6,575,256 23,682,457 0.80
Sweden 1.09% (0.97%) TeliaSonera 6,321,071 32,355,685 1.09
Switzerland 6.93% (6.23%) Actelion 421,168 14,847,054 0.50 BB Biotech 122,611 5,187,598 0.18 Novartis 1,493,230 56,494,915 1.91 Roche 643,376 60,687,658 2.05 Syngenta 176,006 33,131,488 1.12 Zurich Financial Services 207,963 34,679,687 1.17
Derivatives -0.25% (2.01%)
Futures & Options 0.26% (1.40%) AUD FX Currency Future January 2011 90 (Put Option) USD5,697 0 0.00 AUD FX Currency Future January 2011 93 (Put Option) USD168 0 0.00 CBOE SPX Volatility Index February 2011 25 (Put Option) USD6,869 2,256,192 0.08 Euro FX Currency Future March 2011 1.26 (Put Option) USD1,362 942,970 0.03 FTSE 100 Index March 2011 5600 (Put Option) £4,783 5,069,980 0.17 FTSE 100 Index January 2011 6150 (Call Option) £(9,427) (1,555,455) (0.05) US Long Bond Future March 2011 134 (Call Option) USD1,606 48,484 0.00 US Long Bond Future March 2011 126 (Call Option) USD2,359 902,078 0.03
CHF Forward Foreign Currency Contracts -0.12% (-0.11%) Forward Foreign Currency Contracts 15/03/11 CHF(127,212,000) (87,749,601) (2.96) Forward Foreign Currency Contracts 15/03/11 £81,429,869 81,429,869 2.75 Forward Foreign Currency Contracts 15/03/11 CHF117,422,000 80,996,554 2.74 Forward Foreign Currency Contracts 15/03/11 £(74,898,182) (74,898,182) (2.53) Forward Foreign Currency Contracts 15/06/11 CHF(76,517,000) (52,901,248) (1.79) Forward Foreign Currency Contracts 15/06/11 £49,327,999 49,327,999 1.67
CNY Forward Foreign Currency Contracts 0.07% (-0.02%) Forward Foreign Currency Contracts 15/03/11 CNY1,174,165,000 114,729,882 3.88 Forward Foreign Currency Contracts 15/03/11 USD(175,106,858) (112,775,719) (3.81)
EUR Forward Foreign Currency Contracts -0.34% (0.56%) Forward Foreign Currency Contracts 15/03/11 EUR(285,150,000) (245,869,199) (8.31) Forward Foreign Currency Contracts 15/03/11 £239,735,484 239,735,484 8.10 Forward Foreign Currency Contracts 15/06/11 EUR(181,751,000) (156,794,086) (5.30) Forward Foreign Currency Contracts 15/06/11 £153,042,051 153,042,051 5.17
JPY Forward Foreign Currency Contracts -0.02% (-0.08%) Forward Foreign Currency Contracts 14/01/11 JPY(1,636,929,963) (12,960,996) (0.44) Forward Foreign Currency Contracts 14/01/11 £12,446,360 12,446,360 0.42
SGD Forward Foreign Currency Contracts 0.06% (0.00%) Forward Foreign Currency Contracts 15/03/11 SGD77,241,079 38,824,309 1.31 Forward Foreign Currency Contracts 15/03/11 £(37,113,960) (37,113,960) (1.25)
- 404 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
USD Forward Foreign Currency Contracts -0.11% (0.26%) Forward Foreign Currency Contracts 15/03/11 USD(141,835,000) (91,413,740) (3.09) Forward Foreign Currency Contracts 15/03/11 £91,416,640 91,416,640 3.09 Forward Foreign Currency Contracts 15/06/11 USD(333,468,000) (215,138,980) (7.27) Forward Foreign Currency Contracts 15/06/11 £211,795,640 211,795,640 7.16
ZAR Forward Foreign Currency Contracts -0.05% (0.00%) Forward Foreign Currency Contracts 15/03/11 SGD(273,149,000) (26,166,652) (0.88) Forward Foreign Currency Contracts 15/03/11 £24,595,480 24,595,480 0.83
Portfolio of investments 2,608,120,177 88.11
Net current assets 351,967,033 11.89
Total Net Assets 2,960,087,210 100.00
Total unapproved and unquoted securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Italy and Spain portfolio categories, which, at 30 June 2010, represented 0.14% and 0.58% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
ADR = American Depositary Receipt
- 405 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 ££ £ £
Income Net capital gains 190,717,711 93,525,928
Revenue 33,932,264 12,626,267
Expenses (8,193,037) (2,557,834)
Finance costs: Interest - (208)
Net revenue before taxation 25,739,227 10,068,225
Taxation (2,768,447) (1,051,276)
Net revenue after taxation 22,970,780 9,016,949
Total return before distributions 213,688,491 102,542,877
Finance costs: Distributions (28,973,016) (10,851,768)
Change in net assets attributable to Shareholders from investment activities 184,715,475 91,691,109
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 ££ £ £
Opening net assets attributable to Shareholders 1,885,375,710 586,851,116
Amounts receivable on issue of shares 893,654,974 432,594,419 Amounts payable on cancellation of shares (28,628,764) (74,543,967) 865,026,210 358,050,452
Dilution adjustment 698,880 797,424
Stamp Duty Reserve Tax (75,988) (73,649)
Change in net assets attributable to Shareholders from investment activities (see above) 184,715,475 91,691,109
Retained distributions on accumulation shares 24,346,395 9,677,246
Unclaimed distributions 528 107
Closing net assets attributable to Shareholders 2,960,087,210 1,046,993,805
- 406 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets* 2,634,883,511 1,645,635,115
Debtors 36,261,936 64,327,102
Cash and bank balances 332,756,416 221,450,091
Total other assets 369,018,352 285,777,193
Total assets 3,003,901,863 1,931,412,308
LIABILITIES
Investment liabilities (26,763,334) (8,193,228)
Creditors (5,527,268) (24,758,129)
Distribution payable on income shares (11,524,051) (13,085,241)
Total other liabilities (17,051,319) (37,843,370)
Total liabilities (43,814,653) (46,036,598)
Net assets attributable to Shareholders 2,960,087,210 1,885,375,710
* Gross of investment liabilities.
- 407 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Sterling Income Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 3.9392 0.3939 3.5453 0.0000 3.5453 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.8659 0.1866 1.6793 1.8660 3.5453 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=84.64%, U=15.36%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £5,405 which is equivalent to 0.0044 pence per share.
The interim distribution for the period ended 31 December 2009 was 3.6547 pence per share.
Interim Distribution for Sterling Income A Shares (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.7000 0.1700 1.5300 0.0000 1.5300 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.6626 0.0663 0.5963 0.9337 1.5300 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 1.5799 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.6789 0.2679 2.4110 0.0000 2.4110 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.0737 0.1074 0.9663 1.4447 2.4110 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=73.58%, U=26.42%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £17,173 which is equivalent to 0.0044 pence per share.
The interim distribution for the period ended 31 December 2009 was 2.3891 pence per share.
- 408 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Distribution Statement (continued)
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.0001 0.2000 1.8001 0.0000 1.8001 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.4547 0.0455 0.4092 1.3909 1.8001 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=55.60%, U=44.40%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £11,139 which is equivalent to 0.0038 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.7853 pence per share.
Interim Distribution for Institutional Shares (Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.7429 0.1743 1.5686 0.0000 1.5686 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.9752 0.0975 0.8777 0.6909 1.5686 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=81.52%, U=18.48%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £598 which is equivalent to 0.0039 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.5604 pence per share.
- 409 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Distribution Statement (continued)
Interim Distribution for X Shares (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 1.5828 0.1583 1.4245 0.0000 1.4245 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.3832 0.0383 0.3449 1.0796 1.4245 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=56.82%, U=43.18%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £962 which is equivalent to 0.0050 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.3568 pence per share
Interim Distribution for Exempt Shares 2 (Net Income) (in pence per share)
Gross Tax Credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Paid
Group 1 2.5921 0.2592 2.3329 0.0000 2.3329 Group 1:Shares purchased prior to 1 July 2010
Group 2 1.5573 0.1557 1.4016 0.9313 2.3329 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=73.82%, U=26.18%
The 20% tax credit on the unfranked portion of the distribution has been split into deemed income tax and foreign tax by reference to the Fund's utilisation of double tax relief against its own corporation tax liability. The Fund has utilised foreign tax totalling £2,853 which is equivalent to 0.0049 pence per share.
The interim distribution for the period ended 31 December 2009 was 1.7768 pence per share
- 410 - BNY Mellon Investment Funds Interim Report & Accounts – Newton Real Return Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 1,149,943,939 439,387,877 Commissions 1,789,282 337,156 Taxes 117,566 490,596 Total purchase costs 1,906,848 827,752
Gross purchases total 1,151,850,787 440,215,629
Analysis of total sales proceeds:
Sales before transaction costs 353,192,475 106,966,755 Commissions (290,243) (79,154) Taxes (1,282) (783) Total sales costs (291,525) (79,937)
Total sales net of transaction costs 352,900,950 106,886,818
- 411 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
BNY MELLON INVESTMENT FUNDS - NEWTON UK EQUITY FUND
Interim Report for the six months ended 31 December 2010
- 412 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Richard Wilmot Ben Russon
Fund Size £72.37m
Benchmark FTSE All-Share
Yield as at 31/12/10:
Exempt Shares 1 (Net Accumulation) 2.60% Exempt Shares 2 (Net Accumulation) 2.53% X Shares (Net Accumulation) 2.99%
Key Dates: Fund Launch 29 March 1996 Converted to ICVC 02 August 2004
Aim
To achieve long–term growth. The Sub-Fund will invest in a carefully selected portfolio of UK securities. An equal emphasis will be placed on the generation of income and capital growth. The Sub-Fund may also invest in collective investment schemes.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Exempt Shares 1 (Net Accumulation) 23.20% 13.79% -17.69% 13.40% 14.23% Exempt Shares 2 (Net Accumulation)#* 23.08% N/A N/A N/A N/A X Shares (Net Accumulation)#** 23.55% N/A N/A N/A N/A
FTSE All Share TR 14.51% 30.12% -29.93% 5.32% 16.75%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 7%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
# Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
* The Exempt Shares 2 (Net Accumulation) Share Class was launched on 14 November 2004, closed on 25 February 2009 and re-opened on 15 October 2009.
** The X Shares (Net Accumulation) Share Class was launched on 16 April 2007, closed on 18 September 2008 and re-opened on 14 December 2009.
***The Exempt Shares 3 (Net Accumulation) Share Class was launched on 4 April 2005 and closed on 3 October 2007.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 413 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Fund Report (continued)
Portfolio Summary
Over the six-month period under review, the Exempt 1 Net Sterling Acc Share Class of the Fund returned 26.72% against 22.01% for the FTSE All-Share Index.
The UK equity market rose in the second half of 2010 against a backdrop of very loose monetary policy. The Fund made good progress in absolute terms and outperformed the market. The positioning in the oil and gas sector proved particularly beneficial. Africa-focused oil and gas explorer Bowleven, which made two potentially significant discoveries in Cameroon, contributed to performance as did John Wood Group and Premier Oil, which performed strongly as medium-term growth prospects were upgraded. The holding in Carphone Warehouse Group also enhanced performance, with the mobile phone retailer producing strong figures. Performance was hurt, however, from being underweight in the Vodafone Group.
The manager established a position in HSBC Holdings in the portfolio when the stock had a period of weakness. He added to the existing holding in Eurasian Natural Resources, the diversified mining group. With some valuations having become less supportive, the manager sold these holdings and invested the proceeds in lower rated stocks whose business models are better placed for an inflationary environment. This resulted, for instance, in the purchase of the budget airline EasyJet and car rental firm Avis. Among the disposals, the defence contractor BAE Systems was sold when its share price reached the manager’s target.
The table below shows the top ten purchases and sales for the period:
Purchases Sales HSBC BP Vodafone Vodafone Royal Dutch Shell B AstraZeneca BHP Billiton British American Tobacco BP BAE Systems Rio Tinto Xstrata Prudential Wood (John) Wetherspoon (J.D.) Unilever BAE Systems Royal Dutch Shell B Xstrata SABMiller
- 414 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Statistics
Price and Revenue Record by Share Class Calendar Year
Highest Lowest Net Revenue Exempt Shares 1 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 226.44 195.77 5.4652
2007 257.14 218.15 6.5010
2008 258.05 181.11 7.4042
2009 240.96 186.92 7.6562
2010 296.51 227.40 6.3839
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation)** Price (p) Price (p) per share (p)*
2006 140.54 121.60 3.2633
2007 159.43 135.31 3.8859
2008 160.00 112.22 4.4768
2009 104.15 96.45 0.6650
2010 128.04 98.25 2.6477
Highest Lowest Net Revenue Exempt Shares 3 (Net Accumulation)**** Price (p) Price (p) per share (p)*
2006 226.81 196.00 5.7363
2007 (to 3 October) 249.73 218.70 4.0424
Highest Lowest Net Revenue X Shares (Net Accumulation)*** Price (p) Price (p) per share (p)*
2007 (from 16 April) 257.97 218.50 5.2894
2008 (to 18 September) 258.91 217.58 4.8376
2009 (from 14 December) 102.42 99.00 0.0108
2010 126.66 96.85 3.2647
*Distributions are shown in the year declared rather than paid.
** The Exempt Shares 2 (Net Accumulation) Share Class was launched on 14 November 2004, closed on 25 February 2009 and re-opened on 15 October 2009.
*** The X Shares (Net Accumulation) Share Class was launched on 16 April 2007, closed on 18 September 2008 and re-opened on 14 December 2009.
****The Exempt Shares 3 (Net Accumulation) Share Class was launched on 4 April 2005 and closed on 3 October 2007. - 415 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Statistics (continued)
Net Asset Value History by Share Class
Exempt Shares 1 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 73,504,862 229.40 32,042,294
30/06/09 54,887,906 197.96 27,726,165
30/06/10 44,280,841 232.67 19,031,645
31/12/10 63,598,244 294.63 21,585,718
Exempt Shares 2 (Net Accumulation)* Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 500,097 142.18 351,741
30/06/09 N/A N/A N/A
30/06/10 517,232 100.53 514,519
31/12/10 693,051 127.23 544,734
Exempt Shares 3 (Net Accumulation)*** Net Asset Pence Shares as at Value (£) per share in issue
30/06/07 121,887,240 242.14 50,338,207
X Shares (Net Accumulation)** Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 3,697,552 230.60 1,603,448
30/06/09 N/A N/A N/A
30/06/10 9,915 99.15 10,000
31/12/10 8,079,365 125.86 6,419,322
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Exempt Shares 1 (Net Accumulation) 0.57 0.57
Exempt Shares 2 (Net Accumulation) 0.67 0.67
X Shares (Net Accumulation) 0.07 0.07
* The Exempt Shares 2 (Net Accumulation) Share Class was launched on 14 November 2004, closed on 25 February 2009 and re-opened on 15 October 2009.
** The X Shares (Net Accumulation) Share Class was launched on 16 April 2007, closed on 18 September 2008 and re-opened on 14 December 2009.
***The Exempt Shares 3 (Net Accumulation) Share Class was launched on 4 April 2005 and closed on 3 October 2007. - 416 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 97.86% (98.96%)
Oil & Gas Producers 11.76% (12.42%) BG 155,792 2,024,517 2.80 Bowleven 131,354 500,459 0.69 Circle Oil 605,359 208,849 0.29 BP 371,125 1,739,834 2.40 Premier Oil 39,010 759,915 1.05 Royal Dutch Shell B 154,017 3,275,942 4.53
Oil Equipment, Services & Distribution 0.69% (0.79%) Wood (John) 90,106 499,638 0.69
Chemicals 0.82% (0.97%) Johnson Matthey 28,983 595,311 0.82
Mining 14.74% (10.70%) Anglo American 64,255 2,148,045 2.97 Bellzone Mining 398,236 332,527 0.46 BHP Billiton 101,393 2,600,730 3.59 Eurasian Natural Resources 75,734 800,508 1.11 Rio Tinto 68,196 3,078,367 4.25 Xstrata 112,446 1,706,368 2.36
Aerospace & Defence 3.13% (3.41%) Cobham 386,934 789,732 1.09 Rolls Royce 191,206 1,201,730 1.66 Rolls Royce ‘C’ Shares Entitlement (Jan 2011) 5,388,672 5,389 0.01 Ultra Electronics 15,612 265,716 0.37
General Industrials 0.70% (1.48%) Smiths 40,467 507,861 0.70
Electronic & Electrical Equipment 0.67% (1.03%) Morgan Crucible 110,415 270,296 0.37 Xaar 90,571 214,653 0.30
Industrial Engineering 0.81% (0.94%) Rotork 15,900 288,426 0.40 Spirax-Sarco Engineering 15,285 295,765 0.41
Support Services 7.46% (7.42%) Aggreko 28,500 424,080 0.59 Bunzl 97,209 701,363 0.97 Digital Barriers 321,110 610,109 0.84 Electrocomponents 134,101 355,502 0.49 Experian 75,317 598,770 0.83 Filtrona 127,682 312,693 0.43 Homeserve 83,334 371,336 0.51 Intertek 19,841 354,559 0.49 Michael Page International 68,880 380,562 0.53 Premier Farnell 118,870 339,849 0.47 SIG 350,654 447,785 0.62 Travis Perkins 47,690 499,791 0.69
- 417 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Beverages 0.77% (2.46%) Barr 27,330 298,717 0.41 Britvic 54,909 259,555 0.36
Food Producers 1.84% (3.01%) Associated British Foods 112,695 1,333,182 1.84
Household Goods & Home Construction 0.44% (0.50%) Berkeley 35,374 315,536 0.44
Health Care Equipment & Services 3.59% (3.22%) Immunogiagnostic Systems 31,271 273,621 0.38 Smith & Nephew 222,975 1,526,264 2.11 Synergy Health 90,022 797,595 1.10
Pharmaceuticals & Biotechnology 1.52% (5.92%) Abcam 76,768 247,346 0.34 Dechra Pharmaceuticals 64,405 327,499 0.45 Genus 39,142 332,903 0.46 Hikma Pharmaceuticals 23,857 193,003 0.27
Food & Drug Retailers 5.54% (5.22%) Booker 504,989 302,993 0.42 Greggs 58,763 276,304 0.38 Morrison (WM) Supermarkets 315,427 842,821 1.16 Ocado 188,563 324,328 0.45 Sainsbury (J) 134,839 511,040 0.71 Tesco 406,847 1,748,222 2.42
General Retailers 2.21% (2.99%) ASOS 21,823 343,930 0.48 Carphone Warehouse 87,665 346,277 0.48 Mothercare 49,771 304,350 0.42 Next 20,459 407,952 0.56 eXpansys 3,261,664 195,700 0.27
Media 4.16% (3.97%) Daily Mail & General Trust 52,636 300,815 0.42 Betfair 18,335 177,850 0.25 ITV 647,551 458,466 0.63 Informa 103,274 420,842 0.58 Reed Elsevier 170,507 919,885 1.27 United Business Media 105,895 730,676 1.01
Travel & Leisure 6.18% (3.79%) Avis Europe 148,273 344,142 0.48 Carnival 21,223 631,809 0.87 Easyjet 83,544 367,677 0.51 Millenium & Copthorne Hotels 108,031 624,959 0.86 Restaurant 127,190 350,027 0.48 Thomas Cook 208,314 398,296 0.55 Wetherspoon (J.D) 268,145 1,204,239 1.66 Whitbread 30,815 555,286 0.77
- 418 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Fixed Line Telecommunications 0.41% (0.81%) Cable & Wireless Communications 616,246 298,879 0.41
Mobile Telecommunications 1.08% (1.03%) Vodafone 469,050 780,030 1.08
Gas, Water & Multiutilities 1.89% (2.76%) Centrica 197,735 657,271 0.91 Pennon 111,243 709,174 0.98
Banks 12.74% (9.57%) Barclays 380,563 1,012,678 1.40 HSBC 693,465 4,549,824 6.29 Lloyds Banking 2,502,483 1,659,146 2.29 Standard Chartered 114,500 2,000,888 2.76
Non-life Insurance 0.45% (0.56%) Admiral 21,517 326,413 0.45
Life Insurance 2.38% (0.76%) Prudential 155,630 1,039,608 1.44 Standard Life 315,358 681,804 0.94
Real Estate Investment & Services 0.97% (0.41%) Capital & Counties Properties 265,196 398,059 0.55 Hansteen 379,234 303,387 0.42
Real Estate Investment Trusts 2.62% (1.89%) Derwent London 24,760 382,047 0.53 Hammerson 112,677 471,779 0.65 Land Securities 97,527 658,307 0.91 Shaftesbury 87,281 383,862 0.53
Financial Services 4.26% (2.50%) Aberdeen Asset Management 154,658 313,492 0.43 Hargreaves Lansdown 79,780 466,713 0.64 ICAP 117,593 626,183 0.87 IG 69,675 352,556 0.49 Investec 88,346 462,933 0.64 London Stock Exchange 73,622 618,425 0.85 Telecity 52,807 249,513 0.34
Software & Computer Services 2.23% (3.15%) Autonomy 17,615 267,572 0.37 Aveva 24,283 389,985 0.54 Fidessa 20,890 321,497 0.44 Sage 230,689 633,241 0.88
- 419 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Technology Hardware & Equipment 1.80% (1.63%) ARM 112,299 478,394 0.66 CSR 69,126 247,748 0.34 Imagination Technologies 86,168 310,377 0.43 Spirent Communications 180,501 266,961 0.37
Portfolio of investments 70,819,830 97.86
Net current assets 1,550,830 2.14
Total Net Assets 72,370,660 100.00
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Personal Goods, Tobacco and Electricity portfolio categories, which, at 30 June 2010, represented 0.51%, 2.08% and 1.06% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
- 420 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income
Net capital gains 11,998,943 8,111,575
Revenue 542,722 764,197
Expenses (154,891) (131,850)
Finance costs : Interest (696) -
Net revenue before taxation 387,135 632,347
Taxation (475) 1,966 Net revenue after taxation 386,660 634,313
Total return before distributions 12,385,603 8,745,888
Finance costs : Distributions (386,659) (634,317)
Change in net assets attributable to Shareholders from investment activities 11,998,944 8,111,571
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 44,807,988 54,887,906
Amounts receivable on issue of shares 18,432,137 1,437,273 Amounts payable on cancellation of shares (3,422,768) (19,689,222) 15,009,369 (18,251,949)
Dilution adjustment 85,400 24,731
Stamp Duty Reserve Tax (8,092) (5,038)
Change in net assets attributable to Shareholders from investment activities (see above) 11,998,944 8,111,571
Retained distributions on accumulation shares 477,051 600,737
Closing net assets attributable to Shareholders 72,370,660 45,367,958
- 421 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 70,819,830 44,341,372
Debtors 437,801 264,153
Cash and bank balances 1,145,635 304,694 Total other assets 1,583,436 568,847 Total assets 72,403,266 44,910,219
LIABILITIES Creditors (32,606) (102,231)
Total liabilities (32,606) (102,231)
Net assets attributable to Shareholders 72,370,660 44,807,988
- 422 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Distribution Statement for the six months ended 31 December 2010
Interim Distribution for Exempt Shares 1 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 2.0761 0.2076 1.8685 0.0000 1.8685 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.7412 0.0741 0.6671 1.2014 1.8685 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 3.1701 pence per share.
Interim Distribution for Exempt Shares 2 (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 0.8320 0.0832 0.7488 0.0000 0.7488 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.3910 0.0391 0.3519 0.3969 0.7488 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.6650 pence per share.
Interim Distribution for X Shares (Net Accumulation) (in pence per share)
Gross Tax credit Net Amount Dividend Distribution Revenue @ 10% Revenue Equalisation Accumulated
Group 1 1.2054 0.1205 1.0849 0.0000 1.0849 Group 1:Shares purchased prior to 1 July 2010
Group 2 0.2992 0.0299 0.2693 0.8156 1.0849 Group 2:Shares purchased 1 July 2010 to 31 December 2010
Percentage of (F)ranked/(U)nfranked revenue; F=100.00%, U=0.00% The interim distribution for the period ended 31 December 2009 was 0.0108 pence per share.
- 423 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Equity Fund
Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs:
Purchases before transaction costs 39,521,369 15,351,610 Commissions 25,194 12,327 Taxes 186,419 70,169
Total purchase costs 211,613 82,496
Gross purchases total 39,732,982 15,434,106
Analysis of total sales proceeds:
Sales before transaction costs 25,279,718 28,603,553 Commissions (19,200) (15,940)
Total sales costs (19,200) (15,940)
Total sales net of transaction costs 25,260,518 28,587,613
- 424 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Opportunities Fund
BNY MELLON INVESTMENT FUNDS - NEWTON UK OPPORTUNITIES FUND
Interim Report for the six months ended 31 December 2010
- 425 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Opportunities Fund
Fund Report for the six months ended 31 December 2010
General Information
Fund Management Team: Ben Russon Richard Wilmot
Fund Size £466.90m
Benchmark FTSE All-Share
Yield as at 31/12/10:
Sterling Income Shares 1.56% Exempt Shares 2 (Net Accumulation) 2.22% Institutional Shares (Accumulation) 2.01% X Shares (Net Accumulation) 2.82%
Key Dates: Fund Launch 08 February 2002
Aim
To maximise long-term capital growth from a concentrated portfolio primarily invested in the securities of UK companies. The Sub-Fund does not have a bias towards any economic sector or company size. The Sub-Fund may also invest in collective investment schemes.
Fund Ratings
AA Rating by Standard & Poor’s Fund Manager Ratings.
Statutory Performance Data
From 31/12/09 31/12/08 31/12/07 31/12/06 31/12/05 To 31/12/10 31/12/09 31/12/08 31/12/07 31/12/06
Sterling Income Shares 14.75% 17.75% -19.57% 10.84% 18.06% Exempt Shares 2 (Net Accumulation) 15.68% 18.67% -19.04% 11.75% 19.04% Institutional Shares (Accumulation) 15.39% 18.42% -19.28% 11.64% 18.77% X Shares (Net Accumulation)* 16.55% 19.48% -18.50% N/A N/A
FTSE All Share 14.51% 30.12% -29.93% 5.32% 16.75%
Source: Lipper as at 31 December 2010 - Total return including revenue net of UK tax and annual charges, but excluding initial charge. All figures are in sterling terms. The impact of the initial charge, which may be up to 4%, can be material on the performance of your investment. Performance figures including the initial charge are available upon request.
*Full 5 year performance data is not available. For share class launch dates, please refer to the Investor Information section at the back of this report.
Past performance is not a guide to future performance. The value of investments and the revenue from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested.
- 426 - BNY Mellon Investment Funds Interim Report & Accounts – Newton UK Opportunities Fund
Fund Report
Portfolio Summary
Over the six-month period under review, the Sterling Income Share Class of the Fund returned 16.85% against 22.01% for the FTSE All-Share Index.
Over the review period, the Fund generated a strong positive return in absolute terms, but nevertheless lost some performance relative to the market. Relative performance was negatively affected by the Fund’s positioning in the industrials sector. Notably, shares in Serco Group came under pressure after the company made an attempt to make its key suppliers share the burden of government spending cuts. Although quickly withdrawn, the move led the market to doubt the earnings guidance for the group. Although government austerity causes pressures in the near term, the manager believes that, in reality, there is likely to be further outsourcing of government functions – to the benefit of Serco Group. The defence company Cobham, another holding, performed poorly following the release of disappointing earnings guidance; however, the manager believes the company continues to be inexpensive when set against its longer term prospects.
Performance was enhanced by the holding in Carphone Warehouse Group. The combination of the mobile phone retailer’s management team with the distribution network of US electrical retailer Best Buy has proved to be more successful than initial expectations. In the oil sector, Premier Oil (subsequently sold) and John Wood Group also performed strongly as medium-term growth prospects were upgraded. The holding in the cruise-ship operator Carnival, which delivered a robust trading update, contributed to performance.
During the period, the manager established a new holding in Standard Life. The finance company has been investing heavily in preparation for the regulatory changes affecting the savings industry. As these costs fall away, the company should be in a very strong position to capitalise on the opportunities that these changes present. The manager established a new position in Lloyds Group, which now has a commanding position in the UK market. Among the disposals, the holding in Compass Group was sold as the manager believed that its turnaround objective had largely been achieved. The manager also sold out of the position in the outsourcing company Capita. The position in Premier Oil was completely sold, as its shares appreciated to the point the manager considered to be a full valuation. The proceeds of the sale were used to increase the exposure to Royal Dutch Shell. The manager exited the energy- engineering company AMEC, switching into John Wood Group.
The table below shows the top ten purchases and sales for the period:
Purchases Sales Syngenta Compass Standard Life BAE Systems Lloyds Banking Capita Informa RSA Insurance Royal Dutch Shell B Premier Oil Associated British Foods Tele Norte Leste Participacoes ADR Reed Elsevier British Sky Broadcasting Carnival AMEC Ultra Electronics Rio Tinto
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Statistics
Price and Revenue Record by Share Class Calendar Year Highest Lowest Net Revenue Sterling Income Shares Price (p) Price (p) per share (p)*
2006 177.43 134.04 2.2135
2007 197.17 172.12 2.4715
2008 194.87 130.18 3.4356
2009 176.08 140.68 4.0519
2010 199.32 166.81 3.0925
Highest Lowest Net Revenue Exempt Shares 2 (Net Accumulation) Price (p) Price (p) per share (p)*
2006 142.41 117.38 2.7006
2007 161.32 139.38 3.1358
2008 159.77 109.47 4.0078
2009 153.61 114.91 4.2957
2010 178.49 147.05 3.9198
Highest Lowest Net Revenue Institutional Shares (Accumulation) Price (p) Price (p) per share (p)*
2006 137.33 113.33 2.3228
2007 155.59 134.34 2.8719
2008 153.92 105.19 3.5260
2009 147.24 110.33 3.8697
2010 170.68 140.92 3.3986
Highest Lowest Net Revenue X Shares (Net Accumulation) Price (p) Price (p) per share (p)*
2007 (from 2 July) 161.74 140.77 N/A
2008 160.22 110.39 4.9743
2009 156.10 116.12 5.1172
2010 182.73 149.56 5.1202
*Distributions are shown in the year declared rather than paid.
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Statistics (continued)
Net Asset Value History by Share Class
Sterling Income Shares Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 169,626,577 170.29 99,610,448
30/06/09 200,290,721 144.15 138,947,831
30/06/10 252,326,730 169.17 149,151,913
31/12/10 294,233,963 197.36 149,082,788
Exempt Shares 2 (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 17,730,819 142.78 12,418,260
30/06/09 23,799,785 125.22 19,006,797
30/06/10 26,864,658 150.90 17,803,427
31/12/10 28,562,491 176.77 16,157,968
Institutional Shares (Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 3,020,436 137.42 2,198,031
30/06/09 71,909,815 120.16 59,847,253
30/06/10 83,360,149 144.46 57,703,454
31/12/10 97,822,709 169.02 57,875,742
X Shares (Net Accumulation) Net Asset Pence Shares as at Value (£) per share in issue
30/06/08 41,077,500 143.65 28,596,052
30/06/09 39,485,836 126.78 31,145,933
30/06/10 42,044,319 153.92 27,314,968
31/12/10 46,284,934 181.00 25,571,814
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Statistics (continued)
Total Expense Ratio
31/12/10 30/06/10 Share Class % %
Sterling Income Shares 1.62 1.62
Exempt Shares 2 (Net Accumulation) 0.79 0.80
Institutional Shares (Accumulation) 1.05 1.05
X Shares (Net Accumulation) 0.04 0.05
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Portfolio Statement as at 31 December 2010
Market Total Net Investments Holding Value (£) Assets (%)
United Kingdom 91.47% (92.27%)
Oil & Gas Producers 10.67% (8.97%) BG 1,418,912 18,438,761 3.95 BP 3,352,876 15,718,283 3.37 Royal Dutch Shell B 736,000 15,654,720 3.35
Oil Equipment, Services & Distribution 2.37% (1.21%) Wood (John) 2,000,000 11,090,000 2.37
Mining 7.28% (5.20%) BHP Billiton 780,417 20,017,696 4.29 Rio Tinto 309,569 13,973,945 2.99
Aerospace & Defence 4.83% (7.35%) Cobham 5,800,570 11,838,963 2.54 Ultra Electronics 628,565 10,698,176 2.29
Support Services 6.23% (10.30%) Bunzl 1,983,802 14,313,131 3.07 Serco 2,611,480 14,754,862 3.16
Food Producers 5.70% (4.78%) Associated British Foods 1,047,000 12,386,010 2.65 Unilever 722,866 14,247,689 3.05
Tobacco 3.64% (3.56%) British American Tobacco 686,320 16,976,125 3.64
Health Care Equipment & Services 3.71% (3.66%) Smith & Nephew 2,533,452 17,341,479 3.71
Pharmaceuticals & Biotechnology 2.97% (3.13%) GlaxoSmithKline 1,110,359 13,873,936 2.97
Food & Drug Retailers 5.67% (6.15%) Morrison (WM) Supermarkets 4,745,156 12,679,057 2.72 Tesco 3,211,085 13,798,032 2.95
General Retailers 3.54% (1.95%) Carphone Warehouse 4,178,516 16,505,138 3.54
Media 6.11% (5.18%) British Sky Broadcasting 1,170,100 8,611,936 1.84 Informa 1,675,000 6,825,625 1.46 Reed Elsevier 2,435,000 13,136,825 2.81
Travel & Leisure 5.17% (7.70%) Carnival 525,000 15,629,250 3.35 Wetherspoon (J.D.) 1,892,565 8,499,509 1.82
Fixed Line Telecommunications 1.97% (2.85%) Cable & Wireless Communications 7,955,627 3,858,479 0.83 Cable & Wireless Worldwide 7,955,627 5,314,359 1.14
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Portfolio Statement (continued)
Market Total Net Investments Holding Value (£) Assets (%)
Mobile Telecommunications 3.98% (3.88%) Vodafone 11,186,283 18,602,789 3.98
Electricity 3.25% (3.41%) Scottish & Southern Energy 1,231,122 15,167,423 3.25
Gas, Water & Multiutilities 3.34% (3.45%) Centrica 4,687,217 15,580,309 3.34
Banks 3.38% (1.62%) Lloyds Banking 9,650,000 6,397,950 1.37 Standard Chartered 537,792 9,397,915 2.01
Life Insurance 1.75% (0.00%) Standard Life 3,783,300 8,179,495 1.75
General Financial 2.44% (2.12%) ICAP 2,136,040 11,374,413 2.44
Software & Computer Services 3.47% (3.38%) Sage 5,894,603 16,180,685 3.47
Overseas Equities 5.72% (5.96%)
United States of America 1.15% (1.41%) Sprint Nextel 2,005,000 5,371,804 1.15
Switzerland 4.57% (2.76%) Roche 121,325 11,444,210 2.45 Syngenta 52,500 9,882,635 2.12
Portfolio of investments 453,761,614 97.19
Net current assets 13,142,483 2.81
Total Net Assets 466,904,097 100.00
Total unapproved securities 0.00%
Comparative figures in brackets refer to 30 June 2010.
During the six months ended 31 December 2010, the Fund disposed of its holdings in the Nonlife Insurance and Brazil portfolio categories, which, at 30 June 2010 represented 2.42% and 1.79% respectively of the Total Net Assets of the Fund.
Unless otherwise indicated, the holdings in the Portfolio Statement represent the ordinary shares, ordinary stock units, common shares or debt securities of the relevant companies or issuers.
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Statement of Total Return for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Income Net capital gains 66,065,551 72,400,930
Revenue 4,971,390 5,266,222
Expenses (2,848,459) (2,504,561) Net revenue before taxation 2,122,931 2,761,661
Taxation - (8,329)
Net revenue after taxation 2,122,931 2,753,332
Total return before distributions 68,188,482 75,154,262
Finance costs: Distributions (47,912) 46,783
Change in net assets attributable to Shareholders from investment activities 68,140,570 75,201,045
Statement of Change in Net Assets Attributable to Shareholders for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Opening net assets attributable to Shareholders 404,595,856 335,486,157
Amounts receivable on issue of shares 16,995,624 40,255,644 Amounts payable on cancellation of shares (22,704,001) (16,705,632) (5,708,377) 23,550,012
Dilution adjustment - 49,354
Stamp Duty Reserve Tax (123,987) (129,581)
Change in net assets attributable to Shareholders from investment activities (see above) 68,140,570 75,201,045
Unclaimed distributions 35 68
Closing net assets attributable to Shareholders 466,904,097 434,157,055
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Balance Sheet as at 31 December 2010
31/12/10 30/06/10 £ £ £ £
ASSETS Investment assets 453,761,614 397,411,934
Debtors 1,443,978 5,813,499
Cash and bank balances 12,321,401 16,493,156 Total other assets 13,765,379 22,306,655
Total assets 467,526,993 419,718,589
LIABILITIES
Creditors (622,896) (10,510,210)
Distribution payable on income shares - (4,612,523) Total liabilities (622,896) (15,122,733) Net assets attributable to Shareholders 466,904,097 404,595,856
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Portfolio Transaction Costs for the six months ended 31 December 2010
31/12/10 31/12/09 £ £ £ £
Analysis of total purchase costs: Purchases before transaction costs 63,278,238 58,783,740 Commissions 54,907 50,523 Taxes 235,223 274,836
Total purchase costs 290,130 325,359 Gross purchases total 63,568,368 59,109,099
Analysis of total sales proceeds: Sales before transaction costs 73,225,019 19,542,801 Commissions (73,209) (20,272) Taxes (134) (6)
Total sales costs (73,343) (20,278) Total sales net of transaction costs 73,151,676 19,522,523
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Directors’ Statement
In accordance with the requirements of the rules in the Financial Services Authority’s Collective Investment Schemes Sourcebook, we hereby certify the Report on behalf of the Directors of BNY Mellon Fund Managers Limited.
} G A Brisk } } Directors } A Mearns }
BNY Mellon Fund Managers Limited London
4 February 2011
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Investor Information
General BNY Mellon Investment Funds (“the Company”) was authorised by the Financial Services Authority on 19 April 1999 as an umbrella company with 15 sub-funds each of which is classified as a securities fund. The Company is incorporated in England and Wales as an investment company with variable capital (“ICVC”) under registration number IC27 and the FSA registered number for the ICVC is 188478.
Each Sub-Fund has a specific portfolio of assets and investments to which the Sub-Fund’s assets and/or liabilities are attributable and each investor should view each Sub-Fund as a separate investment entity.
Investors should be aware that the Company’s creditors may look to all the Company’s assets for payment regardless of the Sub-Fund in respect of which the debt has arisen. Assets may be re-allocated to and from other Sub-Funds if it is necessary to do so to satisfy any creditor proceeding against the Company. In the event that any assets are so re- allocated, the Authorised Corporate Director (“ACD”) will advise shareholders in the next report to shareholders.
Each Sub-Fund will be charged with the liabilities, expenses, costs and charges of the Company attributable to that Sub-Fund and within the Sub- Funds charges will be allocated between Share Classes in accordance with the terms of issue of those Share Classes. The FSA registered number for the ACD is 122007.
Any assets, liabilities, expenses, costs or charges not attributable to a particular sub-fund may be allocated by the ACD in a manner which is fair to shareholders as a whole but they will normally be allocated to all sub-funds pro rata to the value of the net assets of the relevant funds.
Although each sub-fund, so far as possible, will be treated as bearing the liabilities, expenses, costs and charges attributable to it, if its assets are not sufficient, the ACD may re-allocate assets, liabilities, expenses, costs and charges between the sub-funds in a manner which is fair to the shareholders of the Company generally. The ACD would normally expect any such re-allocation to be effected on a pro rata basis having regard to the Net Asset Values of the relevant sub-funds. If there is any such re-allocation the ACD will advise shareholders of it in the next succeeding annual or half-yearly report to shareholders.
Shareholders are not, however, liable for the debts of the Company. A shareholder is not liable to make any further payment to the Company after he has paid the purchase price of the Shares.
Significant Events The following additions and amendments have been made:- Additions:- 2000 – launched Newton Global Innovation Fund (24 March); Newton European High Yield Bond Fund (02 October) and A Share Class of Newton Intrepid Fund (27 October).
2002 – launched Newton UK Opportunities Fund (08 February).
2004 – launched Newton American Fund – Exempt 1 Net Acc. (02 August), Newton Income Fund – Exempt 2 Net Acc. (14 September), Newton Absolute Intrepid Fund - Exempt 2 Net Acc. (28 October), Newton UK Equity Fund – Exempt 2 Net Acc. (14 November).
2005 – launched Newton Higher Income Fund – Exempt 2 Net Acc. (26 January) and Institutional Net Acc. (11 April), Newton Overseas Equity Fund – Exempt 2 Net Acc. (26 January), Newton UK Opportunities Fund – Exempt 2 Net Acc. (31 January) and Institutional Net Acc. (25 May), Newton Income Fund – Institutional Net Acc. (11 April), Newton Global Balanced Fund – Exempt 2 Net Acc. (14 April), Newton Long Corporate Bond Fund – Exempt 2 Gross Acc. (6 May), Newton Global Opportunities Fund (01 July), Newton 60/40 Global Equity Fund – Exempt 2 Net Acc. (3 November), Newton Global Higher Income Fund (30 November), Newton Asian Income Fund (30 November), Newton International Bond Fund – Institutional Net Acc. (7 December).
2006 – launched the following sub-funds/share classes: Newton Absolute Intrepid Fund – X Net Acc. (27 February), Newton International Growth Fund – Exempt 1 Net Acc. (02 February), Newton Global Dynamic Bond Fund – Sterling Inc. and Exempt 2 Gross Acc. (28 April), Newton Higher Income Fund – Institutional Net Inc. (2 May), Newton Balanced Fund – Institutional Net Acc. (5 June), Newton Managed Fund – Institutional Net Acc. (12 June), Newton Income Fund – Institutional Net Inc. (23 June), Newton Global Dynamic Bond Fund – Institutional Net Inc. (29 June), Newton Global Higher Income Fund – Exempt Shares 2 Net Inc. (4 August), Newton Long Corporate Bond Fund – Institutional Net Acc. (24 October), Newton Phoenix Multi-Asset Fund – Sterling Inc. and Sterling Acc. (27 November), Newton Global Opportunities Fund – X Net Acc. (12 December).
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Investor Information (continued)
2007 – launched the following sub-funds/share classes: Newton Oriental Fund – Institutional Net Acc. (29 January) and X Net Acc. (3 July), Newton European Higher Income Fund – Sterling Inc. and Institutional Net Inc. launched (30 January) and Institutional Net Acc. (10 September), Newton Long Corporate Bond Fund – X Gross Acc. (2 April), Newton Long Gilt Fund – X Shares Gross Acc. (2 April), Newton Overseas Equity Fund – X Gross Acc. (16 April), Newton UK Equity Fund – X Net Acc. (16 April), Newton International Bond Fund – Institutional Net Inc. (27 April), and Exempt 2 Gross Acc. (18 May), Newton Higher Income Fund – X Net Acc. (2 July), Newton UK Opportunities Fund – X Gross Acc. (2 July), Mellon Long-Term Global Equity Fund (Walter Scott & Partners Limited act as Investment Advisers to this sub-fund) – Institutional Net Acc. and Exempt 2 Net Acc. (24 August) and Sterling Inc. (28 September), Newton International Growth Fund – X Net Acc. (10 September), Newton Global Higher Income Fund – X Net Acc. (1 October), Newton Index Linked Gilt Fund – X Gross Acc. (1 October), Newton Diversified Growth Fund – Institutional Acc. and Exempt 2 Net Acc. (14 December).
2008 – launched the following share classes: Newton European High Yield Bond Fund – X Net Acc. (19 March); Newton Global Dynamic Bond Fund – X Net Acc. (19 March); Newton Income Fund – X Net Acc. (19 March); Newton Phoenix Multi-Asset Fund – Exempt Shares 2 Net Acc. (1 February); Newton Strategic Corporate Bond Fund – X Net Acc. (19 March);
2009 – launched the following sub-funds/share classes: Newton International Growth Fund – Exempt 3 Net Acc. (2 February); Newton Growth Fund – Institutional Net Acc (3 March); Newton Asian Income Fund – X Net Inc (2 April); Newton European Higher Income Fund – X Net Inc. (2 April); Newton Higher Income Fund – X Net Inc. (2 April); BNY Mellon Global Strategic Bond Fund – Sterling Inc., Institutional Net Inc., Institutional Net Acc. (9 April); Newton Real Return Fund – Institutional Net Acc. (30 June); X Net Inc. (15 July); Newton International Bond Fund – X Net Acc. (29 June); Newton Real Return Fund X Shares Net Inc share class (15 July); Newton Real Return Fund Exempt 2 Net Inc share class (14 August); Newton Overseas Equity Fund – Exempt 3 Net Acc (22 September); Newton UK Equity Fund – Exempt 2 Net Acc reopened (15 October); Newton UK Equity Fund – X Shares Net Acc re-launched (14 December);
2010 – launched the following share classes: Newton Real Return Fund – P Net Acc (26 February); Newton Higher Income Fund – X Net Inc re-launched (8 October 2010); Newton Global Higher Income Fund – X Net Inc (8 October 2010); Newton Global Dynamic Bond Fund – X Net Inc (11 October 2010); Newton European Higher Income Fund – X Net Inc re-launched (12 November 2010); BNY Mellon Long-Term Global Equity Fund – X Net Acc (17 December 2010).
Amendments:- 2004 – . 30 July - Newton Intrepid Fund name changed to Newton Absolute Intrepid Fund. . 31 July - Following the restructuring of Newton’s range of exempt unit trusts, a number of sub-funds and/or share classes were added to the Company. The sub-funds offer one or more of the following Share Class types – Sterling Inc., Mellon Newton Euro Acc., Exempt 1 Net Acc., Exempt 2 Net Acc., Exempt 1 Gross Acc., Exempt 2 Gross Acc., Institutional Net Acc.. . 2 August – The name of the Company was changed from Newton Investment Funds to Mellon Investment Funds ICVC (“MIF”) and the name of the ACD was changed from Newton Fund Managers Limited to Mellon Fund Managers Limited.
2005 - . 31 March – Mellon Newton Euro Acc. shares name changed to Euro Acc. shares. The following funds offer a Euro Acc. share class: Newton American Fund; Newton Continental European Fund; Newton Global Innovation Fund; Newton International Bond Fund; Newton International Growth Fund; Newton Japan Fund; Newton Oriental Fund and Newton Pan-European Fund. The MIF Prospectus was amended to include an Exempt 3 class for all sub-funds as and when required. . 1 July – The MIF Prospectus was amended to include an X Share Class for all sub-funds as and when required. MIF is meeting the requirements of the European Union Savings Directive (EUSD). . 30 September - At a series of Extraordinary General Meetings of Shareholders in the Company the following changes were approved and effected from:
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Investor Information (continued)
. 1 October – The objective of the Company was changed, as stated in the Instrument of Incorporation, to enable sub-funds of the Company to take up the wider powers prescribed by the recently amended UCITS Directive. The wider powers were adopted by the following sub-funds: Newton European High Yield Bond Fund, Newton Strategic Corporate Bond Fund (formerly Newton High Yield Bond Fund), Newton International Bond Fund, Newton Long Corporate Bond Fund, Newton Absolute Intrepid Fund, Newton Balanced Fund, Newton Global Balanced Fund and Newton Managed Intrepid Fund. Consequently the investment objective and policy of these sub-funds was amended to permit greater investment flexibility, including the greater use of derivatives. . The Newton High Yield Bond Fund name changed to Newton Strategic Corporate Bond Fund.
2005 (cont.) - . The following sub-funds had the investment objective and policy amended to take up/permit greater investment flexibility but did not take up the wider investment powers permitted under the amended UCITS Directive: Newton American Fund; Newton Continental European Fund; Newton Income Fund; Newton Index Linked Gilt Fund; Newton Japan Fund; Newton Oriental Fund; Newton Pan-European Fund and Newton UK Equity Fund. . The limit on investing in other collective investment schemes was increased from 5% to 10% on all sub-funds. . The investment objective of all sub-funds explicitly permits the use of collective investment schemes as an asset class. . The investment objective and policy of the Newton International Bond Fund was amended to remove the list of Government and other public securities allowable for investment. . 14 October – The basis for charging Registrar Fees and other allowable expenses to the sub-funds changed. An Administration Fee of 0.10% per annum is charged on Sterling Income shares; 0.03% per annum is charged on Institutional Income shares, Institutional Accumulation shares and all Exempt and X share classes. The Administration Fee is calculated and accrued daily and payable monthly. . 8 November – The Prospectus was amended to include an Institutional Inc. share class for all sub-funds as and when required. . 13 November – The annual management charge of the Newton Absolute Intrepid Fund is charged to capital rather than income.
2006 - . 30 June – Newton Managed Intrepid Fund was merged into Newton Absolute Intrepid Fund. . 18 December – Newton Global Innovation Fund was closed.
2007 – . 1 September – Newton Growth Fund annual management charge increased to 1.5%. . 1 October – Following the successful merger of Mellon Financial Corporation with Bank of New York, Mellon Fund Managers Limited became part of BNY Asset Management International Holdings Limited. . 1 October - Newton Strategic Corporate Bond Fund changed from the IMA UK Other Bond to the IMA UK Corporate Bond Sector. . 3 October - the Exempt 3 Net Acc. share class of both the Newton Overseas Equity Fund and the Newton UK Equity Fund was closed. . 31 December – Newton Equity & Bond Fund changed sector from IMA UK Equity & Bond Income to IMA Balanced Managed. The performance record was retained.
2008 - . 31 March - Following the successful merger of Mellon Financial Corporation with The Bank of New York, the name of the Company changed from Mellon Investment Funds ICVC (“MIF”) to BNY Mellon Investment Funds (“BNYMIF”) and the name of the ACD from Mellon Fund Managers Limited to BNY Mellon Fund Managers Limited. . 31 March – BNY Mellon Long-Term Global Equity Fund name changed to BNY Mellon Long-Term Global Equity Fund. . 11 June – Newton Absolute Intrepid Fund changed sector from IMA Active Managed to IMA Absolute Return. The performance record from 31 March 2004 is retained. . 1 July - No initial charge will be applied to the reinvestment of distribution income. . 18 September – Newton UK Equity Fund X Net Acc. share class was closed. . 31 December – the name of the Newton Strategic Corporate Bond Fund changed to Newton Corporate Bond Fund. . The Newton Corporate Bond Fund moved from the IMA UK Corporate Bond Sector to the IMA £ Corporate Bond Sector. The performance record was retained.
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Investor Information (continued)
. Newton Higher Income Fund - at the interim accounting date (31 December 2008), in accordance with the Regulations and the objective of the Fund, a proportion of the income available for distribution was retained within the Fund. For the period 1 January to 30 June 2009, the value of the deferred income was included in the daily Net Asset Value (NAV) calculations and, therefore, included in the published price. At the annual accounting date (30 June 2009) all accrued income was distributed. . Suspension of dealing – the ACD and Depositary have agreed that the previous suspension limit of 28 days be extended to indefinite. The ACD and Depositary must review the temporary suspension at least every 28 days and inform the FSA of the result of that review with the aim of ending the temporary suspension as soon as practicable after the exceptional circumstances have ceased. Following the end of the temporary suspension, for dealing purposes, the ACD will recommence the calculation of the net asset value and share price of the fund(s) at the next relevant valuation point.
2009 – . 28 January – Newton Diversified Growth Fund Exempt 2 Net Acc. share class was closed. . 5 February – Newton Diversified Growth Fund Institutional Net Acc. share class was closed. . 25 February – Newton UK Equity Fund Exempt 2 Net Acc. share class was closed . 1 July – The Newton Absolute Intrepid Fund name changed to Newton Real Return Fund. The Newton Higher Income Fund distribution frequency changed from half-yearly to quarterly. The BNY Mellon Long-Term Global Equity Fund minimum investment level reduced to £1,000 and ISA functionality introduced. . Administration for the Exempt and X share classes moved from the London office to BNY Mellon House, Ingrave Road, Brentwood, CM15 8TG. . Shares in Exempt and X share classes represented to 4 decimal places. . 1 August – the annual management charge of the Newton Income Fund is charged to capital rather than income. . 9 October 2009 - Newton International Bond Fund X Shares Net Acc closed; . 30 October 2009 (close of business). Newton European High Yield Bond Fund At an Extraordinary General Meeting held on 28 October 2009, Shareholders voted in favour of the following changes which will be implemented with effect from midnight on 30 October 2009:- The name of the Newton European High Yield Bond Fund changed to Newton Global High Yield Bond Fund; The investment objective changed to:- “The objective of the Sub-Fund is to achieve a high yield from a globally diversified portfolio which may include but is not limited to fixed interest bonds and other debt instruments (such as floating rate notes and index-linked notes). The Sub-Fund may also invest in deposits, derivative instruments, forward transactions and collective investment schemes. At least 80% of the Sub-Fund’s assets should be in Sterling denominated assets or hedged back to Sterling” with effect from 31 October 2009; The IMA sector changed from Global Bonds to £ High Yield – please note that the performance history has been retained. Newton Equity & Bond Fund The lead fund manager changed from Jamie Korner to Simon Nicholls.
30 November 2009 (close of business) – Newton Global Dynamic Bond – change of benchmark from a customised benchmark of 25% Merrill Lynch Global Bond Index; 25% Merrill Lynch Global High Yield index; 25% JP Morgan Emerging Markets Bond Index; 25% JP Morgan Global Bonds Index hedged to a cash benchmark of LIBOR 1 month GBP + 2% p.a. (gross);
31 December 2009 (midnight) – the following changes were implemented on the Newton Equity & Bond Fund:- The Annual Management Charge was reduced on the Sterling Income share class from 1.5% to 1.25% and on the Institutional Net Acc. share class from 1% to 0.75%. The IMA sector changed from Balanced Managed to Cautious Managed;
2010 29 January 2010 (midnight) - the name of the Newton Equity & Bond Fund changed to Newton Cautious Managed Fund; 19 March 2010 – Newton Real Return Fund P Net Acc share class was reduced to zero; 31 March 2010 (midnight) – the following changes were made to the Newton 60/40 Global Equity Fund:- name changed to Newton 50/50 Global Equity Fund;
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Investor Information (continued)
investment objective changed as follows: The objective of the Sub-Fund is to invest in a broad spread of UK and international securities to achieve income and capital growth over the longer term. The Sub-Fund will be managed to a benchmark of approximately 50% UK and 50% international equities. The Sub-Fund may also invest in collective investment schemes. The benchmark changed to: 50% UK equities represented by FTSE All-Share; and 50% overseas equities represented by 1/3 FTSE AW North America, 1/3 FTSE AW Europe ex UK and 1/3 FTSE AW Asia Pacific. 27 April 2010 – the Newton European Higher Income Fund X shares net income share class was reduced to zero; 27 April 2010 – the Newton Higher Income Fund X shares net income share class was reduced to zero;
2011 17 January 2011 - the ACD notified investors of its intention, subject to regulatory approval, to close the Newton Japan Fund as it was no longer economically viable. The ACD continues to progress with the closure process and investors will be updated as appropriate.
Client classification notice: Under the FSA’s Conduct of Business rules we are required to classify our investors. We have classified you as a Retail Client unless otherwise notified. This means that you will have the maximum amount of protection available for complaints and compensation, and will receive information in a straightforward way. However, some clients, such as professional investors, may not necessarily have the same rights under the Financial Ombudsman Service and the Financial Services Compensation Scheme. Further details may be found on our website – www.bnymellonam.co.uk under Client Classification.
The ACD makes available the daily prices of Sterling Income, Sterling Income A, Euro Accumulation, Institutional Net Income, Institutional Net Accumulation Exempt and X shares on its website: www.bnymellonam.co.uk and www.bnymellonam.com. The Sterling Income and Sterling Income A share prices are also available, free, via our Priceline on 0500 330 000. At the ACD’s discretion, Sterling Income and Sterling Income A share prices are currently published in the Financial Times. In addition, the prices of the Institutional share classes are available on the www.bnymellonam.com website.
The ACD has dispensed with the requirement to convene Annual General Meetings of the Company. However, Extraordinary General Meetings will continue to take place as and when required.
Dilution Adjustment As set out in the Prospectus, the ACD may make a dilution adjustment when calculating the price of a share. In deciding whether to make a dilution adjustment at any valuation point, the ACD will take into account the number of shares to be created or cancelled. Where the number of shares to be created exceeds the number of shares to be cancelled, the dilution adjustment to the share price will be upwards. Where the number of shares to be cancelled exceeds the number of shares to be created, the dilution adjustment to the share price will be downwards.
Dealing Arrangements The Investment Adviser uses dealing commission that it pays to brokers to cover costs relating to the execution of trades on behalf of its clients, and, in the case of bundled commission, to purchase research services from brokers or third parties. The Investment Adviser considers such use of commission to be beneficial to the sub-funds, as it enables the Investment Adviser to obtain valuable research and execution services in a cost effective manner.
In many cases, the research services will be provided by the broker and the Investment Adviser will include payment for the research services alongside the execution cost in the commission payment to the broker. In other cases the research services will be provided by a third party, in which case the cost of the services will be met by requesting a broker to pay the third party a portion of the commission that the broker has received, being an amount over and above what was justified by the broker’s own services.
The Investment Adviser currently receives the following goods and services under its Dealing Arrangements in accordance with FSA guidance: (1) goods and services relating to the execution of trades: - market information services; (2) goods and services relating to the provision of research; - research from third party information providers; - broker led research; and - non-broker led research. - 441 - BNY Mellon Investment Funds Interim Report & Accounts
Investor Information (continued)
Annual and Interim Reports The ACD acts on instructions received from shareholders when making a copy of the Interim and Annual Short Report for BNY Mellon Investment Funds available each year.
Help the Environment - Access the Reports Online You can log on to our website and access a copy of the Long Form Financial Statements and the Short Report in English, German, Spanish or Portuguese using the following links:-
English Long Form – www.bnymellonam.com/mifenlong English Short Report – www.bnymellonam.com/mifenshort
German Long Form – www.bnymellonam.com/mifdelong German Short Report – www.bnymellonam.com/mifdeshort
Spanish Long Form – www.bnymellonam.com/mifeslong Spanish Short Report – www.bnymellonam.com/mifesshort
Portuguese Long Form – www.bnymellonam.com/mifptlong Portuguese Short Report – www.bnymellonam.com/mifptshort
A copy of the full Long Form financial statements is also available on written request from BNY Mellon Fund Managers Limited, BNY Mellon House, Ingrave Road, Brentwood, Essex CM15 8TG, England, United Kingdom. The annual accounting period is to 30 June and the interim accounting period is to 31 December.
Help the Environment – Opt Out and Access the Reports Online (UK Investors only) If you are a UK investor and have received a copy of the latest Short Report but would prefer not to receive a hard copy of the Annual and Interim Short Report for future reporting periods, please log on to our website www.bnymellonam.co.uk, select the “Individual Investors” tab and click on “Subscribe to reports” within the Quick Links section. Alternatively, UK and non-UK investors can write to BNY Mellon Fund Managers Limited at BNY Mellon House, Ingrave Road, Brentwood, Essex CM15 8TG, England, United Kingdom. We will note your instructions on your account.
If you reside outside the UK but wish to receive a copy of the Annual and Interim Short Reports in English, please write to BNY Mellon Fund Managers Limited, BNY Mellon House, Ingrave Road, Brentwood CM15 8TG, England, UK and we will record your preference on your account.
The cost of producing the BNY MIF Interim and Annual Reports is charged to the Company in accordance with the provisions of the Regulations and the Prospectus. This Short Report is printed on recycled material from sustainable sources.
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INVESTMENT FUNDS INFORMATION MANAGEMENT AND PROFESSIONAL SERVICES Company Investment Advisers Austrian Paying and Information Agent BNY Mellon Investment Funds Newton Investment Management Limited UniCredit Bank Austria BNY Mellon Centre BNY Mellon Centre Schottemgasse 6-8 160 Queen Victoria Street 160 Queen Victoria Street 1011 Vienna London EC4V 4LA London EC4V 4LA Austria Authorised and regulated by the Tel.: +44 (0) 207163 4300 Financial Services Authority
Authorised Corporate Director (ACD) Walter Scott & Partners Limited Austrian Tax Agent BNY Mellon Fund Managers Limited One Charlotte Square KPMG BNY Mellon Centre Edinburgh EH2 4DZ Kolingasse 19 160 Queen Victoria Street Authorised and regulated by the A-1090 Vienna London EC4V 4LA Financial Services Authority Austria
Tel.: +44 (0) 207163 4300 Standish Mellon Asset Management German Paying and Information Agent Company LLC JP Morgan AG Directors of BNY Mellon Fund Managers Limited BNY Mellon Center Junghofstrasse 14 G A Brisk 201 Washington Street, Suite 2900 60311 Frankfurt am Main P W Feeney Boston MA 02108-4408 Germany A Mearns (Chairman) Registered with and regulated by the S T Pryke Securities and Exchange Commission German Tax Agent KPMG Marie-Curie-Strasse 30 D-60439 Frankfurt am Main Germany Dealing Registrar and Administration (i) For Sterling Income; Sterling Income A; (i) For Sterling Income; Sterling Income A; Sterling Accumulation; Institutional Income and Sterling Accumulation; Institutional Income; Institutional Accumulation Share Classes: Institutional Accumulation; Euro Accumulation; Exempt and X Share Classes:
Call, free, on 0500 440 000 BNY Mellon Fund Managers Limited Priceline BNY Mellon House (i) Call, free, 0500 330 000 Ingrave Road Brentwood Dealing Essex CM15 8TG (ii) For Exempt and X Share Classes: Depositary Call 0844 892 2715 The Royal Bank of Scotland plc Fax 0844 892 2716 Trustee & Depositary Services The Broadstone Client Enquiries 50 South Gyle Crescent (i) Call, free, on 0800 614 330 Edinburgh EH12 9UZ (ii) Call +44 (0) 131 305 3102 Auditors Authorisation Ernst & Young LLP BNY Mellon Fund Managers Limited Ten George Street Authorised and regulated by the Edinburgh EH2 2DZ Financial Services Authority Registered office: BNY Mellon Fund Managers Limited 1 More London Place Registered in England No. 1998251 London SE1 2AF A subsidiary of BNY Mellon Asset Management International Holdings Limited
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