UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
FORM N-CSR
________
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-8104
CONSTELLATION FUNDS
(Exact name of registrant as specified in charter)
________
1205 Westlakes Drive Suite 280
Berwyn, PA 19312
(Address of principal executive offices) (Zip code)
Constellation Funds
P.O. Box 219520
Kansas City, MO 64105-9520
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-866-242-5742
DATE OF FISCAL YEAR END: SEPTEMBER 30, 2004
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
[Graphic Omitted: Constellation Group Logo]
Annual Report
September 30, 2004
Constellation Clover Large Cap Value Fund
Constellation Clover Core Value Fund
Constellation Clover Small Cap Value Fund
Constellation Clover Core Fixed Income Fund
Constellation Chartwell Ultra Short Duration Fixed Income Fund
Constellation Chartwell Short Duration Fixed Income Fund
Constellation Chartwell High Yield Fund
Constellation HLAM Large Cap Value Fund
Constellation Pitcairn Diversified Value Fund
Constellation Pitcairn Select Value Fund
Constellation Pitcairn Diversified Growth Fund
Constellation Pitcairn Small Cap Fund
Constellation Pitcairn Family Heritage(R) Fund
Constellation Pitcairn Taxable Bond Fund
Constellation Pitcairn Tax-Exempt Bond Fund
Constellation Sands Capital Select Growth Fund
Constellation TIP Small Cap Value Opportunities Fund
Constellation TIP Financial Services Fund
Constellation TIP Healthcare & Biotechnology Fund
Constellation TIP Tax Managed U.S. Equity Fund
Constellation International Equity Fund
Constellation Strategic Value and High Income Fund
CONTENTS
1 Letter to Shareholders
2 Total Returns of the Constellation Funds
4 Disclosure of Fund Expenses
6 Investment Review:
Constellation Clover Large Cap Value Fund
8 Investment Review:
Constellation Clover Core Value Fund
10 Investment Review:
Constellation Clover Small Cap Value Fund
12 Investment Review:
Constellation Clover Core Fixed Income Fund
14 Investment Review:
Constellation Chartwell Ultra Short Duration Fixed Income Fund
16 Investment Review:
Constellation Chartwell Short Duration Fixed Income Fund
18 Investment Review:
Constellation Chartwell High Yield Fund
20 Investment Review:
Constellation HLAM Large Cap Value Fund
22 Investment Review:
Constellation Pitcairn Diversified Value Fund
24 Investment Review:
Constellation Pitcairn Select Value Fund
26 Investment Review:
Constellation Pitcairn Diversified Growth Fund
28 Investment Review:
Constellation Pitcairn Small Cap Fund
30 Investment Review:
Constellation Pitcairn Family Heritage(R) Fund
32 Investment Review:
Constellation Pitcairn Taxable Bond Fund
34 Investment Review:
Constellation Pitcairn Tax-Exempt Bond Fund
36 Investment Review:
Constellation Sands Capital Select Growth Fund
38 Investment Review:
Constellation TIP Small Cap Value Opportunities Fund
40 Investment Review:
Constellation TIP Financial Services Fund
42 Investment Review:
Constellation TIP Healthcare & Biotechnology Fund
44 Investment Review:
Constellation TIP Tax Managed U.S. Equity Fund
46 Investment Review:
Constellation International Equity Fund
48 Investment Review:
Constellation Strategic Value and High Income Fund
50 Financial Statements
128 Notes to Financial Statements
140 Report of Independent Registered Public Accounting Firm
141 Notice to Shareholders
142 Trustees and Officers of the Trust
145 Shareholder Voting Results
Shareholder Services
Constellation Fund shareholders receive annual and semiannual reports, and
quarterly account statements. Shareholders who have questions about their
accounts may call a toll-free number, 1 (866) 242-5742, visit our website,
www.constellationfundsgroup.com, or write to Constellation Funds, P.O. Box
219520, Kansas City, Missouri 64105-9520.
LETTER TO SHAREHOLDERS NOVEMBER 2004
TO OUR SHAREHOLDERS
November 30, 2004
TO OUR CONSTELLATION FUNDS SHAREHOLDERS:
We are pleased to provide you with the 2004 Annual Report for the Constellation
Funds. This Report contains financial, expense and performance information
through September 30, 2004, the last day of the Funds' fiscal year. We encourage
you to visit our website at www.ConstellationFundsGroup.com for up-to-date
performance information, current offering materials (including account
applications), and timely information about the Funds and the financial markets.
On November 8, 2004 we began offering shares of the Constellation HLAM Large Cap
Quality Growth Fund. With the addition of this Fund, the Constellation Funds
family now consists of 23 publicly-offered funds that cover the spectrum of
investment styles and asset classes, from large cap U.S. growth equity to ultra
short duration fixed income. The total net assets of the Group now exceed $2.2
billion, all of which is under the day-to-day management of nine highly regarded
institutional money managers that serve as the Funds' sub-advisers. From the
first group of sub-advisers, which included Turner Investment Partners, Clover
Capital Management and Chartwell Investment Partners, we have added Pitcairn
Investment Management (part of the Pitcairn Financial Group), Hilliard Lyons
Asset Management (part of J.J.B. Hilliard, W.L. Lyons), and Sands Capital
Management, as well as three firms with international expertise, Brandywine
Asset Management, Oechsle International Advisors and The Boston Company Asset
Management.
We are dedicated to managing the Funds with three basic principles in mind:
Oversight
Accountability
Insight
By focusing on these core concepts, we aim to deliver high quality funds with an
institutional focus, and to surround these products with skilled, professional
sales and service support. We are glad that you have invested in one or more of
the Funds in the Constellation Funds family, and we invite you to consider our
larger, more varied line-up for your investment needs.
Thank you for investing with us.
/s/ John H. Grady
- -----------------
John H. Grady
President, Constellation Funds
November 30, 2004
Constellation Funds 2004 Annual Report | 1
PERFORMANCE
TOTAL RETURNS OF THE CONSTELLATION FUNDS
Through September 30, 2004
Current performance may be lower or higher than the performance data quoted.
Please call (866)242-5742 for most recent month end performance information.
Year (Annualized) Total
Three to One Three Five Ten Since Assets
Fund Name/Index Months Date Year Years Years Years Inception ($mill)
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CONSTELLATION CLOVER LARGE CAP VALUE FUND (1.69) 1.07 14.07 4.00 2.64 N/A 4.36 $6.25
Russell 1000 Value Index 1.54 5.54 20.52 7.57 4.31 n/a 6.66
Inception Date: 10/31/97
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CONSTELLATION CLOVER CORE VALUE FUND(1) (0.94) 4.89 20.75 11.19 10.31 11.11 11.63 $59.71
Russell 3000 Value Index 1.42 5.72 20.89 8.29 5.03 12.50 12.89
Inception Date: 12/6/91
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CONSTELLATION CLOVER SMALL CAP VALUE FUND(1) (3.30) 5.88 23.72 12.69 15.77 N/A 14.60 $540.29
Russell 2000 Value Index 0.15 7.99 25.66 17.69 14.71 n/a 12.82
Inception Date: 2/28/96
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CONSTELLATION CLOVER CORE FIXED INCOME FUND 3.14 3.27 2.97 5.03 6.82 7.16 6.96 $32.33
Lehman Aggregate Bond Index 3.20 3.35 3.68 5.88 7.48 7.66 7.20
Inception Date: 12/6/91
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CONSTELLATION CHARTWELL ULTRA SHORT DURATION FIXED
INCOME FUND -- CLASS I SHARES 0.56 1.30 1.63 1.99 3.85 5.09 5.03 $391.93
Merrill Lynch 3-Month U.S. Treasury Bill Index 0.37 0.84 1.10 1.47 3.11 4.23 4.22
Inception Date: 3/1/94
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CONSTELLATION CHARTWELL ULTRA SHORT DURATION FIXED
INCOME FUND -- CLASS II SHARES 0.50 1.01 1.38 1.74 3.58 4.90 4.84 $8.89
Merrill Lynch 3-Month U.S. Treasury Bill Index 0.37 0.84 1.10 1.47 3.11 4.23 4.22
Inception date: 2/27/98(5)
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CONSTELLATION CHARTWELL SHORT DURATION FIXED INCOME
FUND -- CLASS I SHARES 1.30 1.58 1.84 2.88 4.77 5.66 5.43 $172.21
Lehman 1-3 Year U.S. Government Bond Index 1.05 1.00 1.16 3.25 5.22 5.79 5.56
Inception Date: 3/1/94
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CONSTELLATION CHARTWELL SHORT DURATION FIXED INCOME
FUND -- CLASS II SHARES 1.34 1.39 1.68 2.66 4.57 6.03 5.77 $2.90
Lehman 1-3 Year U.S. Government Bond Index 1.05 1.00 1.16 3.25 5.22 5.79 5.56
Inception date: 4/28/99(5)
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CONSTELLATION CHARTWELL HIGH YIELD FUND 4.40 4.99 9.34 6.93 (1.26) N/A (0.84) $10.17
Merrill Lynch High Yield, Cash Pay Index 4.64 6.03 12.23 12.07 6.61 n/a 5.39
Inception Date: 2/27/98
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CONSTELLATION HLAM LARGE CAP VALUE FUND (2.54) N/A N/A N/A N/A N/A (1.58) $1.44
Russell 1000 Value Index 1.54 n/a n/a n/a n/a n/a 5.00
Inception Date: 4/30/04
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CONSTELLATION PITCAIRN DIVERSIFIED VALUE FUND 0.82 4.61 18.23 8.37 N/A N/A 3.94 $152.20
Russell 1000 Value Index 1.54 5.54 20.52 7.57 n/a n/a 3.75
Inception Date: 8/4/00
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CONSTELLATION PITCAIRN SELECT VALUE FUND (0.74) 3.65 17.45 3.86 N/A N/A 3.31 $61.82
Russell 1000 Value Index 1.54 5.54 20.52 7.57 n/a n/a 3.51
Inception Date: 8/11/00
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CONSTELLATION PITCAIRN DIVERSIFIED GROWTH FUND (3.94) (1.29) 7.68 (0.17) N/A N/A (13.92) $104.53
Russell 1000 Growth Index (5.23) (2.63) 7.51 1.61 n/a n/a (13.14)
Inception Date: 8/4/00
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CONSTELLATION PITCAIRN SMALL CAP FUND(1) (0.58) 4.29 19.72 13.82 N/A N/A 11.40 $92.85
Russell 2000 Index (2.86) 3.71 18.77 13.71 n/a n/a 3.51
Inception Date: 8/25/00
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CONSTELLATION PITCAIRN FAMILY HERITAGE(R) FUND (1.05) 3.65 16.15 6.96 2.67 10.64 10.09 $78.10
Wilshire 5000 Index (1.78) 2.08 14.76 6.12 (0.05) 10.73 10.46
Inception Date: 8/4/00(3)
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2 | Constellation Funds 2004 Annual Report
PERFORMANCE
Year (Annualized) Total
Three to One Three Five Ten Since Assets
Fund Name/Index Months Date Year Years Years Years Inception ($mill)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTELLATION PITCAIRN TAXABLE BOND FUND 3.26 2.98 3.46 5.21 7.12 7.15 7.35 $43.24
Lehman U.S. Government/Credit Index 3.56 3.37 3.35 6.33 7.74 7.76 8.24
Inception Date: 8/4/00(3)
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CONSTELLATION PITCAIRN TAX-EXEMPT BOND FUND 3.51 2.36 3.60 5.31 6.22 5.72 6.02 $113.88
Lehman Municipal Bond Index 3.88 3.18 4.59 5.78 6.77 6.77 7.35
Inception Date: 8/11/00(3)
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CONSTELLATION SANDS CAPITAL SELECT GROWTH FUND --
CLASS I SHARES (4.09) 6.75 15.45 10.57 N/A N/A (8.89) $32.59
Russell 1000 Growth Index (5.23) (2.63) 7.51 1.61 n/a n/a (13.27)
Inception Date: 8/27/04(6)
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CONSTELLATION SANDS CAPITAL SELECT GROWTH FUND --
CLASS II SHARES (4.09) 6.75 15.45 10.57 N/A N/A (8.89) $70.03
Russell 1000 Growth Index (5.23) (2.63) 7.51 1.61 n/a n/a (13.27)
Inception Date: 8/11/00
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CONSTELLATION TIP SMALL CAP VALUE OPPORTUNITIES
FUND(1) 1.82 9.16 29.36 N/A N/A N/A 21.38 $14.53
Russell 2000 Value Index 0.15 7.99 25.66 n/a n/a n/a 11.64
Inception Date: 3/4/02
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CONSTELLATION TIP FINANCIAL SERVICES FUND(2) (0.93) (0.93) 12.31 10.77 8.24 N/A 12.27 $15.27
S&P 500 Financials Index 0.35 2.74 14.88 7.28 7.42 n/a 13.22
Inception Date: 5/22/96
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CONSTELLATION TIP HEALTHCARE & BIOTECHNOLOGY
FUND(1)(2) (6.00) 3.14 12.12 7.44 N/A N/A 9.47 $35.37
S&P 500 Healthcare Index (5.39) (3.36) 4.80 (3.02) n/a n/a (4.01)
Inception Date: 2/28/01
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CONSTELLATION TIP TAX MANAGED U.S. EQUITY FUND (4.12) (1.23) 9.95 2.62 N/A N/A (3.38) $5.08
After Taxes (Pre-Liquidation)(4) (4.12) (1.23) 9.95 2.62 n/a n/a (3.38)
After Taxes (Post-Liquidation)(4) (2.68) (0.80) 6.47 2.24 n/a n/a (2.86)
S&P 500 Index (1.87) 1.51 13.87 4.05 n/a n/a (1.34)
Inception Date: 2/28/01
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTELLATION INTERNATIONAL EQUITY FUND (2.25) 3.13 18.76 6.73 (3.72) 0.75 3.43 $107.00
MSCI All Country World ex-U.S. Index 1.01 5.15 23.15 11.38 0.49 4.25 5.33
Inception Date: 8/4/00(3)
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CONSTELLATIONSTRATEGIC VALUEANDHIGHINCOME FUND 1.93 4.26 16.04 N/A N/A N/A 23.21 $0.71
S&P 500 Index (1.87) 1.51 13.87 n/a n/a n/a 14.75
Inception Date: 10/31/02
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Returns less than one year are cumulative. The Constellation Funds are
distributed by Constellation Investment Distribution Company, Inc. Berwyn, PA
19312.
THE INVESTOR SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES BEFORE INVESTING. THIS INFORMATION CAN BE FOUND IN THE PROSPECTUS. A
FREE PROSPECTUS, WHICH CONTAINS DETAILED INFORMATION, INCLUDING FEES AND
EXPENSES, AND THE RISKS ASSOCIATED WITH INVESTING IN THESE FUNDS, CAN BE
OBTAINED BY CALLING (866)242-5742. READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING. The performance data quoted represents past performance and the
principal value and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results. Returns shown, unless
otherwise indicated, are total returns, with dividends and income reinvested.
Returns spanning more than one year are annualized. Fee waivers are in effect;
if they had not been in effect, performance would have been lower. The indices
mentioned are unmanaged statistical composites of stock market performance.
Investing in an index is not possible. The holdings and sector weightings of
the Funds are subject to change.
(1) Investing in technology and science companies and small and mid
capitalization companies may subject the Funds to specific inherent
risks, including above-average price fluctuations.
(2) Funds that take a focus or sector specific approach are subject to
greater risk from downturns affecting a specific issuer or industry.
(3) For periods prior to August 2000, when the Fund began operating, the
performance data quoted represents past performance of the Pitcairn
Investment Management's similarly managed common trust fund, adjusted to
reflect fees and expenses expected to be borne by the Fund. The common
trust fund was not a registered mutual fund, and therefore, was not
subject to certain investment and tax restrictions which may have
adversely affected performance.
(4) After-tax returns are shown using the highest individual federal income
tax rates in effect at the time of each distribution. They do not reflect
the impact of state and local taxes. Your after-tax return depends on
your individual tax situation, and may differ form the figures presented
here. If you own fund shares in a tax-deferred account such as an IRA or
401(k) plan, this information does not apply to your investment because
these accounts are not subject to current taxes. After-tax returns for
most funds are calculated using the tax liability implied by each fund's
declared distributions. However, the exact tax characteristics of many
distributions are not known until after the close of the year. For
certain funds, conservative estimates are used based on fund history
until final amounts become available.
(5) Class II Shares for the periods prior to the inception date shown,
reflect the performance of the Funds' Class I Shares.
(6) Class I Shares for the periods prior to the inception date shown, reflect
the performance of the Fund's Class II Shares.
Constellation Funds 2004 Annual Report | 3
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
All mutual funds have operating expenses. As a shareholder of a fund, your
investment is affected by these ongoing costs, which include (among others)
costs for portfolio management, administrative services, and shareholder
reports like this one. It is important for you to understand the impact of
these costs on your investment returns.
Operating expenses such as these are deducted from the fund's gross income and
directly reduce your final investment return. These expenses are expressed as
a percentage of the fund's average net assets; this percentage is known as the
fund's expense ratio.
The following examples use the expense ratio and are intended to help you
understand the ongoing costs (in dollars) of investing in your fund and to
compare these costs with those of other mutual funds. The examples are based
on an investment of $1,000 made at the beginning of the period shown and held
for the entire period.
The table on the next page illustrates your fund's costs in two ways:
* ACTUAL FUND RETURN. This section helps you to estimate the actual expenses
after fee waivers that your fund incurred over the period. The "Expenses Paid
During Period" column shows the actual dollar expense cost incurred by a
$1,000 investment in the fund, and the "Ending Account Value" number is
derived from deducting that expense cost from the fund's gross investment
return.
You can use this information, together with the actual amount you invested in
the fund, to estimate the expenses you paid over that period. Simply divide
your actual account value by $1,000 to arrive at a ratio (for example, an
$8,600 account value divided by $1,000 = $8.6), then multiply that ratio by
the number shown for your fund under "Expenses Paid During Period".
* HYPOTHETICAL 5% RETURN. This section helps you compare your fund's costs
with those of other mutual funds. It assumes that the fund had an annual 5%
return before expenses during the year, but that the expense ratio (in the
"Annualized Expense Ratios" column) for the period is unchanged. This example
is useful in making comparisons because the Securities and Exchange Commission
requires all mutual funds to make this 5% calculation. You can assess your
fund's comparative cost by comparing the hypothetical result for your fund in
the "Expense Paid During Period" column with those that appear in the same
charts in the shareholder reports for other funds.
Note: Because the return is set at 5% for comparison purposes -- NOT your
fund's actual return -- the account values shown may not apply to your
specific investment.
4 | Constellation Funds 2004 Annual Report
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
3/31/04 9/30/04 RATIOS PERIOD*
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Constellation Clover Large Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return $1,000.00 $ 984.70 1.25% $6.20
Hypothetical Fund Return 1,000.00 1,018.75 1.25 6.31
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Constellation Clover Core Value Fund
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Actual Fund Return 1,000.00 1,006.00 1.06 5.32
Hypothetical Fund Return 1,000.00 1,019.70 1.06 5.35
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Constellation Clover Small Cap Value Fund
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Actual Fund Return 1,000.00 990.00 1.22 6.07
Hypothetical Fund Return 1,000.00 1,018.90 1.22 6.16
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Constellation Clover Core Fixed Income Fund
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Actual Fund Return 1,000.00 1,005.30 0.79 3.96
Hypothetical Fund Return 1,000.00 1,021.05 0.79 3.99
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Constellation Chartwell Ultra Short Duration Fixed Income Fund -- Class I Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,006.60 0.49 2.46
Hypothetical Fund Return 1,000.00 1,022.55 0.49 2.48
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Constellation Chartwell Ultra Short Duration Fixed Income Fund -- Class II Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,005.30 0.74 3.71
Hypothetical Fund Return 1,000.00 1,021.30 0.74 3.74
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Constellation Chartwell Short Duration Fixed Income Fund -- Class I Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,005.30 0.49 2.46
Hypothetical Fund Return 1,000.00 1,022.55 0.49 2.48
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Constellation Chartwell Short Duration Fixed Income Fund -- Class II Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,004.10 0.74 3.71
Hypothetical Fund Return 1,000.00 1,021.30 0.74 3.74
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Constellation Chartwell High Yield Fund
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Actual Fund Return 1,000.00 1,040.10 0.90 4.59
Hypothetical Fund Return 1,000.00 1,020.50 0.90 4.55
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Constellation HLAM Large Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 984.20 1.20 5.95
Hypothetical Fund Return 1,000.00 1,019.00 1.20 6.06
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Constellation Pitcairn Diversified Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,018.30 1.04 5.25
Hypothetical Fund Return 1,000.00 1,019.80 1.04 5.25
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Constellation Pitcairn Select Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 995.70 1.05 5.24
Hypothetical Fund Return 1,000.00 1,019.75 1.05 5.30
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* Expenses are equal to the Fund's annualized expense ratio multiplied by
the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
- ------------------------------------------------------------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
3/31/04 9/30/04 RATIOS PERIOD*
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Constellation Pitcairn Diversified Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return $1,000.00 $ 978.10 1.03% $5.09
Hypothetical Fund Return 1,000.00 1,019.85 1.03 5.20
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Constellation Pitcairn Small Cap Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 979.50 1.11 5.49
Hypothetical Fund Return 1,000.00 1,019.45 1.11 5.60
- ------------------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R) Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,004.30 1.24 6.21
Hypothetical Fund Return 1,000.00 1,018.80 1.24 6.26
- ------------------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,001.10 0.78 3.90
Hypothetical Fund Return 1,000.00 1,021.10 0.78 3.94
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Constellation Pitcairn Tax-Exempt Bond Fund
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Actual Fund Return 1,000.00 1,010.90 0.63 3.17
Hypothetical Fund Return 1,000.00 1,021.85 0.63 3.18
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Constellation Sands Capital Select Growth Fund -- Class I
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,008.90 1.11 5.57
Hypothetical Fund Return 1,000.00 1,019.45 1.11 5.60
- ------------------------------------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund -- Class II
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,005.90 1.22 6.12
Hypothetical Fund Return 1,000.00 1,018.90 1.22 6.16
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Constellation TIP Small Cap Value Opportunities Fund
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Actual Fund Return 1,000.00 1,015.70 1.45 7.31
Hypothetical Fund Return 1,000.00 1,017.75 1.45 7.31
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Constellation TIP Financial Services Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 949.40 1.43 6.97
Hypothetical Fund Return 1,000.00 1,017.85 1.43 7.21
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Constellation TIP Healthcare & Biotechnology Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 968.40 1.52 7.48
Hypothetical Fund Return 1,000.00 1,017.40 1.52 7.67
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Constellation TIP Tax Managed U.S. Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 961.90 1.25 6.13
Hypothetical Fund Return 1,000.00 1,018.75 1.25 6.31
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Constellation International Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 977.50 1.36 6.72
Hypothetical Fund Return 1,000.00 1,018.20 1.36 6.86
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Constellation Strategic and High Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 999.80 0.25 1.25
Hypothetical Fund Return 1,000.00 1,023.75 0.25 1.26
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Constellation Funds 2004 Annual Report | 5
INVESTMENT REVIEW
CONSTELLATION CLOVER LARGE CAP VALUE FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Clover Large Cap Value Fund is sub-advised by Clover Capital
Management. The Fund seeks to produce attractive returns by investing in a
diversified portfolio of stocks. The Fund's focus is on companies whose market
capitalizations fall in the large cap category similar to the Russell 1000
Index. Clover Capital Management focuses on companies that trade at attractive
values relative to their cash flow, book value, financial strength, peer and
company-specific historical valuation. Clover believes that application of
classic value investment disciplines can yield attractive long term returns.
Using a combination of valuation screens, technical analysis, and fundamental
research, the analyst team seeks to find companies that have inexpensive
valuations and improving business fundamentals.
FUND PERFORMANCE & POSITIONING
For the fiscal year ended September 30, 2004 the Constellation Clover Large Cap
Value Fund gained 14.07% compared with a return of 20.52% for the Russell 1000
Value Index. According to Lipper, the Fund ranked 395 out of 461 large cap value
funds for the one year period ending September 30, 2004, placing it in the 86th
percentile.
Strong stock selection in the healthcare sector, specifically within the
biotechnology and pharmaceutical industries, contributed positively to results
for the year. Biogen Idec, a biotechnology company with four commercial drug
products currently available and others in the development pipeline, was one of
the Fund's strongest individual performers. Other individual holdings posting
good relative results for the year include BP, an oil company with worldwide
operations and Bank of America, a provider of financial services and products.
Unfortunately, this strength was more than offset by sub-optimal stock selection
in the materials, financial services and consumer discretionary sectors. SPX, an
industrial conglomerate, down close to 40% during the period was a significant
detractor for the Fund on an absolute and relative basis. The Fund was also hurt
by poor performance from radio broadcast company, Clear Channel Communications
and advertising company, Interpublic Group. Fund management believed that many
advertising, media and communications companies were well positioned to benefit
from a robust recovery in advertising spurred on by the presidential election
and the summer Olympics. Significant media events such as these typically drive
profits for media companies, but an oversupply of airtime and other factors kept
pricing low and the expectations for a recovery were not met. While many of
these companies remain healthy, generating free cash flows and maintaining
strong fundamentals, the stocks of these companies suffered.
There were no significant changes to Fund strategy during the period. The Fund
uses a blend of fundamental and quantitative methodologies in the investment
process. Fund management remains focused on identifying inexpensive stocks with
improving fundamentals and improving investor sentiment.
6 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CLOVER LARGE CAP VALUE FUND
FUND PROFILE
As of September 30, 2004
Ticker TLCVX
- ----------------------------------------------------
CUSIP 21038A505
- ----------------------------------------------------
% in 10 largest holdings 45.5%
- ----------------------------------------------------
# of holdings 80
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 16.02
- ----------------------------------------------------
Weighted Average Market
Capitalization $85.1 billion
- ----------------------------------------------------
Net assets $6 million
- ----------------------------------------------------
Top 10 Holdings
1 Exxon Mobil
2 General Electric
3 Bank of America
4 American International Group
5 Citigroup
6 Anheuser-Busch
7 Microsoft
8 Albertson's
9 Verizon Communications
10 International Business
Machines
Investment Style
value blend growth
---------------------------
large |XXXXXXX| | |
Market ---------------------------
Capitalization medium | | | |
---------------------------
small | | | |
---------------------------
SECTOR WEIGHTINGS+
26.8% Financials
11.4% Industrials
10.5% Consumer Discretionary
9.6% Energy
8.3% Consumer Staples
7.7% Information Technology
7.4% Cash Equivalents
6.3% Utilities
4.4% Materials
3.7% Telecommunication Services
3.0% Health Care
0.9% Exchange Traded Funds
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER LARGE CAP VALUE CATEGORY
PERIOD RANK PERCENTILE
5 year (152 of 226 funds) 67%
- ----------------------------------------------------
3 year (292 of 341 funds) 86%
- ----------------------------------------------------
1 year (395 of 461 funds) 86%
GROWTH OF $10,000 INVESTMENT IN THE FUND
October 31, 1997 - September 30, 2004*
Clover S&P 500 Russell 1000
LCF Index Value Index
------ ------- ------------
Oct 31 97 10000 10000 10000
Sep 98 9347 11283 10657
Sep 99 11793 14419 12652
Sep 00 14133 16334 13779
Sep 01 11947 11986 12551
Sep 02 9598 9530 10424
Sep 03 11779 11855 12964
Sep 04 13436 13499 15624
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Clover Large
Cap Value Fund is October 31, 1997.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Since
year years years inception
14.07% 4.00% 2.64% 4.36%
Constellation Funds 2004 Annual Report | 7
INVESTMENT REVIEW
CONSTELLATION CLOVER CORE VALUE FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Clover Core Value Fund is sub-advised by Clover Capital
Management. The Fund seeks to produce attractive returns by investing in a
diversified portfolio of stocks. The Fund invests in a broad range of large,
medium and small capitalization companies which typically are found in the
Russell 3000 Value Index. Clover Capital Management focuses on companies that
trade at attractive values relative to their cash flow, book value, financial
strength, peer and company-specific historical valuation. Clover believes that
application of classic value investment disciplines can yield attractive long
term returns. Using a combination of valuation screens, technical analysis, and
fundamental research, the analyst team seeks to find companies that have
inexpensive valuations and improving business fundamentals.
FUND PERFORMANCE & POSITIONING
For the fiscal year ended September 30, 2004 the Constellation Clover Core Value
Fund posted a total return of 20.75% compared with a total return for the
Russell 3000 Value Index of 20.89% and 25.62% for the Russell Midcap Value
Index. According to Lipper, the Fund ranked 135 out of 212 mid-cap value funds
for the one year period ending September 30, 2004, placing it in the 64th
percentile.
Strong stock selection and a significant overweighting in the healthcare sector
contributed positively to results for the year. Several holdings in the energy
sector, including Valero Energy and Pioneer Natural Resources also contributed
positively to results. Other holdings in the Fund posting strong individual
performance results include Countrywide Credit Industry, a diversified financial
services company focusing on residential mortgage banking and Brunswick, a
global manufacturer of fitness, leisure and boating products.
The Fund's underweight position in Real Estate Investment Trusts hindered
performance. The technology sector also detracted from performance for the
period, largely due to the poor performance of Maxtor, a manufacturer of disk
drives and computer storage devices, which was down more than 50% due to fierce
price competition in the computer storage market. The Fund was also hurt by poor
performance from radio broadcast company, Clear Channel Communications and
advertising company, Interpublic Group. Fund management believed that many
advertising, media and communications companies were well positioned to benefit
from a robust recovery in advertising spurred on by the presidential election
and the summer Olympics. Significant media events such as these typically drive
profits for media companies, but an oversupply of airtime and other factors kept
pricing low and the expectations for a recovery were not met. While many of
these companies remain healthy, generating free cash flow and maintaining strong
fundamentals, the stocks of these companies suffered.
There were no significant changes to Fund strategy during the period. Clover
Capital Management remained focused on identifying inexpensive stocks with
improving fundamentals and improving investor sentiment. The current positioning
of the Fund remains consistent. The largest sector investment is in financial
services companies, with an emphasis on regional banks and personal lines
insurance operators. The Fund continues to be underweight REITs. At the
individual stock level, Management trims positions in stocks that have performed
well and invests the proceeds in stocks of companies that are well positioned
but whose stocks have not risen to their full potential.
8 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CLOVER CORE VALUE FUND
FUND PROFILE
As of September 30, 2004
Ticker CCEVX
- ----------------------------------------------------
CUSIP 21038A604
- ----------------------------------------------------
% in 10 largest holdings 21.8%
- ----------------------------------------------------
# of holdings 65
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 14.76
- ----------------------------------------------------
Weighted Average Market
Capitalization $12.2 billion
- ----------------------------------------------------
Net assets $60 million
- ----------------------------------------------------
Top 10 Holdings
1 Jones Apparel Group
2 CVS
3 Safeco
4 Countrywide Credit Industry
5 Radian Group
6 Ingram Micro, Cl A
7 SCANA
8 Pioneer Natural Resources
9 Yellow Roadway
10 CMS Energy
Investment Style
value blend growth
---------------------------
large | | | |
Market ---------------------------
Capitalization medium |XXXXXXX| | |
---------------------------
small | | | |
---------------------------
SECTOR WEIGHTINGS+
26.0% Financials
15.7% Cash Equivalents
11.3% Utilities
9.4% Industrials
8.5% Health Care
8.4% Consumer Discretionary
7.4% Information Technology
5.3% Consumer Staples
4.4% Materials
3.6% Energy
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER MID-CAP VALUE CATEGORY
PERIOD RANK PERCENTILE
10 year (24 of 36 funds) 67%
- ----------------------------------------------------
5 year (65 of 100 funds) 65%
- ----------------------------------------------------
3 year (106 of 149 funds) 71%
- ----------------------------------------------------
1 year (135 of 212 funds) 64%
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
Clover Russell Russell Russell
Core Value Midcap Value 3000 3000
Fund Index Index Value Index
---------- ------------ ----------- ------------
Sep 30 94 10000 10000 10000 10000
Sep 95 12543 12475 12931 12672
Sep 96 13926 14439 15390 14887
Sep 97 17606 20250 21342 21190
Sep 98 16550 19499 22330 21608
Sep 99 17564 21316 28207 25419
Sep 00 19965 24087 33338 27796
Sep 01 20864 24078 24034 25578
Sep 02 19535 22763 19510 21514
Sep 03 23756 29205 24568 26868
Sep 04 28686 36687 28071 32481
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Clover Core
Value Fund is December 6, 1991.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
20.75% 11.19% 10.31% 11.11% 11.63%
Constellation Funds 2004 Annual Report | 9
INVESTMENT REVIEW
CONSTELLATION CLOVER SMALL CAP VALUE FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Clover Small Cap Value Fund is sub-advised by Clover Capital
Management. The Fund holds a diversified portfolio of stocks, focused on
companies with market capitalizations that fall in the small cap category
similar to the Russell 2000 Index. Clover Capital focuses on companies that
trade at attractive values relative to their cash flow, book value, financial
strength, peer and company-specific historical valuation. Clover believes that
application of classic value investment disciplines within the smaller company
universe can yield attractive long term returns. Using a combination of
valuation screens, technical analysis, and fundamental research, the analyst
team seeks to find companies that have inexpensive valuations and improving
business fundamentals.
FUND PERFORMANCE & POSITIONING
For the fiscal year ended September 30, 2004 the Constellation Clover Small Cap
Value Fund gained 23.72%, net of expenses, compared with a return of 25.66% for
the Russell 2000 Value Index and a return of 18.77% for the Russell 2000 Index.
According to Lipper, for the one year period ending September 30, 2004, the Fund
ranked 120 out of 237 small cap value funds, placing it in the 51st percentile
among peers.
Performance was positively impacted by stock selection in the consumer
discretionary, industrials and materials sectors. This strength was partially
offset by sub-optimal selection within the financial services and energy
sectors. Overall, sector & industry allocation had a negative impact on
performance, as the benefit of underweighting the telecommunications segment was
overwhelmed by the negative impact of an underweight position in materials and
an overweight position in technology.
The Fund's holdings in AK Steel Holding, a steel producer, American Eagle
Outfitters, a casual clothing retailer focused on the teen and young adult
market, Vans, a merchandiser of sports footware and apparel and Reliant Energy,
a producer of electricity and ancillary services, contributed positively to
results for the period. Several companies within the portfolio detracted from
performance during the year. These include Maxtor, a manufacturer of disk drives
and computer storage devices, Calpine, a power company, and Intermet, a company
specializing in the manufacture of castings for the automotive and industrials
business.
Management made no major changes to Fund strategy during the period. Clover
Capital Management remains focused on identifying inexpensive stocks with
improving fundamentals and improving investor sentiment. Over the course of the
last twelve months, the management team moved to reduce major overweight and
underweight positions and bring the portfolio exposure more in line with that of
the the Russell 2000 Value benchmark. This marginal shift was implemented in
response to the maturing economic cycle and an investing environment
characterized by extending valuations and higher share prices. The Fund's
portfolio managers felt that the environment generally presented fewer
opportunities for the portfolio to benefit from price dislocations within
individual stocks and sectors and, as a result, positioned the Fund with greater
sensitivity to benchmark weightings.
10 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CLOVER SMALL CAP VALUE FUND
FUND PROFILE
As of September 30, 2004
Ticker TCSVX
- ----------------------------------------------------
CUSIP 21038A828
- ----------------------------------------------------
% in 10 largest holdings 9.8%
- ----------------------------------------------------
# of holdings 151
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 17.92
- ----------------------------------------------------
Weighted Average Market
Capitalization $1.2 billion
- ----------------------------------------------------
Net assets $540 million
- ----------------------------------------------------
Top 10 Holdings
1 FelCor Lodging Trust
2 CMS Energy
3 AGCO
4 Province Healthcare
5 Stewart & Stevenson Services
6 Providian Financial
7 Platinum Underwriters Holdings
8 BankAtlantic Bancorp, Cl A
9 Webster Financial
10 Owens-Illinois
Investment Style
value blend growth
----------------------------
large | | | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small |XXXXXXX| | |
----------------------------
SECTOR WEIGHTINGS+
28.1% Cash Equivalents
20.4% Financials
12.7% Industrials
11.4% Consumer Discretionary
8.6% Information Technology
4.9% Materials
4.1% Health Care
3.6% Utilities
3.6% Energy
1.7% Consumer Staples
0.9% Telecommunication Services
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER SMALL CAP VALUE CATEGORY
PERIOD RANK PERCENTILE
5 year (34 of 132 funds) 26%
- ----------------------------------------------------
3 year (142 of 172 funds) 83%
- ----------------------------------------------------
1 year (120 of 237 funds) 51%
GROWTH OF $10,000 INVESTMENT IN THE FUND
February 29, 1996 - September 30, 2004*
Clover
Small Cap Russell 2000 Russell 2000
Value Fund Index Value Index
---------- ------------ -------------
Feb 29 96 10000 10000 10000
Sep 96 10838 10752 10785
Sep 97 16169 14320 15385
Sep 98 12733 11596 13417
Sep 99 15511 13808 14199
Sep 00 20101 17037 16381
Sep 01 22543 13424 17299
Sep 02 20584 12175 17047
Sep 03 26072 16619 22444
Sep 04 32256 19739 28203
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Clover Small
Cap Value Fund is February 28, 1996.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Since
year years years inception
23.72% 12.69% 15.77% 14.60%
Constellation Funds 2004 Annual Report | 11
INVESTMENT REVIEW
CONSTELLATION CLOVER CORE FIXED INCOME FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Clover Core Fixed Income Fund is sub-advised by Clover Capital
Management. The Fund seeks to produce attractive long-term total rates of return
and a high level of current income by investing in a diversified portfolio of
bonds. The Fund maintains a laddered maturity structure and a weighted average
duration that is consistent with an intermediate-term bond portfolio. However,
individual bonds may have a final maturity from one month to thirty years or
more. The Fund focuses its investment in those sectors and individual issues
that, in aggregate, are expected to produce a total rate of return greater than
the return earned on the Lehman Aggregate Bond Index. Clover Capital Management
combines a top down macro economic outlook with individual security selection
evaluation and techniques. Factors such as the business cycle, Federal Reserve
policy, and credit spreads are taken into account to establish an overall
framework for sector allocation and yield curve positioning, as well as the
overall posture of the portfolio (offensive or defensive).
FUND PERFORMANCE & POSITIONING
For the fiscal year ended September 30, 2004, the Constellation Clover Core
Fixed Income Fund posted a net total return of 2.97% versus 3.68% for the Lehman
Aggregate Bond Index. According to Lipper, the Fund ranked 287 out of 444
intermediate investment grade bond funds for the one year period ending
September 30, 2004, placing it in the 65th percentile.
The vast majority of the Fund's performance shortfall occurred during the first
quarter of the fiscal year (September 30, 2003-December 31, 2003) and was
primarily due to the strong performance in the corporate bond market. The rally
in that sector was a continuation of the recovery from the prior year's debacle
of corporate scandals. The Fund's relative performance was adversely impacted by
the rally in corporate bonds because the Fund maintains a bias towards high
quality issuers in the corporate sector. During most sharp moves in the market,
lower quality and higher beta companies tend to lead performance in both
directions. That phenomenon was evident in this rally as well, as lower quality
issuers outpaced the Fund's higher quality holdings. While the Fund did
experience some material spread tightening in bonds such as XTO Energy 7.50% due
4/15/12, as well as a tender offer for the holding in SLMA 0% due 10/3/22, this
was offset by holdings in long Treasury bonds which underperformed similar
maturity corporate bonds.
Since 12/31/03, the Fund has performed much more in line with its benchmark as
some of the steam ran out of the corporate bond rally and the Fund shifted its
focus to that of income generation. With interest rates at relatively low
absolute levels and credit spreads very tight, Fund managers expect that
opportunities to earn principal appreciation in the bond market will be limited.
Therefore, the Fund has concentrated on adding yield and improving its spread
versus the benchmark while still maintaining a relatively high overall credit
quality. In this environment, individual security selection will be increasingly
important. During the past year, the Clover Capital Management added attractive
holdings in the mortgage backed securities sector, as well as corporate bonds
issued by companies including Thermo Electron, ConAgra Foods, and Bisys Group.
Clover Capital Management intends to continue with this theme of bolstering the
portfolio's yield through individual security selection to support returns in a
challenging environment.
12 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CLOVER CORE FIXED INCOME FUND
FUND PROFILE
As of September 30, 2004
Ticker TCFIX
- ----------------------------------------------------
CUSIP 21038A703
- ----------------------------------------------------
% in 10 largest holdings 38.4%
- ----------------------------------------------------
# of holdings 57
- ----------------------------------------------------
Weighted Average Effective Duration 4.42
- ----------------------------------------------------
Weighted Average Quality AA3
- ----------------------------------------------------
Weighted Average Yield 4.13%
- ----------------------------------------------------
Net assets $32 million
- ----------------------------------------------------
Top 10 Holdings
1 FNMA Pool #254759
2 U.S. Treasury Bonds
3 Dial
4 FNMA Pool #738783
5 Marsh & McClennan
6 FNMA Pool #689022
7 Natural Fuel Gas
8 U.S. Treasury Bonds
9 Scana
10 Roadway
Duration
short long
---------------------------
high | |XXXXXXXXX| |
---------------------------
Quality | | | |
---------------------------
low | | | |
---------------------------
SECTOR WEIGHTINGS+
41.9% Corporate Obligations
36.0% U.S. Government Mortgage-Backed Obligations
13.0% U.S. Treasury Obligations
3.5% U.S. Government Agency Obligations
3.2% Cash Equivalents
2.4% Convertible Bonds
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER INTERMEDIATE INVESTMENT GRADE BOND CATEGORY
PERIOD RANK PERCENTILE
10 year (39 of 113 funds) 35%
- ----------------------------------------------------
5 year (113 of 258 funds) 44%
- ----------------------------------------------------
3 year (189 of 348 funds) 54%
- ----------------------------------------------------
1 year (287 of 444 funds) 65%
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
Clover Lehman
Core Fixed US Aggregate
Income Fund Bond Index
----------- ------------
Sep 30 94 10000 10000
Sep 95 11382 11407
Sep 96 11973 11964
Sep 97 13126 13129
Sep 98 14612 14639
Sep 99 14351 14585
Sep 00 15386 15604
Sep 01 17231 17625
Sep 02 18756 19141
Sep 03 19388 20174
Sep 94 19964 20916
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Clover Core
Fixed Income Fund is December 6, 1991.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
2.97% 5.03% 6.82% 7.16% 6.96%
Constellation Funds 2004 Annual Report | 13
INVESTMENT REVIEW
CONSTELLATION CHARTWELL ULTRA SHORT DURATION FIXED INCOME FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Chartwell Ultra Short Duration Fund is sub-advised by
Chartwell Investment Partners. The Fund seeks to provide above market income,
liquidity, and risk-adjusted total return. Fund management targets these goals
using a low risk approach, selecting a core group of securities from better
yielding sectors within the government markets, and enhancing liquidity and
yield by combining very short maturities with fixed rate issues in a barbell
structure. The Fund avoids higher risk strategies, including exposure to
non-dollar currencies and lower quality credits. The Fund generally has a
targeted duration of 0.5 years and holds 100% of the portfolio in government
quality issues.
FUND PERFORMANCE & POSITIONING
For the 12 months ending September 30, 2004, the Fund returned 1.63% (Class I
Shares), outperforming the Merrill Lynch 3-Month U.S. Treasury Bill Index return
of 1.10%. During this period, the Fund has outperformed the average return of
1.12% achieved by funds in the Lipper Ultra Short Obligation category group.
A move to generally higher interest rates, including an increase in the Fed
Funds rate from 1.0% to 1.75%, had the most significant impact on short-term
fixed income performance during the last year. Under these conditions, the
Fund's performance benefited from its focus on better yielding securities
because this excess income provided a cushion against higher rates.
During the year, the Fund added a significant position in floating rate
securities as Fund management anticipated a gradual increase in rates along with
solid economic growth. This shift from fixed to floating rate securities
provided both a rising income stream and a defensive price structure against
rising rates. Longer term (2 to 3 years) fixed rate mortgage securities were the
least defensive part of the fund's portfolio and lagged in return.
14 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CHARTWELL ULTRA SHORT DURATION FIXED INCOME FUND
FUND PROFILE
As of September 30, 2004
Ticker (Class I/Class II) TSDOX/TDGOX
- ----------------------------------------------------
CUSIP (Class I/Class II) 21038A802/21038A885
- ----------------------------------------------------
% in 10 largest holdings 24.5%
- ----------------------------------------------------
# of holdings 91
- ----------------------------------------------------
Weighted Average Effective Duration 0.62
- ----------------------------------------------------
Weighted Average Quality Government
- ----------------------------------------------------
Weighted Average Life 0.70
- ----------------------------------------------------
SEC 30-day Yield 2.54%
- ----------------------------------------------------
Net assets (CI/CII) $392 mil/$9 mil
- ----------------------------------------------------
Top 10 Holdings
1 FNMA CMO/REMIC Ser 2002-81, Cl F
2 FNMA CMO/REMIC Ser 2002-82, Cl PC
3 GNMA CMO/REMIC Ser 2003-34, Cl PM
4 FHLMC CMO/REMIC Ser 2463, Cl PE
5 FHLB
6 FHLMC CMO/REMIC
Ser 2586, Cl XG
7 FHLMC CMO/REMIC
Ser 2650, Cl FX
8 FHLMC CMO/REMIC
Ser 2527, Cl LU
9 FNMA CMO/REMIC
Ser 2003-46, Cl PA
10 FHLMC CMO/REMIC Ser 2799, Cl F
Duration
short long
--------------------------
high |XXXXXXX| | |
--------------------------
Quality | | | |
--------------------------
low | | | |
--------------------------
SECTOR WEIGHTINGS+
68.4% U.S. Government Mortgage-Backed Obligations
27.3% Cash Equivalents
4.3% U.S. Government Agency Obligations
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING*
As of September 30, 2004
LIPPER ULTRA SHORT OBLIGATION CATEGORY
PERIOD RANK PERCENTILE
10 year (5 of 17 funds) 29%
- ----------------------------------------------------
5 year (12 of 29 funds) 41%
- ----------------------------------------------------
3 year (20 of 41 funds) 49%
- ----------------------------------------------------
1 year (13 of 72 funds) 18%
*Rankings for Class I Shares
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
Chartwell Chartwell Merrill Lynch
Ultra Short Ultra Short 3-month
Dur FIF Dur FIF U.S. Treasury
Class 1 Class 2 Bill Index
----------- ----------- -------------
Sep 30 94 10000 10000 10000
Sep 95 10688 10661 10588
Sep 96 11439 11382 11168
Sep 97 12147 12057 11770
Sep 98 12903 12891 12401
Sep 99 13592 13535 12984
Sep 00 14454 14348 13734
Sep 01 15479 15326 14483
Sep 02 15935 15738 14773
Sep 03 16158 15919 14968
Sep 04 16422 16139 15132
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Chartwell
Ultra Short Duration Fixed Income Fund (Class I Shares) is March 1, 1994.
**Class II Shares were offered beginning on February 27, 1998. Class II Shares'
performance for the periods prior to February 27, 1998 reflects the performance
of the Fund's Class I Shares. The performance of the Class II Shares has been
adjusted for the differences in fees between classes.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
Class I Shares 1.63% 1.99% 3.85% 5.09% 5.03%
Class II Shares 1.38% 1.74% 3.58% 4.90%** 4.84%**
Constellation Funds 2004 Annual Report | 15
INVESTMENT REVIEW
CONSTELLATION CHARTWELL SHORT DURATION FIXED INCOME FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Chartwell Short Duration Fixed Income Fund is sub-advised by
Chartwell Investment Partners. The Fund seeks to provide above market income,
liquidity, and risk-adjusted total return. Fund management targets these goals
using a low risk approach, selecting a core group of securities from better
yielding sectors within the government and corporate markets, and enhancing
liquidity and yield by combining very short maturities with fixed rate issues in
a barbell structure. The Fund avoids higher risk strategies, including exposure
to non-dollar currencies and below "A" rated credits. The Fund generally has an
average duration of between 1.5 and 2.0 years and holds no more than 20% of the
portfolio in non-government issues.
FUND PERFORMANCE & POSITIONING
For the 12 months ending September 30, 2004, the Fund returned 1.84% (Class I
Shares), outperforming the Lehman 1-3 Year U.S. Government Bond Index return of
1.16%. During this period, the Fund has outperformed the average return of 1.28%
achieved by funds in the Lipper Short-Intermediate US Government category group.
A move to generally higher interest rates, including an increase in the Fed
Funds rate from 1.0% to 1.75%, had the most significant impact on short-term
fixed income performance during the last year. Under these conditions, the
Fund's performance benefited from its focus on better yielding securities
because this excess income provided a cushion against higher rates. The Fund's
high quality bias resulted in some lost opportunity for greater income from low
quality credit issues, but is in keeping with the Fund's goal of avoiding higher
risk strategies.
Short maturity MBS passthrough securities and CMO's provided attractive income
with limited price volatility as rates rose. Longer term (4+ years) fixed rate
mortgage securities were the least defensive part of the Fund's portfolio. To
enhance liquidity, the Fund has modestly shifted its MBS exposure into
passthroughs by reducing its CMO weighting.
16 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CHARTWELL SHORT DURATION FIXED INCOME FUND
FUND PROFILE
As of September 30, 2004
Ticker (CI I/CI II) TSDGX/TDGTX
- ----------------------------------------------------
CUSIP (CI I/CI II) 21038A877/21038A869
- ----------------------------------------------------
% in 10 largest holdings 30.1%
- ----------------------------------------------------
# of holdings 87
- ----------------------------------------------------
Weighted Average Effective Duration 1.46
- ----------------------------------------------------
Weighted Average Quality Government
- ----------------------------------------------------
Weighted Average Life 1.55
- ----------------------------------------------------
SEC 30-day Yield 3.17%
- ----------------------------------------------------
Net assets (CI I/CI II) $172 mil/$3 mil
- ----------------------------------------------------
Top 10 Holdings
1 FNMA Pool #535560
2 FNMA CMO/REMIC
Ser 2001-68, Cl JL
3 FNMA CMO/REMIC
Ser 2003-34, Cl GJ
4 FHLMC CMO/REMIC
Ser 2416, Cl PN
5 FHLMC CMO/REMIC
Ser 2515, Cl ED
6 FHLMC CMO/REMIC
Ser 2590, Cl UL
7 FHLMC
8 FHLMC CMO/REMIC
Ser 2744, Cl TA
9 FHLB
10 FNMA Pool #725284
SECTOR WEIGHTINGS+
67.9% U.S. Government Mortgage-Backed Obligations
19.2% Cash Equivalents
7.4% U.S. Government Agency Obligations
3.7% Corporate Obligations
1.8% Asset Backed Securities
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING*
As of September 30, 2004
LIPPER SHORT-INTERMEDIATE US GOVERNMENT CATEGORY
PERIOD RANK PERCENTILE
10 year (26 of 42 funds) 62%
- ----------------------------------------------------
5 year (54 of 69 funds) 78%
- ----------------------------------------------------
3 year (61 of 74 funds) 82%
- ----------------------------------------------------
1 year (14 of 81 funds) 17%
*Rankings for Class I Shares
Duration
short long
--------------------------
high |XXXXXXX| | |
--------------------------
Quality | | | |
--------------------------
low | | | |
--------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
Lehman
Chartwell Chartwell 1-3 Year
Short Dur Short Dur US Gov
FIF Class 1 FIF Class 2 Bond Index
----------- ----------- ----------
Sep 30 94 10000 10000 10000
Sep 95 10879 10852 10818
Sep 96 11534 11477 11431
Sep 97 12353 12262 12219
Sep 98 13350 13221 13188
Sep 99 13736 14365 13609
Sep 00 14560 15215 14403
Sep 01 15921 16600 15940
Sep 02 16668 17352 16873
Sep 03 17026 17662 17345
Sep 04 17339 17959 17546
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Chartwell
Short Duration Fixed Income Fund (Class I Shares) is March 1, 1994.
**Class II Shares were offered beginning on April 28, 1999. Class II Shares'
performance for the periods prior to April 28, 1999 reflects the performance of
the Fund's Class I Shares. The performance of the Class II Shares has been
adjusted for the differences in fees between the classes.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
Class I Shares 1.84% 2.88% 4.77% 5.66% 5.43%
Class II Shares 1.68% 2.66% 4.57% 6.03%** 5.77%**
Constellation Funds 2004 Annual Report | 17
INVESTMENT REVIEW
CONSTELLATION CHARTWELL HIGH YIELD FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Chartwell High Yield Fund is sub-advised by Chartwell
Investment Partners ("Chartwell"). Chartwell's philosophy of high yield bond
management is defensive, stressing preservation of principal and compounding of
the income stream as the keys to adding value in the high yield bond market. The
Fund focuses on the higher quality tiers of the market, principally the BB and
B-rated sectors, and on cash-pay issues only, which offer an attractive yield
premium but a sharply lower incidence of credit erosion relative to the market
as a whole.
In evaluating investment candidates, Chartwell takes the perspective of a
lender. The Fund emphasizes low beta companies with proven, predictable business
models, and multiple sources of repayment. In particular, the focus is on large
capitalization issues demonstrating attributes of financial transparency,
stable-to-improving cash flow, internal deleveraging capacity, and ample
financial flexibility. Chartwell's investment process relies heavily on the
collective judgement of their portfolio management team. A formal credit
committee meets weekly to address new purchase ideas, assess credit
developments, and set portfolio strategy. The investment selection process is
primarily bottom-up, with business cycle and interest rate analysis incorporated
into the determination of industry exposure. New purchase decisions are debated
by the group as a whole, and must be unanimous. Portfolios typically consist of
80-100 issues, with carefully controlled issue and industry concentrations.
Duration is managed to within plus or minus one year of the reference index.
Sell decisions may be initiated by any individual member of the credit
committee, and are triggered by adverse credit or industry developments, price
depreciation relative to the index, or excessive spread compression.
FUND PERFORMANCE & POSITIONING
For the 12 months ending September 30, 2004, the Fund returned 9.34%, net of
expenses, compared to 12.23% for the Merrill Lynch High Yield, Cash Pay Index,
and 11.26% for the Lipper High Current Yield fund average.
The Fund experienced notably different performance patterns over the course of
the twelve months ending September 30, 2004. During the first half of the year,
from September 30, 2003 through March 31, 2004, the Fund underperformed,
returning 5.13% vs. 8.21% for the Merrill Lynch High Yield, Cash Pay Index.
However, the Fund outperformed the Index for the remainder of the year, from
March 31, 2004 through September 30, 2004, returning 4.01% vs. 3.72% for the
index. The performance shortfall during the first half of the year is
attributable principally to three factors: the Fund's overweighting in single B
issues, which underperformed both higher quality BB's and lower quality CCC's
during the period; a significant underweight in electric utilities, which were
strong performers during the last quarter of 2003 and comprised nearly 10% of
the Index as of September 30, 2003; and the impact of trading costs due to above
average fund cash flows during the first 6 months of the fiscal year.
While the Fund's overweighting in single B issues hurt performance during the
first six months of the fiscal year, that position contributed to the Fund's
outperformance during the latter six months of the year. Single B issues proved
to be the top performing sector from March 31, 2004 through September 30, 2004.
Based on Fund management's expectation of an improving economy and gradually
rising interest rates, the Fund is maintaining an overweight on economically
sensitive B-rated issuers.
Similarly, the decision to underweight utilities hurt performance during the
first half of the year but helped during the second. The Fund maintains an
underweight in electric utilities because the bulk of the issuers in the sector
are rated CCC by S&P and Moodys. These ratings reflect overleveraged balance
sheets, excessive financial complexity, and the impact of high energy prices on
their operating margins.
The Fund maintained a bias toward Single B issues throughout the year, but
lowered exposure to the richly valued homebuilder and energy sectors. Exposure
to industrial cyclicals increased during the period. In general, single B issues
may be more likely to outperform when the economy is in an expansion phase and
interest rates are rising. While recent economic data arguably points to a
somewhat more moderate rate of growth, Fund management believes the the
potential for continued economic expansion remains intact. Accordingly, the Fund
is maintaining a consistent portfolio posture entering the 2005 fiscal year,
with particular emphasis on B-rated consumer and industrial cylicals.
18 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION CHARTWELL HIGH YIELD FUND
FUND PROFILE
As of September 30, 2004
Ticker PCSHX
- ----------------------------------------------------
CUSIP 21038A851
- ----------------------------------------------------
% in 10 largest holdings 14.8%
- ----------------------------------------------------
# of holdings 94
- ----------------------------------------------------
Weighted Average Market
Capitalization ($ million) $10.2
- ----------------------------------------------------
Weighted Average Quality B
- ----------------------------------------------------
Weighted Average Yield 8.3%
- ----------------------------------------------------
Net assets $10 million
- ----------------------------------------------------
Top 10 Holdings
1 Lasis Healthcare
2 Courtyard by Marriott, Ser B
3 Coinmach
4 Aztar
5 Ship Finance International
6 Mandaly Resort Group
7 Chesapeake Energy
8 Nextel Communications
9 AES
10 NRG Energy
Duration
short long
--------------------------
high | | | |
--------------------------
Quality | | | |
--------------------------
low | |XXXXXXX| |
--------------------------
SECTOR WEIGHTINGS+
31.0% Consumer Discretionary
25.1% Industrials
10.9% Materials
7.8% Cash Equivalents
5.8% Health Care
4.7% Consumer Staples
4.4% Telecommunication Services
4.4% Financials
2.8% Utilities
2.6% Energy
0.5% Information Technology
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER HIGH CURRENT YIELD CATEGORY
PERIOD RANK PERCENTILE
5 year (262 of 276 funds) 95%
- ----------------------------------------------------
3 year (331 of 350 funds) 95%
- ----------------------------------------------------
1 year (364 of 420 funds) 87%
GROWTH OF $10,000 INVESTMENT IN THE FUND
February 28, 1998 - September 30, 2004*
Chartwell Merrill
High Yield Lynch
Bond Fund High Yield
---------- ----------
Feb 28 98 10000 10000
Sep 98 9278 9895
Sep 99 10080 10265
Sep 00 10137 10391
Sep 01 7739 10045
Sep 02 7116 9825
Sep 03 8653 12598
Sep 04 9461 14139
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Chartwell
High Yield Fund is February 27, 1998. Prior to May 1, 2002, Penn Capital
Management Company, Inc. served as investment adviser to the Fund.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Since
year years years inception
9.34% 6.93% (1.26)% (0.84)%
Constellation Funds 2004 Annual Report | 19
INVESTMENT REVIEW
CONSTELLATION HLAM LARGE CAP VALUE FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation HLAM Large Cap Value Fund is sub-advised by Hilliard Lyons
Asset Management ("Hilliard Lyons"). The Fund invests in equity securities of
U.S. companies with large market capitalizations that the manager believes to be
high quality companies selling at compelling valuations. Hilliard Lyons creates
a focused portfolio of 25 to 30 stocks that emphasizes companies that they
believe have an enduring competitive advantage over their competition. Hilliard
Lyons also strives to reduce the business risk of the portfolio; by focusing on
shareholder-oriented management teams that have deployed capital to the benefit
of shareholders over the years, they seek to reduce the company specific risk in
the portfolio. By purchasing stocks at compelling valuations, a minimum discount
of 25% of their calculation of intrinsic value, they seek to reduce the amount
of price risk in the portfolio. Portfolio turner is generally very low because
Hilliard Lyons emphasizes long-term ownership of companies and eschews trading
in and out of different stocks.
FUND PERFORMANCE & POSITIONING
For the time period since the inception of the fund on April 30, 2004, through
September 30, 2004, the Fund returned (1.58)% versus a gain of 5.00% for its
benchmark, the Russell 1000 Value Index.
Management concentrates the Fund's holdings in companies that have traditionally
earned high returns on capital and that they believe have some sustainable
advantage over their competition. Generally, these are not characteristics of
companies in the energy, utilities and materials sectors of the economy, and as
a result the Fund was underweighted in these sectors. During the 5 month period
ended September 30, 2004, these sectors lead the performance of the Russell 1000
Value Index by a wide margin. Consequently, the Fund's performance trailed the
Index significantly. As the price of oil and other commodities continued to soar
ever higher, the prices of stocks in those sectors have benefited. The Fund's
portfolio managers believe that most of the companies in those sectors do not
earn their cost of capital over an entire economic cycle and, therefore, are not
compelling businesses to own over longer periods of time.
Fund management is comfortable with both the quality and the valuations of the
businesses owned in the Fund. Berkshire Hathaway, Home Depot, Automatic Data
Processing, Johnson & Johnson and PepsiCo are among the Fund's largest holdings.
Although short-term performance has lagged, these types of companies are
attempting to increase their intrinsic value consistently over time and the
Fund's portfolio managers believe that this excellent business performance will
be reflected in attractive rates of return over the next several years.
20 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION HLAM LARGE CAP VALUE FUND
FUND PROFILE
As of September 30, 2004
Ticker HLCVX
- ----------------------------------------------------
CUSIP 21038A836
- ----------------------------------------------------
% in 10 largest holdings 50.4%
- ----------------------------------------------------
# of holdings 28
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 17.97
- ----------------------------------------------------
Weighted Average Market
Capitalization $43.4 billion
- ----------------------------------------------------
Net assets $1 million
- ----------------------------------------------------
Top 10 Holdings
1 Berkshire Hathaway, Cl B
2 Cincinnati Financial
3 Home Depot
4 Freddie Mac
5 Automatic Data Processing
6 Waters
7 American International Group
8 Johnson & Johnson
9 First Data
10 PepsiCo
Investment Style
value blend growth
----------------------------
large |XXXXXXX| | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
SECTOR WEIGHTINGS+
34.2% Financials
26.3% Consumer Discretionary
15.1% Health Care
12.6% Consumer Staples
9.0% Information Technology
2.2% Telecommunication Services
0.6% Cash Equivalents
+Percentages based on total investments
GROWTH OF $10,000 INVESTMENT IN THE FUND
April 30, 2004 - September 30, 2004*
HLAM S&P 500
Large Cap Barra Russell 1000
Value Fund Value Index Value Index
---------- ----------- ------------
Apr 30 04 10000 10000 10000
Sep 04 9842 10442 10500
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation HLAM Large
Cap Value Fund is April 30, 2004.
CUMULATIVE TOTAL RETURNS
Periods ending September 30, 2004
Since
inception
(1.58%)
Constellation Funds 2004 Annual Report| 21
INVESTMENT REVIEW
CONSTELLATION PITCAIRN DIVERSIFIED VALUE FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Pitcairn Diversified Value Fund is sub-advised by Pitcairn
Investment Management ("Pitcairn"). The Fund invests in a diversified portfolio
of equity securities that Pitcairn's analysts believe have exceptional
appreciation potential relative to their sector and industry peers. The Fund is
managed with the goal of producing returns in excess of its benchmark, the
Russell 1000 Value Index, while keeping exposure to risk characteristics similar
to that of the benchmark. The management process is designed to generate excess
returns through superior stock selection. Management seeks to identify stocks
with strong fundamental characteristics which are attractively priced relative
to their peer groups.
FUND PERFORMANCE & POSITIONING
For the one-year period ended September 30, 2004, the Fund returned 18.23%. This
compares to a 20.52% return for the Russell 1000 Value Index. The Constellation
Pitcairn Diversified Value Fund ranked at the 46th percentile (214 out of 461
funds) when compared to the Lipper Multi-Cap Value category over the
twelve-month period.
Because the Fund maintains sector exposures that are consistent with those in
the Russell 1000 Value, security selection is the most significant driver of
Fund performance. Unfortunately, stock selection in the Fund over this time
period did not meet expectations and performance suffered. While the Fund had a
number of stocks that provided outstanding returns over the past year, it
likewise had a number of stocks that turned in disappointing returns. The Fund
did benefit from a modest tilt toward stocks with lower than average
price/earnings multiples, lower dividend yields and smaller market
capitalizations. This was offset to some degree by management's preference for
stocks with stronger relative growth characteristics.
A number of holdings posted very strong absolute and relative performance
results. Among the stocks contributing most significantly to overall returns
were: Norfolk Southern, a rail transportation holding company, Rockwell
Automation, a provider of industrial automation products and systems, TXU, an
electric utilities company. The Fund also benefited from strong stock selection
within the financial services sector, which averaged more than 36% of the
portfolio during the period. FleetBoston Financial, Countrywide Financial, First
Bancorp of Puerto Rico and North Fork Bancorporation delivered good results for
the year.
Merck was the most significant detractor from performance for the year. This was
largely attributable to a significant one day decline on the last trading day of
the fiscal year prompted by the company's voluntary withdrawal of Vioxx, a
widely prescribed drug treating arthritis and pain. Other companies detracting
from Fund performance included Intuit, a company specializing in software for
personal and small business finance, Micron Technology, a semiconductor company
and Tribune, a media and newspaper company.
There were no significant changes in the Fund's strategy during the year. The
only changes made to the Fund's positioning were in response to Russell's mid
year index reconstitution. These changes included modest increases and decreases
to sector and industry exposures.
22 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN DIVERSIFIED VALUE FUND
FUND PROFILE
As of September 30, 2004
Ticker PTDVX
- ----------------------------------------------------
CUSIP 21038A794
- ----------------------------------------------------
% in 10 largest holdings 35.1%
- ----------------------------------------------------
# of holdings 53
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 16.36
- ----------------------------------------------------
Weighted Average Market
Capitalization $66.2 billion
- ----------------------------------------------------
Net assets $152 million
- ----------------------------------------------------
Top 10 Holdings
1 Exxon Mobil
2 Citigroup
3 Wells Fargo
4 ChevronTexaco
5 MBNA
6 North Fork Bancorporation
7 Bear Stearns
8 Walt Disney
9 Rockwell Automation
10 Hibernia, Cl A
Investment Style
value blend growth
----------------------------
large |XXXXXXX| | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
SECTOR WEIGHTINGS+
37.1% Financials
13.3% Consumer Discretionary
11.5% Energy
9.7% Industrials
6.8% Information Technology
5.8% Utilities
5.4% Telecommunication Services
3.7% Consumer Staples
3.2% Health Care
2.6% Materials
0.9% Exchange Traded Funds
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER MULTI-CAP VALUE CATEGORY
PERIOD RANK PERCENTILE
3 year (97 of 341 funds) 28%
- ----------------------------------------------------
1 year (214 of 461 funds) 46%
GROWTH OF $10,000 INVESTMENT IN THE FUND
August 31, 2000 - September 30, 2004*
Pitcairn Russell 1000
DVF Value Index
-------- ------------
Aug 31 00 10000 10000
Sep 00 10122 10092
Sep 01 9079 9193
Sep 02 7858 7635
Sep 03 9774 9495
Sep 04 11556 11444
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Diversified Value Fund is August 4, 2000.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
18.23% 8.37% 3.94%
Constellation Funds 2004 Annual Report | 23
INVESTMENT REVIEW
CONSTELLATION PITCAIRN SELECT VALUE FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Pitcairn Select Value Fund is sub-advised by Pitcairn
Investment Management ("Pitcairn"). Pitcairn constructs a focused portfolio of
equity securities that its analysts believe have exceptional appreciation
potential. The portfolio is structured to keep risk exposures controlled
relative to the Russell 1000 Value benchmark. Individual security selection is
expected to be the source for any excess returns.
FUND PERFORMANCE & POSITIONING
For the one-year period ended September 30, 2004, the Constellation Pitcairn
Select Value Fund returned 17.45%. This compares to a 20.52% return posted by
the Russell 1000 Value Index. The Constellation Pitcairn Select Value Fund
ranked at the 53rd percentile (246 out of 461 funds) when compared to the Lipper
Multi-Cap Value category over the twelve-month period.
The Fund benefited from a bias toward smaller stocks in the first six months of
the year when small capitalization stocks far outpaced large capitalization
stocks. The Russell 2000 Index advanced close to 22% in the first half of the
fiscal year compared to about 13% for the Russell 1000 Index. That effect faded
in the second half of the year as large cap stocks began to outperform their
smaller counterparts. In addition, while value stocks outperformed growth stocks
over the time period, the Fund was disadvantaged by its emphasis on stocks with
more pronounced growth characteristics.
Individual holdings posting strong results include Alliance Data Systems, a data
processing and services company, Countrywide Financial, a diversified financial
services company, ChevronTexaco, a petroleum and chemical company, Rockwell
Automation, a provider of industrial automation products and services and
Spinnaker Exploration, an idependent energy company engaged in the exploration
and production of oil and gas. These holdings contributed positively to results
for the year.
Companies detracting from performance included Flextronics, an electronics
manufacturer, Kohl's, a department store retailer, Walt Disney, a diversified
entertainment company and CenturyTel, a communications company focused on
providing local exchange telephone services.
There were no significant changes to the Constellation Pitcairn Select Value
Fund's strategy during the year. The only changes made to the Fund, with regard
to positioning, were in response to Russell's mid year index reconstitution.
These changes included some modest increases and decreases to sector and
industry exposures.
24 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN SELECT VALUE FUND
FUND PROFILE
As of September 30, 2004
Ticker PTSVX
- ----------------------------------------------------
CUSIP 21038A752
- ----------------------------------------------------
% in 10 largest holdings 47.0%
- ----------------------------------------------------
# of holdings 31
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 16.57
- ----------------------------------------------------
Weighted Average Market
Capitalization $47.9 billion
- ----------------------------------------------------
Net assets $62 million
- ----------------------------------------------------
Top 10 Holdings
1 North Fork Bancorporation
2 Stancorp Financial Group
3 Walt Disney
4 ChevronTexaco
5 MBNA
6 Sprint
7 Capital One Financial
8 Rockwell Automation
9 Radian Group
10 Devon Energy
Investment Style
value blend growth
----------------------------
large |XXXXXXX| | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
SECTOR WEIGHTINGS+
35.6% Financials
12.0% Energy
10.0% Information Technology
8.9% Industrials
8.3% Consumer Staples
8.3% Consumer Discretionary
5.6% Utilities
4.7% Telecommunication Services
3.6% Health Care
2.0% Materials
0.6% Exchange Traded Funds
0.4% Cash Equivalents
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER MULTI-CAP VALUE CATEGORY
PERIOD RANK PERCENTILE
3 year (296 of 341 funds) 87%
- ----------------------------------------------------
1 year (246 of 461 funds) 53%
GROWTH OF $10,000 INVESTMENT IN THE FUND
August 31, 2000 - September 30, 2004*
Pitcairn Russell 1000
SVF Value Index
-------- ------------
Aug 31 00 10000 10000
Sep 00 10514 10092
Sep 01 10094 9193
Sep 02 7757 7635
Sep 03 9628 9495
Sep 04 11308 11444
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Select Value Fund is August 11, 2000.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
17.45% 3.86% 3.31%
Constellation Funds 2004 Annual Report | 25
INVESTMENT REVIEW
CONSTELLATION PITCAIRN DIVERSIFIED GROWTH FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Pitcairn Diversified Growth Fund is sub-advised by Pitcairn
Investment Management ("Pitcairn"). The Fund invests in a diversified portfolio
of equity securities that Pitcairn's analysts have identified as having
exceptional appreciation potential relative to their sector and industry peers.
In managing the portfolio, Pitcairn employs a disciplined investment process
focused on risk management and security selection. The risk management process
is designed to emphasize security selection as the primary driver of our
relative returns. This is accomplished by minimizing sector and thematic bets in
the portfolio. Pitcairn's security selection methodology emphasizes a company's
growth prospects and relative valuation. Management seeks to identify stocks
that offer significant growth potential, but are attractively valued relative to
their peers.
FUND PERFORMANCE & POSITIONING
For the fiscal year ending September 30, 2004, the Pitcairn Diversified Growth
Fund posted a return of 7.68%. Over the same period, the Fund's benchmark, the
Russell 1000(R) Growth Index returned 7.51%. The Constellation Pitcairn
Diversified Growth Fund ranked at the 40th percentile (255 out of 631 funds)
when compared to the Lipper Large-Cap Growth category over the twelve-month
period.
Over the past twelve months, the performance of the Fund was driven largely by
security selection. The Fund experienced a positive impact from securities held
in the portfolio and the decision not to own certain securities included in the
benchmark. In addition, the Fund benefited from management's preference to own
stocks with lower relative price to earnings multiples.
Holdings in the financial services and consumer sectors contributed positively
to performance for the year. Individual holdings posting strong relative results
included AT&T Wireless and Starbucks. AT&T Wireless shares gained after the
company put itself up for sale. Starbucks performance was in response to better
than expected operating results.
Holdings in the technology sector had the most significant negative impact on
performance during the past year. Specific holdings that detracted from Fund
performance included Veritas Software, a developer of data storage software,
Intuit, a company specializing in software for personal and small business
finance, and Flextronics International, a provider of electronic components for
use in a wide range of product and industry applications. Several bright spots
within the sector include Qualcomm, a provider of digital wireless
communications products and services and Rockwell Automation, a provider of
industrial automation products and systems. Both of these companies posted
strong relative results that had a positive impact on performance in the Fund.
There were no significant changes made to the Fund's strategy during the year.
In addition, the only changes made to the Fund's portfolio with regard to
positioning were in response to Russell's mid year index reconstitution. These
changes included some modest increases and decreases to sector and industry
exposures.
26 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN DIVERSIFIED GROWTH FUND
FUND PROFILE
As of September 30, 2004
Ticker PTDGX
- ----------------------------------------------------
CUSIP 21038A810
- ----------------------------------------------------
% in 10 largest holdings 35.1%
- ----------------------------------------------------
# of holdings 60
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 21.04
- ----------------------------------------------------
Weighted Average Market
Capitalization $78.8 billion
- ----------------------------------------------------
Net assets $105 million
- ----------------------------------------------------
Top 10 Holdings
1 Pfizer
2 Microsoft
3 Johnson & Johnson
4 PepsiCo
5 Medtronic
6 Cisco Systems
7 MBNA
8 Wal-Mart Stores
9 Home Depot
10 Procter & Gamble
Investment Style
value blend growth
----------------------------
large | | |XXXXXXXX|
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
SECTOR WEIGHTINGS+
26.0% Information Technology
24.4% Health Care
17.9% Consumer Discretionary
10.3% Consumer Staples
9.4% Financials
7.0% Industrials
1.4% Exchange Traded Funds
1.4% Energy
1.0% Telecommunication Services
1.0% Materials
0.2% Cash Equivalents
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER LARGE-CAP GROWTH CATEGORY
PERIOD RANK PERCENTILE
3 year (293 of 513 funds) 57%
- ----------------------------------------------------
1 year (255 of 631 funds) 40%
GROWTH OF $10,000 INVESTMENT IN THE FUND
August 31, 2000 - September 30, 2004*
Pitcairn Russell
DGF 1000 GI
-------- -------
Aug 31 00 10000 10000
Sep 00 8899 9054
Sep 01 4986 4922
Sep 02 3719 3814
Sep 03 4607 4802
Sep 04 4960 5163
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Diversified Growth Fund is August 4, 2000.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
7.68% (0.17)% (13.92)%
Constellation Funds 2004 Annual Report | 27
INVESTMENT REVIEW
CONSTELLATION PITCAIRN SMALL CAP FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Pitcairn Small Cap Fund is sub-advised by Pitcairn Investment
Management ("Pitcairn"). The Fund invests in a diversified portfolio of equity
securities that Pitcairn's analysts believe have exceptional appreciation
potential relative to their sector and industry peers. The Fund's primary focus
is on small capitalization stocks. The Fund is diversified by issuer and
industry and typically owns both value and growth stocks.
In managing the portfolio, Fund management employs a disciplined investment
process focused on risk management and security selection. The risk management
process is designed to emphasize security selection as the primary driver of our
relative returns. This is accomplished by minimizing sector and thematic bets in
the portfolio. Pitcairn's security selection methodology emphasizes a company's
growth prospects and relative valuation. Management seeks to identify stocks
that offer significant growth potential, but are attractively valued relative to
their peer groups.
FUND PERFORMANCE & POSITIONING
For the period ending September 30, 2004, the Constellation Pitcairn Small Cap
Fund delivered a 19.72% return compared to 18.77% for the Russell 2000 Index.
The Constellation Pitcairn Small Cap Fund ranked at the 53rd percentile (288 out
of 541 funds) when compared to the Lipper Small Core category over the
twelve-month period.
A number of stocks enhanced the performance of the portfolio during the year,
including Metris, a financial services company, Serologicals, a biotechnology
company that engaged in corporate transactions that left the company focused on
research/life sciences and improved operating results. First Bancorp of Puerto
Rico benefited from solid profit growth and a higher multiple. Aeropostale, a
specialty retailer focused on the teen and young adult market, enjoyed stronger
same store sales which drove earnings and confidence in management's growth
plan.
Several of the Fund's holdings within the software and semiconductor industries
detracted from performance for the year. Cypress Semiconductor, Kulicke and
Soffa Industries, and Kana Software all sold off due to general slowing in
semiconductor demand and an increasingly competitive software end market. Fund
performance also was negatively impacted by Synovis Life Technolgies, a medical
device company, and Collagenex Pharmaceuticals, a pharmaceutical company
providing specialized medical therapies to the dental and dermatological
markets.
There were no significant changes to the Constellation Pitcairn Small Cap Fund
strategy. The only changes made to the Fund, with regard to positioning, were in
response to Russell's mid year index reconstitution. These changes included some
modest increases and decreases to sector and industry exposures.
28 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN SMALL CAP FUND
FUND PROFILE
As of September 30, 2004
Ticker PTMVX
- ----------------------------------------------------
CUSIP 21038A745
- ----------------------------------------------------
% in 10 largest holdings 29.8%
- ----------------------------------------------------
# of holdings 67
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 20.99
- ----------------------------------------------------
Weighted Average Market
Capitalization $936.7 million
- ----------------------------------------------------
Net assets $93 million
- ----------------------------------------------------
Top 10 Holdings
1 Metris
2 Hyperion Solutions
3 Capital Automotive REIT
4 California Pizza Kitchen
5 Aeroflex
6 Lionbridge Technologies
7 Serologicals
8 Laureate Education
9 Aeropostale
10 Belden CDT
Investment Style
value blend growth
----------------------------
large | | | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | |XXXXXXXX|
----------------------------
SECTOR WEIGHTINGS+
22.1% Information Technology
21.3% Financials
13.0% Health Care
12.9% Consumer Discretionary
10.2% Industrials
5.7% Energy
5.2% Materials
4.2% Consumer Staples
2.3% Utilities
1.4% Telecommunication Services
0.9% Cash Equilvalents
0.8% Exchange Traded Funds
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER SMALL CAP CORE CATEGORY
PERIOD RANK PERCENTILE
3 year (208 of 434 funds) 48%
- ----------------------------------------------------
1 year (288 of 541 funds) 53%
GROWTH OF $10,000 INVESTMENT IN THE FUND
August 31, 2000 - September 30, 2004*
Pitcairn Russell 2000 Russell 2000
SCF Index Value Index
-------- ------------ ------------
Aug 31 97 10000 10000 10000
Sep 00 10059 9706 9943
Sep 01 10412 7647 10501
Sep 02 10111 6936 10347
Sep 03 12822 9468 13624
Sep 04 15350 11245 17119
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Small Cap Fund is August 25, 2000.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
19.72% 13.82% 11.40%
Constellation Funds 2004 Annual Report | 29
INVESTMENT REVIEW
CONSTELLATION PITCAIRN FAMILY HERITAGE(R) FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Pitcairn Family Heritage(R) Fund is sub-advised by Pitcairn
Investment Management ("Pitcairn"). The Fund invests in a portfolio of equity
securities that Pitcairn's analysts believe offer exceptional appreciation
potential relative to their sector and industry peers.
The Fund invests predominantly in companies in which the founding family still
maintains significant influence over the direction of the firm. Influence may
take the form of significant ownership by the family or a related foundation,
senior executive positions held by family members or significant board presence
of founding family members. The Fund is managed with the goal of producing
returns in excess of its benchmark, the Wilshire 5000 Index, while keeping
exposure to risk characteristics similar to that of the benchmark. Pitcairn's
security selection methodology emphasizes a company's growth prospects and
relative valuation. Management seeks to identify stocks that offer significant
growth potential, but are attractively valued relative to their peer groups.
FUND PERFORMANCE & POSITIONING
For the one-year period ended September 30, 2004, the Fund returned 16.15%. This
compares to a 14.76% return from the Wilshire 5000 Index and a 14.26% return for
the Russell 3000 Index. The Constellation Pitcairn Family Heritage(R) Fund
ranked in the 20th percentile (139 out of 684 funds) when compared to the Lipper
Multi-Cap Core category over the twelve-month period.
Over the past year, the Fund benefited from a modest tilt toward stocks with
smaller market capitalizations and lower price/earnings multiples and dividend
yields. This benefit was somewhat offset by management's preference for stocks
with stronger than average growth characteristics, as growth stocks generally
were out of favor over the last twelve months. Stock selection played a
significant role in performance for the period. Portfolio holdings that
contributed positively to performance over the past year included Yahoo!, an
Internet services and search company, Qualcomm, a provider of digital wireless
communications products and services, Worthington Industries (70%), Westport
Resources, a steel processing company and Fastenal, an industrial and
construction supply wholesaler.
Detractors from Fund performance over the past year included King
Pharmaceuticals, Vishay Intertechnology, an electronic components manufacturer,
Albany Molecular Research, a drug development company and Viacom, a diversified
broadcast and entertainment company.
There were no significant changes to the Fund's strategy or positioning during
the past year.
30 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN FAMILY HERITAGE(R) FUND
FUND PROFILE
As of September 30, 2004
Ticker PTFMX
- ----------------------------------------------------
CUSIP 21038A786
- ----------------------------------------------------
% in 10 largest holdings 33.6%
- ----------------------------------------------------
# of holdings 53
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 19.58
- ----------------------------------------------------
Weighted Average Market
Capitalization $41.0 billion
- ----------------------------------------------------
Net assets $78 million
- ----------------------------------------------------
Top 10 Holdings
1 Microsoft
2 Eli Lilly
3 Wal-Mart Stores
4 Stryker
5 MBNA
6 TCF Financial
7 Dell
8 iShares Dow Jones US
Utilities Sector Index Fund
9 Berkshire Hathaway, Cl B
10 Kerr-McGee
Investment Style
value blend growth
----------------------------
large | | |XXXXXXXX|
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
SECTOR WEIGHTINGS+
23.5% Financials
18.8% Information Technology
12.3% Health Care
10.8% Consumer Discretionary
10.1% Industrials
9.7% Consumer Staples
6.4% Energy
4.5% Exchange Traded Funds
2.9% Materials
0.7% Telecommunication Services
0.3% Utilities
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER MULTI-CAP CORE CATEGORY
PERIOD RANK PERCENTILE
3 year (126 of 501 funds) 25%
- ----------------------------------------------------
1 year (139 of 684 funds) 20%
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
Pitcairn
Family
Hertigage(R) Wilshire
Fund 5000 Index
--------- ----------
Sep 30 94 10000 10000
Sep 95 11440 12910
Sep 96 12578 15353
Sep 97 17952 21191
Sep 98 19059 21886
Sep 99 24102 27785
Sep 00 29031 32639
Sep 01 22470 23196
Sep 02 19628 19132
Sep 03 23671 24154
Sep 04 27494 27720
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Family Heritage(R) Fund is October 31, 1989.
**For periods prior to August 4, 2000, when the Fund began operating, the
performance data quoted represents past performance of the Sub-Adviser's
similarly managed common trust fund, adjusted to reflect fees and expenses
expected to be borne by the Fund. The common trust fund was not a registered
mutual fund, and therefore was not subject to certain investment and tax
restrictions which may have adversely affected performance. The common trust
fund changed its investment strategy in April 1996.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
16.15% 6.96% 2.67%** 10.64%** 10.09%**
Constellation Funds 2004 Annual Report | 31
INVESTMENT REVIEW
CONSTELLATION PITCAIRN TAXABLE BOND FUND
INVESTMENT PHILOSOPHY & PROCESS
The Fund is managed with a focus on seeking maximum total rates of return
consistent with moderate risk of capital and maintenance of liquidity. The Fund
invests in a broad range of investment grade fixed income securities across the
full maturity spectrum. Investments are actively managed with the goal of
achieving a total return advantage over the Lehman U.S. Government/Credit Index.
Additional value is gained by anticipating changing credit conditions and
identifying unique anomalies offered by the marketplace.
FUND PERFORMANCE & POSITIONING
For the fiscal year ended September 30, 2004, the Pitcairn Taxable Bond Fund
returned 3.46%. In comparison, the benchmark, the Lehman U.S. Government/Credit
Index returned 3.35%. The Constellation Pitcairn Taxable Bond Fund ranked at the
71st percentile when compared to the Lipper General Municipal Debt category over
the twelve-month period.
During the fiscal year, corporate bonds outperformed all other investment grade
sectors. Tyco International Group, Ford Motor Credit, and Harman International
were the best performing bonds in the portfolio, while AT&T bonds lagged. AT&T
suffered after management announced it will discontinue marketing to new
residential customers. This shift caused many analysts to adjust their cash flow
projections downward and subsequently the credit was downgraded to
non-investment grade levels. The performance of the other corporate holdings
during the fiscal year more than compensated for the decline in value of the
portfolios' AT&T holdings and produced excess returns, after fees and expenses,
to the benchmark.
We did not make any significant changes to the Constellation Pitcairn Taxable
Bond Fund.
32 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN TAXABLE BOND FUND
FUND PROFILE
As of September 30, 2004
Ticker PTGCX
- ----------------------------------------------------
CUSIP 21038A729
- ----------------------------------------------------
% in 10 largest holdings 36.6%
- ----------------------------------------------------
# of holdings 42
- ----------------------------------------------------
Average Effective Duration 5.04
- ----------------------------------------------------
Average Quality AA3
- ----------------------------------------------------
Average Maturity 8.34
- ----------------------------------------------------
Average Current Yield 5.81%
- ----------------------------------------------------
Net assets $43 million
- ----------------------------------------------------
Top 10 Holdings
1 Tyco International Group
2 U.S. Treasury Bonds
3 General Motors Acceptance
4 FHLMC
5 FHLB, Ser TV06
6 Lehman Brothers Holdings
7 FNMA
8 TVA, Ser B
9 Standard Credit Card
Master Trust, Ser
1994-2, Cl A
10 Harman International
SECTOR WEIGHTINGS+
56.1% Corporate Obligations
5.1% Asset Backed Securities
1.9% U.S. Government Mortgage-Backed Obligations
20.4% U.S. Government Agency Obligations
14.8% U.S. Treasury Obligations
1.7% Cash Equivalents
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER CORPORATE DEBT FUNDS BBB RATING CATEGORY
PERIOD RANK PERCENTILE
3 year (93 of 131 funds) 71%
- -----------------------------------------------------
1 year (124 of 175 funds) 71%
Duration
short long
----------------------------
high | | |XXXXXXXX|
Quality ----------------------------
| | | |
----------------------------
low | | | |
----------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
CONSTELLATION Lehman US
PITCAIRN TAXABLE Govt/Credit
BOND FUND Index
------------- -----------
Sep 30 94 10000 10000
Sep 95 11406 11435
Sep 96 11813 11951
Sep 97 12892 13097
Sep 98 14483 14778
Sep 99 14135 14539
Sep 00 15081 15516
Sep 01 17118 17559
Sep 02 17984 19175
Sep 03 19270 20423
Sep 04 19937 21107
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Taxable Bond Fund is December 31, 1988.
**For periods prior to August 4, 2000, when the Fund began operating, the
performance data quoted represents past performance of the Sub-Adviser's
similarly managed common trust fund, adjusted to reflect fees and expenses
expected to be borne by the Fund. The collective trust fund was not a registered
mutual fund, and therefore was not subject to certain investment and tax
restrictions which may have adversely affected performance.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
3.46% 5.21% 7.12%** 7.15%** 7.35%**
Constellation Funds 2004 Annual Report | 33
INVESTMENT REVIEW
CONSTELLATION PITCAIRN TAX-EXEMPT BOND FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Pitcairn Tax Exempt Bond Fund is sub-advised by Pitcairn
Investment Management ("Pitcairn"). The Fund is managed with a focus on
providing income, exempt from federal income taxes; ensuring total rates of
return consistent with moderate risk of capital; and maintaining adequate
liquidity. Pitcairn invests in a broad range of investment grade fixed income
securities across the full maturity spectrum. The Fund is a national market
portfolio. This national emphasis is designed to improve total return
possibilities, while at the same time reducing risk. Investments are actively
managed with the goal of achieving a total return advantage over the Lehman
Municipal Bond Index. Additional value is gained by anticipating changing credit
conditions and identifying unique anomalies offered by the marketplace.
FUND PERFORMANCE & POSITIONING
For the fiscal year ending September 30, 2004, the Constellation Pitcairn
Tax-Exempt Bond Fund returned 3.60%. The Fund's benchmark, the Lehman Municipal
Bond Index, returned 4.59%. The Constellation Pitcairn Tax-Exempt Bond Fund
ranked at the 61st percentile (183 out of 299 funds) when compared to the Lipper
General Municipal Debt category over the twelve-month period.
As rates remain near 40 year lows, investors looked for yield in areas that have
been out of favor over the past several years. The Fund's underweight in several
sectors led to the underperformance relative to the index.
The portfolio was underweight in bonds backed by the Tobacco Master Settlement
Agreement and in California bonds. Despite continued headline risk associated
with Tobacco bonds, the segment outperformed during the fiscal year, after
excessively poor performance during the prior fiscal year. California bonds also
beat the overall municipal bond index, as a new Governor was able to bring to
market large bond issues that staved off a cash crunch at the state level.
There were no significant changes to the strategy of the Constellation Pitcairn
Tax-Exempt Bond Fund during the last year.
34 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION PITCAIRN TAX-EXEMPT BOND FUND
FUND PROFILE
As of September 30, 2004
Ticker PTTEX
- ----------------------------------------------------
CUSIP 21038A737
- ----------------------------------------------------
% in 10 largest holdings 22.9%
- ----------------------------------------------------
# of holdings 82
- ----------------------------------------------------
Average Effective Duration 7.07
- ----------------------------------------------------
Average Quality AA1
- ----------------------------------------------------
Average Maturity 12.24
- ----------------------------------------------------
Average Current Yield 5.00%
- ----------------------------------------------------
Net assets $114 million
- ----------------------------------------------------
Top 10 Holdings
1 California State GO, AMBAC
2 Oklahoma City, Water Utilities Authority RB, Ser A
3 Las Vegas, New Convention & Visitors
Center RB, AMBAC
4 University of Hawaii RB, Ser A, FGIC
5 Henry County, Water & Sewer Authority
RB, AMBAC
6 Health Facilities Finance Authority
RB, St. Francis Memorial Hospital,
Ser C, ETM
7 Public Facilities Authority RB,
Franciscan Missionaries Project,
Ser A, FSA
8 Cape May County, Municipal
Utilities Authority RB, FSA
9 New York City, Transitional Finance
Authority RB, Ser A
10 Fort Worth Water & Sewer RB
SECTOR WEIGHTINGS+
15.1% General Obligation
14.8% Utilities
11.3% Medical
9.4% Facilities
9.0% Higher Education
7.1% Development
6.9% Transportation
5.7% Power
5.4% School District
4.9% General Revenue
2.8% Airport
1.5% Single Family Housing
1.1% Water
1.1% Cash Equivalents
1.0% Public Improvement
1.0% Pollution
1.0% Education
0.9% Multi-Family Housing
+Percentages based on total investments
Duration
short long
----------------------------
high | |XXXXXXXX | |
Quality ----------------------------
| | | |
----------------------------
low | | | |
----------------------------
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER GENERAL MUNICIPAL DEBT CATEGORY
PERIOD RANK PERCENTILE
3 year (65 of 265 funds) 25%
- --------------------------------------------------------
1 year (183 of 299 funds) 61%
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
CONSTELLATION Lehman
PITCAIRN TAX-EXEMPT Municipal
BOND FUND Bond Index
-------------------- ----------
Sep 30 94 10000 10000
Sep 95 10786 11119
Sep 96 11250 11791
Sep 97 12150 12855
Sep 98 13121 13976
Sep 99 12898 13878
Sep 00 13577 14736
Sep 01 14932 16270
Sep 02 16246 17725
Sep 03 16833 18414
Sep 04 17439 19259
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Pitcairn
Tax-Exempt Bond Fund is August 31, 1988.
**For periods prior to August 11, 2000, when the Fund began operating, the
performance data quoted represents past performance of the Sub-Adviser's
similarly managed common trust fund adjusted to reflect fees and expenses
expected to be borne by the Fund. The common trust fund was not a registered
mutual fund, and therefore was not subject to certain investment and tax
restrictions which may have adversely affected performance. The common trust
fund changed its investment strategy in January 1997.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
3.60% 5.31% 6.22%** 5.72%** 6.02%**
Constellation Funds 2004 Annual Report | 35
INVESTMENT REVIEW
CONSTELLATION SANDS CAPITAL SELECT GROWTH FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Sands Capital Select Growth Fund is sub-advised by Sands
Capital Management ("Sands Capital"). Sands Capital's basic investment
philosophy is that of a growth investor. In short, Sands Capital believes that
"the secret to common stock price appreciation is sustained above average growth
of earnings" and the investment process applied to the Fund is consistent with
that belief. To execute on that philosophy, the Fund invests in 25 to 30
companies that management believes have the long-term potential to significantly
outperform the relevant index, the Russell 1000 Growth Index(R). The portfolio
management team at Sands Capital finds that companies meeting their investment
criteria are generally high-quality, seasoned and growing businesses; spread
across an array of attractive and growing business spaces.
FUND PERFORMANCE & POSITIONING
Despite a year punctuated by geopolitical uncertainty, rising fuel prices, and
the political machinations common to a presidential election year, the Fund's
focused portfolio of leading growth companies once again significantly
outperformed the Russell 1000 Growth Index(R). The Fund's continued strong
performance is a testament to the manager's time tested process of owning
leading, high quality businesses in attractive growth industries. The Russell
1000 Growth Index(R) finished the year ending September 30, 2004 up 7.51%. By
comparison, the Fund was up 15.45% (Class II Shares) resulting in outperformance
of 7.94%.
Overall stock selection contributed approximately 7.00% to relative Fund
performance and overall sector weight deviations contributed more than 1.50%.
These contributions were only slightly offset by the portfolio's overall style
factors, which detracted less than 1.00% from overall Fund performance.
The Fund was overweighted relative to the benchmark in eBay, Starbucks, and
Qualcomm. These individual stock positions were all significant contributors to
overall Fund performance. Detractors from relative performance include Krispy
Kreme Doughnuts and Kohl's.
Going forward, management continues to expect the companies in the Fund to
capitalize on the sustainable, long-term advantages they have created and to
generate above-average growth. Turnover, or changes to holdings in the Fund, has
historically been very low. As a result, investors can expect the Fund to be a
long term owner of these types of "businesses enterprises", regardless of
short-term stock performance, as long as the companies continue to meet the
investment criteria of Sands Capital.
36 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION SANDS CAPITAL SELECT GROWTH FUND
FUND PROFILE
As of September 30, 2004
Ticker (Class I/Class II) CFSIX/PTSGX
- ----------------------------------------------------
CUSIP (Class I/Class II) 21038A711/21038A760
- ----------------------------------------------------
% in 10 largest holdings 56.8%
- ----------------------------------------------------
# of holdings 27
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 32.67
- ----------------------------------------------------
Weighted Average Market
Capitalization $51.9 billion
- ----------------------------------------------------
Net assets(CI/CII) $33 mil/$70 mil
- ----------------------------------------------------
Top 10 Holdings
1 eBay
2 Starbucks
3 Genentech
4 Capital One Financial
5 Apollo Group, Cl A
6 Dell
7 Lowe's
8 Qualcomm
9 Harley-Davidson
10 Medtronic
SECTOR WEIGHTINGS+
33.2% Consumer Discretionary
27.2% Health Care
26.8% Financials
18.8% Information Technology
8.3% Financials
5.5% Industrials
4.5% Consumer Staples
2.5% Cash Equivalents
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING*
As of September 30, 2004
LIPPER LARGE-CAP GROWTH CATEGORY
PERIOD RANK PERCENTILE
3 year (3 of 513 funds) 1%
- --------------------------------------------------------------------------
1 year (8 of 631 funds) 1%
*Rankings for Class II Shares
Investment Style
value blend growth
----------------------------
large | | |XXXXXXXX|
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
August 31, 2000 - September 30, 2004*
Constellation Sands CONSTELLATION SANDS
Capital Select Growth CAPITAL SELECT GROWTH Russell 1000
Fund, Class I FUND, CLASS II Growth Index
--------------------- --------------------- ------------
Aug 31 00 10000 10000 10000
Sep 00 8841 8841 9054
Sep 01 4863 4863 4922
Sep 02 4186 4186 3814
Sep 03 5694 5694 4802
Sep 04 6573 6573 5163
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Sands
Capital Select Growth Fund (Class II Shares) is August 11, 2000.
**Class I Shares were offered beginning on August 27, 2004. Class I Shares
performance for the periods prior to August 27, 2004 reflects performance of the
Fund's Class II Shares. The performance of the Class I Shares has not been
adjusted for the differences in fees between the classes.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
Class I Shares 15.45%** 10.57%** (8.89)%**
Class II Shares 15.45% 10.57% (8.89)%
Constellation Funds 2004 Annual Report | 37
INVESTMENT REVIEW
CONSTELLATION TIP SMALL CAP VALUE OPPORTUNITIES FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation TIP Small Cap Value Opportunities Fund is sub-advised by
Turner Investment Partners ("Turner"). The Fund invests in securities of
companies operating in a broad range of industries based primarily on a
fundamental analysis of each company and due consideration of such
characteristics as price to cash flow, price to earnings and price to book value
ratios. Turner uses a series of qualitative screens to identify "hidden" assets
that may signify attractive return potential to share prices. The Managers look
to identify a catalyst for positive change in each company's fundamentals. They
seek companies with quality management teams that can take advantage of unique
product opportunities and emphasize companies that are undervalued in the
marketplace.
FUND PERFORMANCE & POSITIONING
For the twelve months ending September 30, 2004, the Fund posted a gain of
29.36% verses a gain of 25.66% for its benchmark, the Russell 2000 Value Index.
Contributing the most to performance during this time frame were holdings in the
autos and transportation, utility, and materials and processing sectors. Within
the autos and transportation sector, diesel engine manufacturer, China Yuchai
Industries posted very strong relative performance. Marine shipping companies
OMI and General Maritime were also contributors within the autos and
transportation sector. The strong demand for oil and a significant increase in
daily rates for shipping benefited both companies. In the utility sector,
wireless holdings Alamosa Holdings and NII Holdings contributed positively to
performance. Both companies delivered good operating results, increasing
earnings estimates and cash flow, due to increases in the subscriber base and
improved roaming charges.
The sectors underperforming the benchmark were energy and consumer staples. A
slight underweight in the oil & gas industry within the energy sector detracted
from performance. In the consumer staples sector, Interstate Bakeries had a
negative impact on the portfolio. The Fund had held the stock based on the
expectation that this company would undergo a significant restructuring that
would improve operations and profitability. Unfortunately, company management
was unable to execute on this strategy and the stock suffered. The Fund sold the
position in March of 2004, well in advance of the company's September 2004
Chapter 11 bankruptcy filing.
There were no significant changes in the portfolio positioning or strategy
during the twelve months ending September 30, 2004.
38 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION TIP SMALL CAP VALUE OPPORTUNITIES FUND
FUND PROFILE
As of September 30, 2004
Ticker TSVOX
- ----------------------------------------------------
CUSIP 21038A208
- ----------------------------------------------------
% in 10 largest holdings 14.1%
- ----------------------------------------------------
# of holdings 87
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 14.84
- ----------------------------------------------------
Weighted Average Market
Capitalization $1.2 billion
- ----------------------------------------------------
Net assets $15 million
- ----------------------------------------------------
Top 10 Holdings
1 OMI
2 Laidlaw International
3 Capital Automotive REIT
4 Terex
5 Amerco
6 Sterling Financial
7 Lone Star Technologies
8 Measurement Specialties
9 Ralcorp Holdings
10 Roper Industries
SECTOR WEIGHTINGS+
23.0% Financials
21.0% Industrials
20.4% Cash Equivalents
6.8% Materials
5.9% Consumer Discretionary
5.1% Energy
4.6% Information Technology
4.6% Telecommunication Services
4.9% Health Care
1.9% Utilities
1.8% Consumer Staples
+Percentages based on total investments
Investment Style
value blend growth
----------------------------
large | | | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small |XXXXXXX| | |
----------------------------
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER SMALL CAP CORE CATEGORY
PERIOD RANK PERCENTILE
1 year (50 of 541 funds) 9%
GROWTH OF $10,000 INVESTMENT IN THE FUND
March 31, 2002 - September 30, 2004*
CONSTELLATION TIP
SMALL CAP VALUE Russell 2000
OPPORTUNITIES FUND Value Index
------------------ ------------
Mar 31 02 10000 10000
Sep 02 8737 7705
Sep 03 11995 10144
Sep 04 15517 12747
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation TIP Small
Cap Value Opportunities Fund is March 4, 2002.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Since
year inception
29.36% 21.38%
Constellation Funds 2004 Annual Report | 39
INVESTMENT REVIEW
CONSTELLATION TIP FINANCIAL SERVICES FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation TIP Financial Services Fund is sub-advised by Turner
Investment Partners ("Turner"). The Fund invests primarily in common stocks of
financial services companies. Turner pursues a bottom-up strategy that blends
quantitative and qualitative analysis to find financial services firms with
superior earnings prospects, reasonable valuation, and favorable trading-volume
and pricing patterns. Management emphasizes the philosophy that earnings
expectations drive stock prices and believes that long term performance can be
best achieved be investing in companies with improving fundamentals and superior
earnings dynamics. Turner employs a disciplined investment process blending a
proprietary quantitative model, rigorous fundamental research, and technical
analysis. A stock becomes a sell candidate if Turner detects deterioration in
the company's earnings growth potential or if portfolio managers identify a
better idea for the portfolio.
FUND PERFORMANCE & POSITIONING
For the twelve months ending September 30, 2004, the portfolio posted a gain of
12.31% versus a gain of 14.88% for its benchmark, the S&P 500 Financials Index.
The Lipper average for Financial Services funds was 16.98% over that time frame.
The Constellation TIP Financial Services Fund ranked in the 84th percentile (87
out of 103 funds) when compared to the Lipper Financial Services category over
the twelve-month period.
Following positive stock market performance in 2003, Turner's view was 2004
would bring continued improvement in the economy and the market. This
perspective is represented in many of the Fund's holdings within the financial
services sector. For example, two of the Fund's brokerage holdings that
underperformed, Charles Schwab and Morgan Stanley, are well positioned to
benefit from economic expansion and more favorable equity markets.
Unfortunately, factors such as violence in Iraq, concerns about a terrorist
attack at the Olympics and Democratic and Republican conventions, higher energy
prices, and corporate scandals in the mutual fund industry weighed on the market
and these stocks. For example, many slower growing regional banks were seen as a
safe haven and outperformed, and the Fund did not own many issues operating in
the segments of the industry that performed well. Regional bank performance was
also aided by a pickup in acquisitions. The Fund did not own FleetBoston,
however, which performed well due to the acquisition by Bank of America.
Positive contributors to the Fund's performance for the year included
CapitalSource, a commercial finance lender and First Marblehead, a company that
provides services to the rapidly growing market for private student loans.
Investors Financial Services continued to report consistent earnings growth and
the stock performed well. In addition, selected holdings within the financial
data processing services industry contributed to performance. Examples are
Alliance Data Systems and Global Payments, both beneficiaries of the growth in
debit and credit cards replacing cash and checks for transactions.
The Fund remains positioned to take advantage of continued improvement in the
economy and stock market. In Turner's view, holdings within the securities
brokerage industry are trading at attractive valuations and will benefit from
continued global expansion. Also, many of the Fund's bank holdings such as City
National, Silicon Valley Bancshares and East-West Bancorp are thought to be well
positioned to grow even in a rising interest rate environment. There were no
significant changes to the strategy or positioning of the Fund during the twelve
months ending September 30, 2004.
40 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION TIP FINANCIAL SERVICES FUND
FUND PROFILE
As of September 30, 2004
Ticker TFFIX
- ----------------------------------------------------
CUSIP 21038A307
- ----------------------------------------------------
% in 10 largest holdings 35.3%
- ----------------------------------------------------
# of holdings 37
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 14.98
- ----------------------------------------------------
Weighted Average Market
Capitalization $38.6 billion
- ----------------------------------------------------
Net assets $15 million
- ----------------------------------------------------
Top 10 Holdings
1 Citigroup
2 American International Group
3 Goldman Sachs Group
4 American Express
5 Morgan Stanley
6 Northern Trust
7 Affiliated Managers Group
8 Wells Fargo
9 Silicon Valley Bancshares
10 Golden West Financial
SECTOR WEIGHTINGS+
76.1% Financials
15.0% Cash Equivalents
8.9% Information Technology
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER FINANCIAL SERVICES CATEGORY
PERIOD RANK PERCENTILE
5 year (35 of 64 funds) 55%
- ------------------------------------------------------------
3 year (28 of 94 funds) 30%
- ------------------------------------------------------------
1 year (87 of 103 funds) 84%
Investment Style
value blend growth
----------------------------
large | |XXXXXXXX | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
May 31, 1996 - September 30, 2004*
CONSTELLATION TIP
FINANCIAL SERVICES S&P 500
FUND Financials Index
------------------ ----------------
May 31 96 10000 10000
Sep 96 10752 10939
Sep 97 16893 17212
Sep 98 14579 16772
Sep 99 17684 19625
Sep 00 24439 26264
Sep 01 19326 22736
Sep 02 17204 19412
Sep 03 23389 24434
Sep 04 26269 28070
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation TIP
Financial Services Fund is May 22, 1996.
(1) Returns prior to November 12, 2001, represent performance of the Titan
Financial Services Fund.
ANNUALIZED TOTAL RETURNS(1)
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Since
year years years inception
12.31% 10.77% 8.24% 12.27%
Constellation Funds 2004 Annual Report | 41
INVESTMENT REVIEW
CONSTELLATION TIP HEALTHCARE & BIOTECHNOLOGY FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation TIP Healthcare & Biotechnology Fund is sub-advised by Turner
Investment Partners ("Turner"). The Fund invests primarily in common stocks of
healthcare and biotechnology companies. Turner pursues a bottom-up investment
strategy that blends quantitative and qualitative analysis to find growth
companies with superior earnings prospects, reasonable valuations, and favorable
trading-volume and pricing patterns. Management emphasizes the philosophy that
earnings expectations drive stock prices and believes that long term performance
can be best achieved by investing in companies with improving fundamentals and
superior earnings dynamics. Turner employs a disciplined investment process
blending a proprietary quantitative model, rigorous fundamental research, and
technical analysis. A stock becomes a sell candidate if Turner detects
deterioration in the company's earnings growth potential or if portfolio
managers identify a better idea for the portfolio.
FUND PERFORMANCE & POSITIONING
For the twelve months ending September 30, 2004, the Fund posted a gain of
12.12% verses a gain of 4.80% for its benchmark, the S&P 500 Healthcare Index.
The Lipper average for Healthcare/Biotechnology funds was 9.16% over that time
frame. The Constellation TIP Healthcare & Biotechnology Fund ranked in the 15th
percentile (30 out of 194 funds) when compared to the Lipper Healthcare/
Biotechnology category over the twelve-month period.
The biotechnology and managed care industries had the largest positive
contribution to overall performance in the portfolio. Aetna and PacifiCare
Health Systems contributed to positive results within the managed care industry.
The main factors driving managed care stock performance were strong EPS growth
derived primarily from excellent SG&A leverage, as well as data from various
actuarial surveys indicating that 2005 healthcare costs are expected to continue
to decelerate. In the biotech industry, Gilead Sciences, which manufactures the
HIV medicine, Viread, was a contributor to the quarter's performance. Genentech,
with the successful launch of their colorectal cancer drug Avastin, and OSI
Pharmaceuticals, with strong Phase III data on their lung cancer drug Tarceeva,
were also strong biotech performers that contributed to performance. Within the
healthcare service industry, Mariner Health Care, a nursing home operator,
contributed to performance as it was acquired for a significant premium.
In addition, the Fund was underweight pharmaceuticals and benefited from not
owning Merck. Merck's performance suffered dramatically resulting from its Vioxx
recall. The Vioxx recall raises concerns of increased FDA oversight, perhaps
leading to the requirement of additional clinical trials and a lengthier
approval process for new drugs to reach the market.
The majority of the fund's underperformance came from the pharmaceutical
industry. Teva Pharmaceutical Industries was a detractor in the generic
pharmaceutical industry. Schering-Plough, Wyeth, and Endo Pharmaceuticals
Holdings also detracted from performance. Pharmaceutical stocks were under
pressure as investors reacted to negative political rhetoric and generally
disappointing research and development pipelines. The weakness in this group is
illustrated by the -0.50% loss for the DRG Index for the twelve months ending
September 30, 2004.
There were no significant changes in the portfolio positioning or strategy of
the Fund during the twelve months ending September 30, 2004.
42 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION TIP HEALTHCARE & BIOTECHNOLOGY FUND
FUND PROFILE
As of September 30, 2004
Ticker THBCX
- ----------------------------------------------------
CUSIP 21038A109
- ----------------------------------------------------
% in 10 largest holdings 32.4%
- ----------------------------------------------------
# of holdings 50
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 20.65
- ----------------------------------------------------
Weighted Average Market
Capitalization $22.8 billion
- ----------------------------------------------------
Net assets $35 million
- ----------------------------------------------------
Top 10 Holdings
1 Pfizer
2 Anthem
3 Boston Scientific
4 Zimmer Holdings
5 Caremark Rx
6 UnitedHealth Group
7 Aetna
8 Wyeth
9 Charles River Laboratories
International
10 Gilead Sciences
SECTOR WEIGHTINGS+
83.9% Health Care
16.1% Cash Equivalents
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER HEALTH/BIOTECHNOLOGY CATEGORY
PERIOD RANK PERCENTILE
3 year (21 of 152 funds) 14%
- -------------------------------------------------------------
1 year (30 of 194 funds) 15%
Investment Style
value blend growth
----------------------------
large | | | |
Market ----------------------------
Capitalization medium | | |XXXXXXXX|
----------------------------
small | | | |
----------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
February 28, 2001 - September 30, 2004*
CONSTELLATION TIP
HEALTHCARE & S&P 500
BIOTECHNOLOGY FUND Healthcare Index
------------------ ----------------
Feb 28 01 10000 10000
Sep 01 11151 9467
Sep 02 9851 7393
Sep 03 12336 8239
Sep 04 13831 8634
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation TIP
Healthcare & Biotechnology Fund is February 28, 2001.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
12.12% 7.44% 9.47%
Constellation Funds 2004 Annual Report | 43
INVESTMENT REVIEW
CONSTELLATION TIP TAX MANAGED U.S. EQUITY FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation TIP Tax Managed U.S. Equity Fund is sub-advised by Turner
Investment Partners ("Turner"). The Fund invests in a diversified portfolio of
stocks that are favorably priced in relation to their fundamental value and
which Turner believes are likely to grow over time. The investment strategy is
sensitive to the potential impact of personal income tax on shareholders'
investment return. Management emphasizes the philosophy that earnings
expectations drive stock prices and believes that long term performance can be
best achieved by investing in companies with improving fundamentals and superior
earnings dynamics. Turner employs a disciplined investment process blending a
proprietary quantitative model, rigorous fundamental research, and technical
analysis.
FUND PERFORMANCE & POSITIONING
For the twelve months ending September 30, 2004, the portfolio posted a gain of
9.95% verses a gain of 13.87% for its benchmark, the S&P 500 Index.
The defensively oriented market of the past year focused on valuation and
dividend yield. In this market, the growth style employed by Turner Investment
Partners was out of favor. The main underperforming sector for the Fund was the
financial services sector. Following positive stock market performance in 2003,
Turner's view was 2004 would bring continued improvement in the economy and the
market. For example, the Fund's brokerage holdings are well positioned to
benefit from economic expansion and more favorable equity markets.
Unfortunately, factors such as violence in Iraq, concerns about a terrorist
attack at the Olympics and Democratic and Republican conventions, higher energy
prices, and corporate scandals in the mutual fund industry weighed on the market
and these stocks. The Fund did not own many slower growing regional banks, which
were seen as a safe haven and outperformed. Regional bank performance was also
aided by a pickup in acquisitions (for example, FleetBoston's acquisition by
Bank of America.)
The producer durables sector was another detractor from Fund performance. The
decrease in capital expenditures and lack of reinvestment in the semiconductor
tools hurt electronic production companies such as Applied Materials, KLA
Tencor, and LAM Research. In addition, the Fund was underweight defensive
industrial companies such as Illinois Tool Works and Boeing, which performed
well due to the increase in military orders for airplane parts. The Fund did not
own these securities, as Turner expected airplane orders to be down due to the
commercial airline problems.
Consumer discretionary was the sector contributing most to the performance of
the Fund. The companies that contributed to performance were strong leaders in
their industries regardless of market conditions. Examples are Yahoo! and eBay.
Both companies have little competition in their niche markets and performed
well. Coach also benefited from strong fundamentals and increased earnings. In
addition, through Peabody Energy and XTO Energy, exposure to oil and natural gas
in the energy sector also contributed to the Fund's relative return.
There were no significant changes to the strategy or positioning of the Fund
during the twelve months ending September 30, 2004.
44 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION TIP TAX MANAGED U.S. EQUITY FUND
FUND PROFILE
As of September 30, 2004
Ticker TTMEX
- ----------------------------------------------------
CUSIP 21038A406
- ----------------------------------------------------
% in 10 largest holdings 24.0%
- ----------------------------------------------------
# of holdings 93
- ----------------------------------------------------
Price/Earnings Ratio
(wtd. harmonic avg.) 22.28
- ----------------------------------------------------
Weighted Average Market
Capitalization $64.1 billion
- ----------------------------------------------------
Net assets $5 million
- ----------------------------------------------------
Top 10 Holdings
1 General Electric
2 American International Group
3 Pfizer
4 Procter & Gamble
5 American Express
6 Goldman Sachs Group
7 T. Rowe Price Group
8 First Data
9 Cisco Systems
10 Morgan Stanley
SECTOR WEIGHTINGS+
20.9% Information Technology
17.7% Financials
14.7% Health Care
10.2% Industrials
10.1% Consumer Discretionary
9.4% Consumer Staples
7.9% Energy
3.9% Materials
2.3% Telecommunication Services
1.7% Utilities
1.2% Cash Equivalents
+Percentages based on total investments
Investment Style
value blend growth
----------------------------
large | | |XXXXXXXX|
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER MULTI-CAP CORE CATEGORY
PERIOD RANK PERCENTILE
3 year (384 of 501 funds) 77%
- ---------------------------------------------------------------
1 year (555 of 684 funds) 81%
GROWTH OF $10,000 INVESTMENT IN THE FUND
February 28, 2001 - September 30, 2004*
CONSTELLATION TIP
TAX MANAGED U.S. S&P 500
EQUITY FUND Index
----------------- -------
Feb 28 01 10000 10000
Sep 01 8181 8459
Sep 02 6291 6726
Sep 03 8041 8366
Sep 04 8841 9527
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation TIP Tax
Managed U.S. Equity Fund is February 28, 2001.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Since
year years inception
9.95% 2.62% (3.38)%
Constellation Funds 2004 Annual Report | 45
INVESTMENT REVIEW
CONSTELLATION INTERNATIONAL EQUITY FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation International Equity Fund uses a multi-manager approach,
relying on several sub-advisers with differing investment philosophies to manage
the Fund's assets. The Fund is subadvised by Oechsle International Advisers,
LLC, The Boston Company Asset Management, LLC and Brandywine Asset Management,
LLC. Oechsle International Advisers employs a growth oriented approach,
investing in companies that they believe have an above average potential for
growth in revenues and earnings. The Boston Company employs a value oriented
style, emphasizing stock selection based on traditional measures of value
including low price-to-earnings, low price-to-cash and low price-to-book values.
Brandywine Asset Management also employs a value oriented style, combining
quantitative and fundamental analysis to identify undervalued stocks that have
the potential to return to a more normal valuation. The Fund invests primarily
in developed countries, but may invest in countries with emerging markets. The
Fund will invest in companies across the market capitalization spectrum.
FUND PERFORMANCE & POSITIONING
For the 12 month time period ending September 30, 2004, the Fund returned 18.76%
underperforming the 23.15% gain posted by its benchmark, the MSCI All Country
World ex-U.S. Index. The Lipper average for International Multi Cap Core funds
was 20.74% over that time frame. The Constellation International Equity Fund
ranked in the 70th percentile (188 out of 268 funds) when compared to the Lipper
International Multi Cap Core category over the twelve-month period.
The portion of the Fund managed by Brandywine Asset Management was positioned
with an overweighting in the consumer, health care and basic materials sectors.
The portfolio was underweighted in the energy, financial, industrial, telecom,
and utility industries. From a country standpoint, the portfolio held less than
market exposure to the United Kingdom, Sweden, Spain, Italy, and Australia, with
the largest relative bets in Hong Kong, Japan, Germany and emerging markets.
Performance significantly lagged the index with the main detractors being
holdings in the financial, basic materials, and industrial sectors. Lower
relative exposure to the strong performing energy and utility stocks also hurt
results. Offsetting this were solid gains in the technology, health care, and
consumer cyclical selections. France and Germany were positive contributors to
relative gains, while stock selection in Australia, Switzerland, Japan, Mexico,
and the United Kingdom detracted from results.
The portion of the Fund managed by Boston Company slightly underperformed the
benchmark on a net of fee basis. Thirty-one out of 32 countries in the fund
advanced, while nine out of ten sectors advanced. France experienced a
turnaround in local consumer demand, while Germany continues to struggle in that
department as a result of pending pension and welfare reforms. Sustained high
commodity prices around the globe benefited materials companies in Australia,
South Africa, and the UK. In addition, the UK continued to ride the residential
real estate boom that has been buoying the economy for some time. Japanese
exports dropped as China's government made a move to reign in excessive
construction and infrastructure spending. However, this move should have a
positive long-term impact on the Chinese economy and others around the world. An
unprecedented economic boom in India experienced a hiccup when the economically
progressive BJP Party was defeated in a stunning election upset by the Congress
Party. Since then, the new government has indicated that they will fully support
the current privatization movement and continue to pass pro-business
legislation, and investors have taken note.From a sector perspective, defensive
sectors were strong as oil prices drove energy companies to +40% annual returns
and high commodity prices were supported by robust global demand. Utility
companies also advanced confidently, due largely to their high dividend payments
and defensive nature. Global consumer demand was lethargic in certain countries
(e.g. France, Germany, and Japan), weighing down the consumer discretionary and
consumer staples sectors. Information technology has been experiencing a
year-long slump as a result of sluggish business IT spending and rising
semi-conductor inventories.
The portion of the Fund managed by Oechsle also underperformed the benchmark
index. In the UK, a number of profit warnings contributed to severe share price
markdowns by investors. Unfortunately some of these companies were holdings in
the portfolio. In particular, caterer Compass Group, satellite TV company BSkyB.
Pharmaceutical company, AstraZeneca languished as investors became conceded
about its drug pipeline going forward. France was also somewhat disappointing as
cosmetics group, L'Oreal and retailer Carrefour lagged the market significantly
as the French consumer provided only intermittent evidence of returning to a
strong spending pattern. Holdings in the energy sector contributed to
performance, as record oil prices drove those stocks higher. The portfolio's
underweight in technology was also a positive contributor. Underweightings to
the industrials and materials sectors were distinctly negative for portfolio
performance.
46 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION INTERNATIONAL EQUITY FUND
FUND PROFILE
As of September 30, 2004
Ticker PTlEX
- ----------------------------------------------------
CUSIP 21038A778
- ----------------------------------------------------
% in 10 largest holdings 13.3%
- ----------------------------------------------------
# of holdings 271
- ----------------------------------------------------
Net assets $107 million
- ----------------------------------------------------
Top 10 Holdings
1 Nestle
2 GlaxoSmithKline
3 Diageo
4 ENI
5 France Telecom
6 Total
7 Kookmin Bank ADR
8 Repsol YPF
9 Takeda Pharmaceutical
10 Pearson
SECTOR WEIGHTINGS+
21.8% Financials
18.2% Consumer Discretionary
11.6% Industrials
10.3% Health Care
9.8% Consumer Staples
8.5% Telecommunication Services
7.4% Materials
7.3% Energy
2.8% Information Technology
2.1% Utilities
0.2% Preferred Stock
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER INTERNATIONAL MULTI-CAP CORE CATEGORY
PERIOD RANK PERCENTILE
3 year (169 of 221 funds) 76%
- ---------------------------------------------------------------------
1 year (188 of 268 funds) 70%
Investment Style
value blend growth
----------------------------
large | |XXXXXXXX | |
Market ----------------------------
Capitalization medium | | | |
----------------------------
small | | | |
----------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
September 30, 1994 - September 30, 2004*
MSCI All
CONSTELLATION Country World
INTERNATIONAL Free ex-U.S.
EQUITY FUND Index
------------- --------------
Sep 30 94 10000 10000
Sep 95 9771 10352
Sep 96 10798 11253
Sep 97 11972 12769
Sep 98 9963 11092
Sep 99 13032 14797
Sep 00 14002 15524
Sep 01 8866 10977
Sep 02 7310 9544
Sep 03 9077 12316
Sep 04 10780 15167
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation
International Equity Fund is May 31, 1993.
**For periods prior to August 4, 2000, when the Fund began operating, the
performance data quoted represents past performance of the Pitcairn Investment
Management similarly managed common trust fund, adjusted to reflect fees and
expenses expected to be borne by the Fund. The common trust fund was not a
registered mutual fund, and therefore was not subject to certain investment and
tax restrictions which may have adversely affected performance. The common trust
fund changed its investment strategy in April 1999.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
18.76% 6.73% (3.72)%** 0.75%** 3.43%**
Constellation Funds 2004 Annual Report | 47
INVESTMENT REVIEW
CONSTELLATION STRATEGIC VALUE AND HIGH INCOME FUND
INVESTMENT PHILOSOPHY & PROCESS
The Constellation Strategic Value and High Income Fund is a "fund of funds"
which means that it invests substantially all of its assets in shares of other
funds. Generally, the Fund will invest at least 40% and may invest up to 60% of
its assets in each of two underlying Constellation Funds: the Constellation
Chartwell High Yield Fund, sub-advised by Chartwell Investment Partners and the
Constellation TIP Small Cap Value Opportunities Fund, sub-advised by Turner
Investment Partners. The Fund will periodically adjust its asset allocation
among these Funds in response to changing market and economic conditions. In
addition, the Fund may, under certain circumstances, invest in other underlying
Funds within the Constellation Funds family.
Chartwell's philosophy in managing the Constellation Chartwell High Yield Fund
is defensive, stressing preservation of principal and compounding of the income
stream as the keys to adding value in the high yield bond market. The Fund
focuses on the higher quality tiers of the market, principally the BB and
B-rated sectors, and on cash-pay issues only, which offer an attractive yield
premium but a sharply lower incidence of credit erosion relative to the market
as a whole.
The Constellation TIP Small Cap Value Opportunities Fund invests in securities
of companies operating in a broad range of industries based primarily on a
fundamental analysis of each company and due consideration of such
characteristics as price to cash flow, price to earnings and price to book value
ratios. Turner uses a series of qualitative screens to identify "hidden" assets
that may signify attractive return potential to share prices. The Fund managers
look to identify a catalyst for positive change in each company's fundamentals.
They seek companies with quality management teams that can take advantage of
unique product opportunities and emphasize companies that are undervalued in the
marketplace.
FUND PERFORMANCE & POSITIONING
For the 12 months ending September 30, 2004, the Fund returned 16.04%, net of
expenses, compared to 18.95% for a 50/50 blend of the Russell 2000 Value
Index/Merrill Lynch High Yield, Cash Pay Index, and 9.20% for the Lipper
Balanced fund average.
The Fund maintained an allocation of 40.5% to the Constellation Chartwell High
Yield Fund, 40% to the Constellation TIP Small Value Opportunities Fund and
19.5% to the Constellation HLAM Large Cap Value Fund. The Fund was allocated
within the large cap value asset class in response to concerns regarding the
potential for increasing market volatility that might more severely impact
smaller capitalization securities.
The Fund benefited most significantly from the performance of the Constellation
TIP Small Cap Value Opportunities Fund, which outperformed the Russell 2000
Value benchmark, driven largely by good stock selection in the autos and
transportation, utility, and materials and processing sectors.
The Fund's exposure to the Constellation Chartwell High Yield Fund hurt
performance during the first six months of the fiscal year, because of that
Fund's overweighting to poorly performing single B issues. However, that
position contributed positively to performance during the latter six months of
the year, when single B issues proved to be the top performing sector within the
high income bond space. Similarly, the decision to underweight utilities hurt
performance during the first half of the year but helped during the second. The
Fund maintains an underweight in electric utilities because the bulk of the
issuers in the sector are rated CCC by S&P and Moody's. These ratings reflect
overleveraged balance sheets, excessive financial complexity, and the impact of
high energy prices on their operating margins.
48 | Constellation Funds 2004 Annual Report
INVESTMENT REVIEW
CONSTELLATION STRATEGIC VALUE AND HIGH INCOME FUND
FUND PROFILE
As of September 30, 2004
Ticker TSVIX
- ----------------------------------------------------
CUSIP 21038A844
- ----------------------------------------------------
% in 3 holdings 100.0%
- ----------------------------------------------------
# of holdings 3
- ----------------------------------------------------
Net assets $706 thousand
- ----------------------------------------------------
3 Holdings
1 Constellation Chartwell High Yield Fund, Cl I
2 Constellation TIP Small Cap Value
Opportunities Fund, Cl II
3 Constellation HLAM Large Cap
Value Fund, Cl II
SECTOR WEIGHTINGS+
59.6% Equity Funds
40.4% Fixed Income Fund
+Percentages based on total investments
LIPPER INC. PERFORMANCE RANKING
As of September 30, 2004
LIPPER BALANCED CATEGORY
PERIOD RANK PERCENTILE
1 year (9 of 545 funds) 2%
Investment Style
value blend growth
----------------------------
large | | | |
Market ----------------------------
Capitalization medium | |XXXXXXXX | |
----------------------------
small | | | |
----------------------------
GROWTH OF $10,000 INVESTMENT IN THE FUND
October 31, 2002 - September 30, 2004*
50/50 Hybrid
of the
Russell 2000
CONSTELLATION Value Index
STRATEGIC and Merrill
VALUE AND Merrill Lynch Lynch High
HIGH INCOME S&P 500 Russell 2000 High Yield, Yield, Cash
FUND Index Value Index Cash Pay Index Pay Index
------------- ------- ------------ -------------- -----------
Oct 31 02 10000 10000 10000 10000 10000
Sep 03 12860 11434 12971 12933 12989
Sep 04 14923 13020 16300 14514 15451
*These figures represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than its original cost. The performance in the above graph does not reflect the
deduction of taxes the shareholder will pay on fund distributions or the
redemptions of fund shares. The inception date of the Constellation Strategic
Value and High Income Fund is October 31, 2002.
ANNUALIZED TOTAL RETURNS
Periods ending September 30, 2004
Past 1 Since
year inception
16.04% 23.21%
Constellation Funds 2004 Annual Report | 49
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Clover Large Cap Value Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (94.7%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (10.8%)
- --------------------------------------------------------------------------------
Clear Channel Communications 3,305 $103
Furniture Brands International (A) 2,955 74
General Motors 1,755 75
IAC/InterActiveCorp* 2,800 62
Interpublic Group* 2,855 30
Jones Apparel Group 2,285 82
RadioShack 3,080 88
Reebok International 900 33
Viacom, Cl B 1,970 66
Walt Disney 2,800 63
-----
676
-----
- --------------------------------------------------------------------------------
CONSUMER STAPLES (8.5%)
- --------------------------------------------------------------------------------
Albertson's 5,070 121
Anheuser-Busch 2,820 141
CVS 2,005 84
Gillette 1,840 77
HJ Heinz 1,235 44
Procter & Gamble 1,210 66
-----
533
-----
- --------------------------------------------------------------------------------
ENERGY (9.9%)
- --------------------------------------------------------------------------------
Baker Hughes 1,085 47
BP ADR* 1,790 103
ChevronTexaco 1,750 94
Diamond Offshore Drilling (A) 1,590 53
Exxon Mobil 6,620 320
-----
617
-----
- --------------------------------------------------------------------------------
FINANCIALS (27.6%)
- --------------------------------------------------------------------------------
ACE 1,995 80
Allstate 745 36
American International Group 3,270 222
AON 3,360 96
Bank of America 6,020 261
Bank of New York 3,270 95
Citigroup 3,560 157
FelCor Lodging Trust* 6,175 70
Goldman Sachs Group 265 25
Mellon Financial 3,615 100
Metlife 1,680 65
MGIC Investment 845 56
PNC Financial Services Group 625 34
Value
Shares (000)
- --------------------------------------------------------------------------------
Providian Financial* 4,800 $ 75
Prudential Financial 1,275 60
Regions Financial 1,900 63
US Bancorp 2,855 82
Wachovia 1,830 86
Wells Fargo 1,085 65
------
1,728
------
- --------------------------------------------------------------------------------
HEALTH CARE (3.1%)
- --------------------------------------------------------------------------------
Abbott Laboratories 1,085 46
Baxter International 1,060 34
Johnson & Johnson 1,085 61
Merck 845 28
Omnicare 770 22
------
191
------
- --------------------------------------------------------------------------------
INDUSTRIALS (11.8%)
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe 2,590 99
CSX 2,845 95
Emerson Electric 1,035 64
General Electric 8,040 270
Honeywell International 2,235 80
Sotheby's Holdings, Cl A* 138 2
SPX 1,870 66
W.W. Grainger 1,085 63
------
739
------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (8.0%)
- --------------------------------------------------------------------------------
BMC Software* 2,950 47
Computer Sciences* 985 46
Dell* 1,085 39
Flextronics International* 2,635 35
International Business Machines 1,300 111
Lexmark International, Cl A* 330 28
Microsoft 4,600 127
National Semiconductor* 1,770 27
Taiwan Semiconductor Manufacturing ADR* 5,562 40
------
500
------
- --------------------------------------------------------------------------------
MATERIALS (4.6%)
- --------------------------------------------------------------------------------
E.I. du Pont de Nemours 1,390 60
International Paper 2,110 85
International Steel Group* 990 33
Smurfit-Stone Container* 5,645 109
------
287
------
50 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Clover Large Cap Value Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (3.9%)
- --------------------------------------------------------------------------------
AT&T 2,500 $ 36
SBC Communications 3,490 91
Verizon Communications 2,930 115
------
242
------
- --------------------------------------------------------------------------------
UTILITIES (6.5%)
- --------------------------------------------------------------------------------
CMS Energy* 5,695 54
Duke Energy 2,705 62
Energy East 1,755 44
KeySpan (A) 2,185 86
Public Service Enterprise Group 1,450 62
Sempra Energy 1,000 37
Xcel Energy 3,600 62
------
407
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $5,646) 5,920
================================================================================
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUND (1.0%)
- --------------------------------------------------------------------------------
iShares Russell 1000 Value
Index Fund* 975 59
- --------------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUND
(COST $57) 59
================================================================================
RIGHTS (0.0%)
- --------------------------------------------------------------------------------
Seagate (B)* 425 --
- --------------------------------------------------------------------------------
TOTAL RIGHTS
(COST $0) --
================================================================================
CASH EQUIVALENT (4.4%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund,
Institutional Shares 277,342 277
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $277) 277
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS
COLLATERAL FOR LOANED SECURITIES (3.2%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust --
Quality Portfolio 200,400 $ 200
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD AS
COLLATERAL FOR LOANED SECURITIES
(COST $200) 200
================================================================================
TOTAL INVESTMENTS (103.3%)
(COST $6,180) 6,456
================================================================================
OTHER ASSETS AND LIABILITIES, NET (-3.3%)
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (200)
Payable due to Investment Adviser (5)
Payable due to Administrator (1)
Other assets and liabilities, net 1
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (205)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $6,251
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization - no par value)
based on 577,359 outstanding shares
of beneficial interest $6,463
Accumulated net realized loss on investments (488)
Net unrealized appreciation on investments 276
- --------------------------------------------------------------------------------
NET ASSETS $6,251
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS I SHARES $10.83
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $194,810.
(B) This security was issued for possible settlement of pending litigation and
does not have an expiration date.
ADR -- American Depositary Receipt
Cl -- Class
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements
Constellation Funds 2004 Annual Report | 51
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Clover Core Value Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (96.5%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (9.6%)
- --------------------------------------------------------------------------------
American Eagle Outfitters* 23,000 $ 848
Brunswick 15,000 686
Delphi 66,000 613
Federated Department Stores 17,500 795
Jones Apparel Group (A) 50,000 1,790
RadioShack 17,000 487
Reebok International 14,000 514
-------
5,733
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (6.1%)
- --------------------------------------------------------------------------------
ConAgra Foods 44,000 1,131
Constellation Brands, Cl A* 19,500 742
CVS 41,500 1,749
-------
3,622
-------
- --------------------------------------------------------------------------------
ENERGY (4.1%)
- --------------------------------------------------------------------------------
Pioneer Natural Resources (A) 39,500 1,362
Valero Energy (A) 13,300 1,067
-------
2,429
-------
- --------------------------------------------------------------------------------
FINANCIALS (29.8%)
- --------------------------------------------------------------------------------
Aflac 28,500 1,117
Capital One Financial 12,700 939
Citigroup 20,000 882
Countrywide Credit Industry 39,600 1,560
E*Trade Financial* 54,000 617
Fidelity National Financial 19,000 724
Freddie Mac 15,500 1,011
Goldman Sachs Group 7,000 653
Hibernia, Cl A 46,000 1,215
iStar Financial (A) 15,700 647
Marshall & Ilsley 15,000 605
Merrill Lynch 15,300 761
North Fork Bancorporation 14,700 653
Platinum Underwriters Holdings 20,500 600
Prudential Financial 26,000 1,223
Radian Group 31,500 1,456
Safeco 35,000 1,598
Webster Financial 17,500 864
Willis Group Holdings 18,500 692
-------
17,817
-------
Value
Shares (000)
- --------------------------------------------------------------------------------
HEALTH CARE (9.7%)
- --------------------------------------------------------------------------------
Aetna 7,000 $ 699
Baxter International 33,900 1,090
Express Scripts* 15,500 1,013
Quest Diagnostics 7,000 618
Thermo Electron* 33,300 900
Triad Hospitals* 23,300 802
WellChoice* 18,900 706
------
5,828
------
- --------------------------------------------------------------------------------
INDUSTRIALS (10.8%)
- --------------------------------------------------------------------------------
CSX 22,000 730
Dun & Bradstreet* 14,500 851
Lafarge ADR 21,500 469
Quebecor World 40,000 895
Republic Services 37,500 1,116
SPX 15,000 531
United Stationers (A)* 12,500 543
Yellow Roadway* 27,500 1,290
------
6,425
------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (8.4%)
- --------------------------------------------------------------------------------
BISYS Group* 42,400 619
Compuware* 93,000 479
eFunds* 60,000 1,115
Fairchild Semiconductor International* 54,800 777
Ingram Micro, Cl A* 89,200 1,436
Solectron* 122,400 606
------
5,032
------
- --------------------------------------------------------------------------------
MATERIALS (5.0%)
- --------------------------------------------------------------------------------
Akzo Nobel ADR 15,800 561
Pactiv (A)* 45,000 1,046
Sappi ADR 42,600 610
Syngenta ADR 41,800 798
------
3,015
------
52 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Clover Core Value Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
UTILITIES (13.0%)
- --------------------------------------------------------------------------------
CMS Energy (A)* 130,000 $ 1,237
KeySpan (A) 26,000 1,019
NiSource 54,500 1,145
Public Service Enterprise Group 17,700 754
Puget Energy 45,500 1,033
SCANA (A) 38,000 1,419
Xcel Energy (A) 65,000 1,126
--------
7,733
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $46,929) 57,634
================================================================================
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR LOANED
SECURITIES (17.2%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust --
Quality Portfolio 10,269,600 10,270
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
HELD AS COLLATERAL FOR
LOANED SECURITIES
(COST $10,270) 10,270
================================================================================
CASH EQUIVALENT (0.7%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund,
Institutional Shares 439,946 440
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $440) 440
================================================================================
TOTAL INVESTMENTS (114.4%)
(COST $57,639) 68,344
================================================================================
OTHER ASSETS AND LIABILITIES, NET (-14.4%)
- --------------------------------------------------------------------------------
Receivable for investment securities sold 3,218
Obligation to return securities lending collateral (10,270)
Payable due to Investment Adviser (36)
Payable due to Administrator (7)
Other assets and liabilities, net (1,535)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (8,630)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 59,714
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization - no par value)
based on 3,616,521 outstanding shares
of beneficial interest $44,961
Undistributed net investment income 6
Accumulated net realized gain on investments 4,042
Net unrealized appreciation on investments 10,705
- --------------------------------------------------------------------------------
NET ASSETS $59,714
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS I SHARES $ 16.51
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $9,969,917.
ADR -- American Depositary Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements
Constellation Funds 2004 Annual Report | 53
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Clover Small Cap Value Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (96.9%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (15.4%)
- --------------------------------------------------------------------------------
American Eagle Outfitters* 71,300 $ 2,627
Charming Shoppes (A)* 400,800 2,854
Cooper Tire & Rubber (A) 154,450 3,115
Cumulus Media, Cl A (A)* 250,900 3,611
Dollar Thrifty Automotive Group (A)* 171,200 4,165
Electronics Boutique Holdings (A)* 116,200 3,962
Entravision Communications, Cl A* 503,400 3,831
Hearst-Argyle Television (A) 81,700 1,998
Helen of Troy (A)* 195,125 5,311
HOT Topic (A)* 205,000 3,493
Men's Wearhouse (A)* 108,950 3,165
Nautilus Group (A) 171,600 3,876
Navigant International (A)* 329,000 5,373
O'Charleys* 165,000 2,690
Payless ShoeSource (A)* 346,000 3,505
Playtex Products (A)* 548,000 3,452
Reebok International 120,000 4,406
Scholastic (A)* 123,600 3,818
Service Corp International* 438,700 2,724
Sharper Image (A)* 70,300 1,508
ShopKo Stores (A)* 302,100 5,260
Sports Authority (A)* 110,000 2,552
Steiner Leisure (A)* 131,900 2,915
Too* 174,700 3,157
-------
83,368
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (2.3%)
- --------------------------------------------------------------------------------
Chiquita Brands International (A)* 150,600 2,622
Natures Sunshine Products (A) 151,000 2,291
NBTY* 140,700 3,033
Rayovac* 167,100 4,403
-------
12,349
-------
- --------------------------------------------------------------------------------
ENERGY (4.8%)
- --------------------------------------------------------------------------------
Cabot Oil & Gas 117,750 5,287
Encore Acquisition* 150,000 5,175
Grey Wolf* 530,900 2,596
Key Energy Services* 479,150 5,294
Magnum Hunter Resources* 208,200 2,403
Reliant Energy (A)* 571,400 5,331
-------
26,086
-------
- --------------------------------------------------------------------------------
FINANCIALS (27.5%)
- --------------------------------------------------------------------------------
Advanta, Cl B (A) 121,500 2,939
American Financial Group 90,700 2,711
American Financial Realty Trust 188,000 2,653
Value
Shares (000)
- --------------------------------------------------------------------------------
AmeriCredit (A)* 152,100 $ 3,176
Arthur J. Gallagher (A) 164,200 5,440
Astoria Financial (A) 112,000 3,975
BankAtlantic Bancorp, Cl A 315,500 5,780
Bankunited Financial, Cl A (A)* 179,000 5,218
Colonial BancGroup 240,900 4,926
Delphi Financial Group, Cl A 81,625 3,279
Developers Diversified Realty (A) 75,800 2,968
FelCor Lodging Trust (A)* 845,800 9,566
FPIC Insurance Group (A)* 89,400 2,311
HCC Insurance Holdings (A) 131,950 3,978
HRPT Properties Trust (A) 362,650 3,986
Hudson United Bancorp (A) 77,700 2,863
Instinet Group (A)* 770,700 3,877
LTC Properties (A) 245,950 4,400
Meristar Hospitality (A)* 362,700 1,977
Metris (A)* 354,300 3,465
Mills 40,700 2,111
Ohio Casualty (A)* 219,400 4,592
PFF Bancorp 16,400 628
Phoenix (A) 226,100 2,356
Platinum Underwriters Holdings 228,500 6,690
Providian Financial (A)* 433,200 6,732
Raymond James Financial (A) 119,475 2,882
Rewards Network (A)* 260,400 1,737
Scottish Re Group (A) 250,800 5,309
Sky Financial Group 178,900 4,472
South Financial Group 143,900 4,058
Sterling Financial* 126,370 4,453
SWS Group 140,400 2,258
Triad Guaranty (A)* 56,400 3,129
US Restaurant Properties (A) 248,050 4,190
W.P. Stewart (A) 157,600 3,150
Waddell & Reed Financial, Cl A (A) 203,000 4,466
Webster Financial 114,000 5,630
--------
148,331
--------
- --------------------------------------------------------------------------------
HEALTH CARE (5.5%)
- --------------------------------------------------------------------------------
Andrx* 97,600 2,182
Curative Health Services (A)* 174,900 1,202
Dendrite International* 187,500 3,023
Hooper Holmes (A) 1,100,500 4,930
OCA (A)* 34,250 162
Orthofix International* 81,000 2,783
Province Healthcare* 353,600 7,397
Triad Hospitals* 145,000 4,994
Viasys Healthcare (A)* 173,300 2,899
--------
29,572
--------
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Clover Small Cap Value Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
INDUSTRIALS (17.1%)
- --------------------------------------------------------------------------------
AGCO (A)* 340,675 $ 7,706
Celadon Group* 194,225 3,700
CNF 121,800 4,993
Federal Signal (A) 185,300 3,443
First Consulting Group* 366,500 1,737
Flowserve* 122,800 2,969
GrafTech International (A)* 178,550 2,491
Lennox International (A) 209,200 3,125
Magnetek* 434,800 3,248
MAIR Holdings* 338,300 2,774
Mesa Air Group (A)* 610,000 3,111
Milacron (A)* 734,000 2,290
Molecular Devices (A)* 59,150 1,394
NCO Group (A)* 111,400 3,002
NS Group* 196,800 3,641
On Assignment* 462,400 2,053
Overnite 85,550 2,689
Reliance Steel & Aluminum 45,500 1,806
School Specialty (A)* 62,500 2,463
Stewart & Stevenson Services (A) 417,100 7,370
Terex* 103,100 4,475
Timken (A) 168,300 4,144
Tredegar (A) 237,000 4,313
United Rentals (A)* 254,300 4,041
Washington Group International* 65,600 2,271
Wolverine Tube* 217,450 2,512
Yellow Roadway* 101,800 4,773
-------
92,534
-------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (11.6%)
- --------------------------------------------------------------------------------
Activision* 338,800 4,699
Acxiom (A) 204,500 4,855
BISYS Group* 257,500 3,762
Carreker (A)* 293,600 2,234
Checkpoint Systems (A)* 180,000 2,803
Ciber (A)* 457,300 3,439
Coherent (A)* 172,900 4,485
Cymer (A)* 102,000 2,923
Earthlink (A)* 218,600 2,251
eFunds* 109,500 2,036
ESS Technology* 194,300 1,331
Exar (A)* 249,700 3,536
FEI (A)* 52,850 1,044
Integrated Silicon Solutions (A)* 296,200 2,153
IXYS* 286,300 2,056
Packeteer (A)* 301,000 3,254
Pegasus Solutions (A)* 284,400 3,390
Register.com* 334,000 1,817
Value
Shares (000)
- --------------------------------------------------------------------------------
S1* 321,400 $ 2,565
THQ (A)* 143,700 2,796
Tier Technologies, Cl B (A)* 265,101 2,558
Zoran* 187,000 2,940
--------
62,927
--------
- --------------------------------------------------------------------------------
MATERIALS (6.6%)
- --------------------------------------------------------------------------------
AK Steel Holding (A)* 527,900 4,308
Arch Chemicals (A) 77,700 2,214
Buckeye Technologies (A)* 328,450 3,662
Caraustar Industries (A)* 238,150 3,994
Chesapeake (A) 113,200 2,719
Georgia Gulf 45,725 2,039
Owens-Illinois* 348,800 5,581
Packaging Corporation of America (A) 188,500 4,613
RPM International (A) 188,100 3,320
Wausau-Mosinee Paper 178,650 2,974
--------
35,424
--------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (1.2%)
- --------------------------------------------------------------------------------
Nice Systems ADR (A)* 226,300 4,893
Yak Communications (A)* 223,375 1,796
--------
6,689
--------
- --------------------------------------------------------------------------------
UTILITIES (4.9%)
- --------------------------------------------------------------------------------
Alliant Energy 80,200 1,995
Avista (A) 219,700 3,977
Calpine (A)* 1,274,700 3,697
CMS Energy (A)* 933,300 8,885
El Paso Electric* 187,300 3,010
Northeast Utilities 147,200 2,854
SEMCO Energy 364,850 2,003
--------
26,421
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $458,680) 523,701
================================================================================
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR LOANED SECURITIES (36.7%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust -- Quality Portfolio 198,311,800 198,312
--------
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR
LOANED SECURITIES (COST $198,312) 198,312
--------
================================================================================
Constellation Funds 2004 Annual Report | 55
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Clover Small Cap Value Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENT (1.3%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 6,779,742 $ 6,780
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $6,780) 6,780
================================================================================
TOTAL INVESTMENTS (134.9%)
(COST $663,772) 728,793
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-34.9%)
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (198,312)
Payable due to Investment Adviser (370)
Payable due to Administrator (65)
Other assets and liabilities, net 10,232
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (188,515)
================================================================================
NET ASSETS (100%) $ 540,278
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares (unlimited
authorization - no par value) based on 22,737,053
outstanding shares of beneficial interest $ 486,852
Undistributed net investment income 46
Accumulated net realized loss on investments (11,641)
Net unrealized appreciation on investments 65,021
- --------------------------------------------------------------------------------
NET ASSETS $ 540,278
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-CLASS I SHARES $ 23.76
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $188,355,796.
ADR -- American Depositary Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements
56 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Clover Core Fixed Income Fund
September 30, 2004
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (41.4%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (1.2%)
- --------------------------------------------------------------------------------
Wal-Mart Stores
6.875%, 08/10/09 $ 350 $ 397
- --------------------------------------------------------------------------------
CONSUMER STAPLES (10.0%)
- --------------------------------------------------------------------------------
ConAgra Foods
7.875%, 09/15/10 700 825
Dial
7.000%, 08/15/06 1,250 1,337
Sysco
7.250%, 04/15/07 405 444
7.160%, 04/15/27 500 605
------
3,211
------
- --------------------------------------------------------------------------------
ENERGY (7.8%)
- --------------------------------------------------------------------------------
Air Products & Chemicals, MTN
7.340%, 06/15/26 250 293
Chevron
8.110%, 12/01/04 80 81
Natural Fuel Gas
6.303%, 05/27/08 1,000 1,082
Pioneer Natural Resource
7.200%, 01/15/28 450 507
XTO Energy
7.500%, 04/15/12 475 558
------
2,521
------
- --------------------------------------------------------------------------------
FINANCIALS (8.7%)
- --------------------------------------------------------------------------------
First Data
4.700%, 11/01/06 1,000 1,036
Marsh & McClennan
7.125%, 06/15/09 1,000 1,133
Prudential Financial
5.100%, 09/20/14 650 650
------
2,819
------
- --------------------------------------------------------------------------------
INDUSTRIALS (5.5%)
- --------------------------------------------------------------------------------
Roadway
8.250%, 12/01/08 925 1,045
Thermo Electron
7.625%, 10/30/08 665 742
------
1,787
------
- --------------------------------------------------------------------------------
UTILITIES (8.2%)
- --------------------------------------------------------------------------------
Carolina Power & Light
5.125%, 09/15/13 685 702
Emerson Electric
7.125%, 08/15/10 750 865
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Scana
5.810%, 10/23/08 $1,000 $ 1,071
-------
2,638
-------
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $12,697) 13,373
================================================================================
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (35.5%)
- --------------------------------------------------------------------------------
FHLMC
Pool #C01844
4.500%, 04/01/34 691 667
FNMA CMO/REMIC
Ser 1994-17, Cl H
6.000%, 02/25/09 343 356
FNMA
Pool #254759
4.500%, 06/01/18 1,664 1,663
Pool #255111
5.500%, 03/01/34 1,015 1,030
Pool #369214
5.000%, 04/01/09 84 86
Pool #535301
6.500%, 04/01/15 125 133
Pool #689022
5.000%, 05/01/33 1,107 1,098
Pool #694431
5.000%, 03/01/18 710 723
Pool #738783
7.000%, 02/01/25 1,154 1,233
GNMA CMO/REMIC
Ser 2004-59, Cl DA
5.000%, 06/16/34 294 299
GNMA
Pool #13125
8.000%, 10/15/06 3 3
Pool #187899
8.000%, 05/15/17 6 7
Pool #196477
10.000%, 04/15/10 24 27
Pool #202886
8.000%, 03/15/17 31 34
Pool #221235
8.500%, 07/15/17 18 20
Pool #331786
8.000%, 08/15/22 27 30
Pool #376400
6.500%, 02/15/24 151 160
Pool #439478
7.000%, 01/15/27 133 142
Pool #457921
5.500%, 12/15/28 194 199
Constellation Funds 2004 Annual Report | 57
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Clover Core Fixed Income Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Pool #462622
6.500%, 03/15/28 $ 234 $ 248
Pool #533974
6.500%, 05/15/32 129 136
Pool #553328
4.500%, 07/15/18 765 768
Pool #570400
6.500%, 09/15/31 285 301
Pool #604616
4.500%, 09/15/18 875 878
Pool #781029
6.500%, 05/15/29 84 89
Pool #781096
6.500%, 12/15/28 389 411
Pool #781231
7.000%, 12/15/30 195 208
Pool #781276
6.500%, 04/15/31 310 327
Pool #781328
7.000%, 09/15/31 204 218
--------
11,494
--------
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS
(COST $11,398) $ 11,494
================================================================================
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (12.9%)
- --------------------------------------------------------------------------------
U.S. Treasury Bonds
7.500%, 11/15/16 1,200 1,542
6.375%, 08/15/27 325 388
6.250%, 08/15/23 500 584
5.500%, 08/15/28 1,000 1,075
U.S. Treasury Notes
5.625%, 02/15/06 550 574
--------
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $3,914) 4,163
================================================================================
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.4%)
- --------------------------------------------------------------------------------
FHLB
4.250%, 11/13/09 350 357
FHLB, Ser HL06
3.000%, 11/15/06 750 751
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $1,104) 1,108
================================================================================
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (2.4%)
- --------------------------------------------------------------------------------
Bisys Group, CV to 29.9458 Shares
4.000%, 03/15/06 650 637
Quebecor World, CV to 30.5880 Shares
6.000%, 10/01/07 128 131
--------
768
--------
Value
Shares (000)
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(COST $769) $ 768
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (3.2%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 1,037,823 1,038
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $1,038) 1,038
================================================================================
TOTAL INVESTMENTS (98.8%)
(COST $30,920) 31,944
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.2%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser (19)
Payable due to Administrator (4)
Other assets and liabilities, net 413
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 390
- --------------------------------------------------------------------------------
NET ASSETS (100%) $32,334
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares (unlimited
authorization - no par value) based on 3,148,968
outstanding shares of beneficial interest $30,914
Accumulated net realized gain on investments 396
Net unrealized appreciation on investments 1,024
- --------------------------------------------------------------------------------
NET ASSETS $32,334
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE-CLASS I SHARES $ 10.27
================================================================================
Cl -- Class
CMO -- Collateralized Mortgage Obligation
CV -- Convertible Security
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Company
FNMA -- Federal National Mortgage Association
GNMA -- General National Mortgage Association
MTN -- Medium Term Note
REMIC -- Real Estate Mortgage Investment Conduit
Ser -- Series
The accompanying notes are an integral part of the financial statements
58 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Chartwell Ultra Short Duration Fixed Income Fund
September 30, 2004
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (68.3%)
- --------------------------------------------------------------------------------
FHLMC CMO/REMIC
Ser 1106, Cl E
7.500%, 07/15/06 $ 3 $ 3
Ser 1377, Cl F (A)
2.313%, 09/15/07 325 325
Ser 1544, Cl L (A)
2.830%, 07/15/08 196 197
Ser 1552, Cl HA
7.000%, 11/15/22 123 123
Ser 161, Cl F
9.500%, 06/15/06 3 3
Ser 1832, Cl E
6.500%, 07/15/10 1,927 1,945
Ser 2118, Cl QD
6.500%, 10/15/27 1,066 1,073
Ser 2303, Cl TD
6.500%, 05/15/30 1,479 1,486
Ser 2357, Cl QG
6.500%, 01/15/30 812 812
Ser 2416, Cl PN
6.000%, 11/15/28 5,987 6,083
Ser 2440, Cl OG
6.500%, 12/15/30 4,909 5,010
Ser 2463, Cl PE
6.000%, 03/15/28 9,939 10,100
Ser 2483, Cl DC
5.500%, 07/15/14 3,002 3,038
Ser 2488, Cl GC
6.000%, 09/15/28 20 20
Ser 2496, Cl PJ
5.000%, 07/15/12 523 524
Ser 2517, Cl TL
4.500%, 04/15/26 304 304
Ser 2520, Cl BD
5.250%, 10/15/31 2,421 2,468
Ser 2522, Cl PB
4.750%, 11/15/14 2,311 2,313
Ser 2527, Cl LT
3.870%, 12/15/28 4,560 4,568
Ser 2527, Cl LU
3.790%, 12/15/28 6,921 6,933
Ser 2537, Cl LA
4.250%, 05/15/30 3,649 3,669
Ser 2543, Cl TA
4.500%, 02/15/18 2,924 2,935
Ser 2545, Cl HA
5.000%, 04/15/18 1,967 1,973
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Ser 2571, Cl FN (A)
2.359%, 08/15/32 $ 6,175 $ 6,239
Ser 2575, Cl LM
4.500%, 01/15/32 3,074 3,096
Ser 2586, Cl WA
4.000%, 12/15/32 5,407 5,425
Ser 2586, Cl XG
4.000%, 12/15/32 9,644 9,693
Ser 2590, Cl UL
3.750%, 03/15/32 3,543 3,541
Ser 2594, Cl YA
4.000%, 04/15/23 3,874 3,883
Ser 2615, Cl FC (A)
3.150%, 05/15/33 2,831 2,829
Ser 2628, Cl F (A)
2.109%, 06/15/32 4,642 4,634
Ser 2641, Cl FB (A)
3.050%, 07/15/33 5,000 4,994
Ser 2649, Cl PJ
3.500%, 06/15/33 4,001 3,951
Ser 2650, Cl FX (A)
2.109%, 12/15/32 9,343 9,323
Ser 2720, Cl FA (A)
2.109%, 01/15/29 3,544 3,565
Ser 2750, Cl FG (A)
2.109%, 02/15/29 6,055 6,062
Ser 2752, Cl FJ (A)
2.059%, 01/15/18 5,511 5,518
Ser 2752, Cl FM (A)
2.059%, 12/15/30 4,608 4,604
Ser 2752, Cl FP (A)
3.109%, 02/15/34 5,000 4,954
Ser 2764, Cl FB (A)
2.059%, 03/15/31 4,797 4,789
Ser 2767, Cl FC (A)
3.209%, 07/15/32 3,229 3,228
Ser 2770, Cl FH (A)
2.109%, 03/15/34 4,908 4,906
Ser 2778, Cl FV (A)
2.309%, 03/15/34 5,388 5,398
Ser 2799, Cl F (A)
2.360%, 05/15/34 6,357 6,355
Ser 2822, Cl FD (A)
2.360%, 03/15/33 2,031 2,047
Ser 2822, Cl FP (A)
2.360%, 11/15/32 4,984 4,964
Ser 2827, Cl HF (A)
3.109%, 05/15/33 1,933 1,937
Constellation Funds 2004 Annual Report | 59
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Chartwell Ultra Short Duration Fixed Income Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
FHLMC
Pool #184967
7.750%, 08/01/08 $ 46 $ 48
Pool #E64944
7.000%, 07/01/11 394 418
FNMA CMO/REMIC
Ser 1996-32, Cl PM
6.500%, 04/25/25 634 634
Ser 2001-28, Cl A
6.000%, 02/25/29 9 9
Ser 2001-4, Cl PB
7.000%, 04/25/20 4,629 4,698
Ser 2001-50, Cl LD
6.500%, 05/25/30 1,467 1,481
Ser 2001-68, Cl A
6.000%, 07/25/29 474 474
Ser 2002-67, Cl AM
5.000%, 11/25/15 4,156 4,241
Ser 2002-81, Cl F (A)
2.340%, 04/25/32 15,000 15,082
Ser 2002-82, Cl FP (A)
2.340%, 02/25/32 5,000 5,031
Ser 2002-82, Cl PC
6.000%, 02/25/29 12,935 13,326
Ser 2002-83, Cl MA
4.500%, 03/25/09 1,055 1,057
Ser 2002-87, Cl FB (A)
2.350%, 10/25/31 2,000 2,010
Ser 2002-9, Cl PB
6.000%, 11/25/14 422 424
Ser 2003-119, Cl PU
4.000%, 11/25/33 4,750 4,780
Ser 2003-33, Cl AM
4.250%, 05/25/33 2,060 2,076
Ser 2003-33, Cl AU
4.000%, 03/25/33 3,290 3,305
Ser 2003-34, Cl AD
4.000%, 01/25/32 2,690 2,687
Ser 2003-34, Cl FX (A)
2.950%, 05/25/33 3,763 3,824
Ser 2003-46, Cl PA
4.000%, 06/25/10 6,478 6,500
Ser 2003-69, Cl NF (A)
3.150%, 07/25/33 3,978 4,038
Ser 2003-76, Cl FB (A)
2.290%, 08/25/33 4,328 4,326
Ser 2003-89, Cl FE (A)
3.250%, 09/25/33 2,231 2,232
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Ser 2004-29, Cl HF (A)
3.290%, 07/25/33 $ 3,732 $ 3,751
FNMA
Pool #190054
7.000%, 10/01/13 624 663
Pool #704214
7.500%, 12/01/27 2,427 2,613
GNMA ARM
Pool #8103 (A)
4.000%, 02/20/16 80 82
Pool #8287 (A)
4.625%, 11/20/17 85 86
Pool #8297 (A)
4.625%, 12/20/17 138 140
Pool #8321 (A)
4.000%, 02/20/18 341 342
Pool #8333 (A)
4.000%, 03/20/18 224 228
Pool #8345 (A)
4.000%, 04/20/18 125 125
Pool #8366 (A)
3.375%, 06/20/18 139 140
Pool #8404 (A)
4.750%, 09/20/18 8 8
Pool #8405 (A)
4.750%, 09/20/18 72 73
Pool #8462 (A)
3.375%, 02/20/19 14 14
Pool #8489 (A)
4.000%, 04/20/19 125 126
GNMA CMO/REMIC
Ser 2003-34, Cl PM
4.000%, 04/20/33 10,944 10,844
--------
273,776
--------
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(COST $271,631) $273,776
================================================================================
60 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Chartwell Ultra Short Duration Fixed Income Fund
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.4%)
- --------------------------------------------------------------------------------
FHLB (A)
4.750%, 09/29/14 $ 3,000 $ 2,970
1.910%, 06/08/06 1,750 1,750
FHLB (B)
2.700%, 01/27/06 9,750 9,743
FNMA (A)
1.990%, 02/24/06 2,950 2,949
---------
17,412
---------
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $17,450) 17,412
================================================================================
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (27.2%)
- --------------------------------------------------------------------------------
PNC Capital Markets 1.710%, dated 09/30/04, to be
repurchased on 10/01/04, repurchase price
$109,216,188 (collateralized by U.S. Government
obligation, 1.850%, 11/17/05, par value
$108,533,000, total market value $109,211,311) (C) 109,211 109,211
================================================================================
TOTAL REPURCHASE AGREEMENT
(COST $109,211) 109,211
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (0.0%)
- --------------------------------------------------------------------------------
BlackRock FedFund, Institutional Shares 539 1
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $1) 1
================================================================================
TOTAL INVESTMENTS (99.9%)
(COST $398,293) 400,400
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (0.1%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser (87)
Payable due to Administrator (49)
Payable due to Shareholder Servicing Agent (2)
Other assets and liabilities, net 567
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 429
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 400,829
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization - no par value) based on 38,744,618
outstanding shares of beneficial interest $396,787
Portfolio capital of Class II Shares
(unlimited authorization - no par value) based on 875,707
outstanding shares of beneficial interest 8,886
Distributions in excess of net investment income (2)
Accumulated net realized loss on investments (6,949)
Net unrealized appreciation on investments 2,107
- --------------------------------------------------------------------------------
NET ASSETS $400,829
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS I SHARES
($391,933,872 / 38,744,618 SHARES) $ 10.12
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS II SHARES
($8,894,898 / 875,707 SHARES) $ 10.16
================================================================================
(A) Variable rate security -- the rate reflected on the Statement of Net Assets
is the rate in effect on September 30, 2004.
(B) Delayed Interest (Step Bonds) -- The interest rate disclosed represents the
effective yield at time of purchase.
(C) Tri-Party Repurchase Agreement
ARM -- Adjustable Rate Mortgage
Cl -- Class
CMO -- Collateralized Mortgage Obligation
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Company
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
REMIC -- Real Estate Mortgage Investment Conduit
Ser -- Series
The accompanying notes are an integral part of the financial statements
Constellation Funds 2004 Annual Report | 61
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Chartwell Short Duration Fixed Income Fund
September 30, 2004
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (67.6%)
- --------------------------------------------------------------------------------
FHLMC CMO/REMIC
Ser 1093, Cl F
7.500%, 06/15/06 $ 27 $ 27
Ser 1538, Cl J
6.500%, 06/15/08 160 168
Ser 161, Cl F
9.500%, 06/15/06 76 76
Ser 2416, Cl PN
6.000%, 11/15/28 5,987 6,083
Ser 2509, Cl EA
4.000%, 12/15/12 1,518 1,525
Ser 2510, Cl TA
4.000%, 06/15/32 1,826 1,802
Ser 2515, Cl ED
5.000%, 03/15/17 4,416 4,513
Ser 2537, Cl LA
4.250%, 05/15/30 3,613 3,632
Ser 2541, Cl MC
6.000%, 01/15/29 3,461 3,558
Ser 2543, Cl YJ
4.500%, 03/15/32 3,138 3,115
Ser 2552, Cl NH
4.500%, 04/15/21 1,750 1,763
Ser 2566, Cl LM
4.500%, 04/15/32 2,267 2,252
Ser 2575, Cl QP
4.500%, 11/15/31 3,036 3,039
Ser 2581, Cl PW
3.000%, 04/15/16 3,000 2,998
Ser 2583, Cl ND
4.250%, 12/15/10 1,610 1,620
Ser 2586, Cl XG
4.000%, 12/15/32 2,411 2,423
Ser 2590, Cl QY
3.750%, 04/15/28 1,999 2,002
Ser 2590, Cl UL
3.750%, 03/15/32 4,452 4,449
Ser 2596, Cl QE
4.000%, 03/15/33 2,798 2,723
Ser 2649, Cl PJ
3.500%, 06/15/33 2,403 2,373
Ser 2744, Cl TA
5.500%, 03/15/26 3,843 3,962
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
FHLMC
Pool #C66916
7.000%, 05/01/32 $ 459 $ 487
Pool #D94598
6.500%, 04/01/21 376 397
Pool #E97227
7.000%, 09/01/14 788 836
Pool #G10288
6.000%, 09/01/09 78 81
Pool #G10446
6.500%, 02/01/11 116 123
Pool #G30085
7.500%, 10/01/17 436 469
Pool #M90771
5.000%, 12/01/07 1,397 1,430
FNMA CMO/REMIC
Ser 1991-133, Cl Z
8.000%, 09/25/06 178 184
Ser 1991-72, Cl G
8.000%, 07/25/06 24 24
Ser 1994-27, Cl PJ
6.500%, 06/25/23 667 684
Ser 1997-81, Cl PC
5.000%, 04/18/27 420 423
Ser 1999-15, Cl PC
6.000%, 09/25/18 88 90
Ser 2001-28, Cl A
6.000%, 02/25/29 5 5
Ser 2001-68, Cl JL
5.500%, 05/25/23 7,000 7,111
Ser 2002-60, Cl F1 (A)
2.240%, 06/25/32 1,474 1,476
Ser 2002-71, Cl AP
5.000%, 11/25/32 2,682 2,713
Ser 2002-72, Cl A
5.000%, 10/25/15 1,149 1,161
Ser 2003-119, Cl PU
4.000%, 11/25/33 2,036 2,048
Ser 2003-30, Cl MB
4.000%, 06/25/27 3,000 2,983
Ser 2003-34, Cl GJ
4.000%, 02/25/33 6,822 6,757
Ser 2003-42, Cl CA
4.000%, 05/25/33 2,232 2,207
62 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Chartwell Short Duration Fixed Income Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Ser 2003-7, Cl PA
4.500%, 03/25/20 $ 1,591 $ 1,607
FNMA
Pool #190054
7.000%, 10/01/13 1,199 1,274
Pool #250477
6.000%, 01/01/11 62 65
Pool #303096
7.500%, 12/01/09 170 180
Pool #313429
7.000%, 03/01/12 471 500
Pool #323441
7.000%, 12/01/13 851 903
Pool #323493
7.500%, 12/01/28 3,444 3,701
Pool #334593
7.000%, 05/01/24 29 32
Pool #535560
7.000%, 08/01/14 7,359 7,809
Pool #555973
7.500%, 12/01/14 2,514 2,676
Pool #6222
9.000%, 04/01/16 64 70
Pool #647567
6.000%, 06/01/17 925 970
Pool #704214
7.500%, 12/01/27 1,374 1,480
Pool #725284
7.000%, 11/01/18 3,657 3,882
Pool #8245
8.000%, 12/01/08 99 105
GNMA ARM
Pool #8426 (A)
4.625%, 11/20/18 52 53
GNMA CMO/REMIC
Ser 2002-13, Cl A
6.000%, 10/16/30 782 790
Ser 2002-72, Cl AB
4.500%, 10/20/32 2,776 2,718
GNMA
Pool #2707
5.500%, 01/20/14 20 21
Pool #2802
5.500%, 07/20/14 20 21
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Pool #2843
5.500%, 11/20/14 $ 280 $ 292
Pool #344233
8.000%, 02/15/23 215 237
Pool #345123
8.000%, 12/15/23 365 402
Pool #351122
6.500%, 07/15/08 74 78
Pool #357343
6.500%, 10/15/08 33 35
Pool #462486
6.500%, 01/15/13 91 96
Pool #569337
6.500%, 04/15/22 117 124
Pool #578189
6.000%, 02/15/32 92 96
Pool #68224
8.000%, 06/15/12 151 164
Pool #780322
8.000%, 11/15/22 240 264
Pool #780327
8.000%, 11/15/17 115 126
Pool #780604
7.000%, 07/15/12 1,458 1,556
Pool #814
8.000%, 08/20/17 271 295
-------
118,414
-------
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED OBLIGATIONS
(COST $117,794) 118,414
================================================================================
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.4%)
- --------------------------------------------------------------------------------
FHLB (A)
4.750%, 09/29/14 4,000 3,960
FHLMC
2.400%, 03/29/07 4,125 4,065
FHLMC, MTN
4.000%, 11/17/08 1,000 1,002
FNMA
2.625%, 01/19/07 2,000 1,981
FNMA (A)
1.990%, 02/24/06 2,000 2,000
-------
13,008
-------
Constellation Funds 2004 Annual Report | 63
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Chartwell Short Duration Fixed Income Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(COST $13,137) $ 13,008
================================================================================
CORPORATE OBLIGATIONS (3.7%)
- --------------------------------------------------------------------------------
FINANCIALS (1.6%)
- --------------------------------------------------------------------------------
International Lease Financing
5.625%, 06/01/07 $ 2,650 2,800
- --------------------------------------------------------------------------------
UTILITIES (2.1%)
- --------------------------------------------------------------------------------
National Rural Utilities
6.000%, 05/15/06 3,500 3,670
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $6,516) 6,470
================================================================================
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (1.9%)
- --------------------------------------------------------------------------------
Discover Card Master Trust I,
Ser 2000-9, Cl A
6.350%, 07/15/08 150 157
Morgan Stanley Capital I,
Ser 1998-XL1, Cl A2
6.450%, 06/03/30 2,865 2,930
PECO Energy Transition Trust,
Ser 1999-A, Cl A6
6.050%, 03/01/09 125 132
--------
3,219
--------
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $3,159) 3,219
================================================================================
REPURCHASE AGREEMENT (19.2%)
- --------------------------------------------------------------------------------
PNC Capital Markets 1.710%,
dated 09/30/04, to be
repurchased on 10/01/04,
repurchase price
$33,591,596 (collateralized
by U.S. Government
obligation, 1.850%, 11/17/05, par
value $33,382,000, total market
value $33,590,638) (B) 33,590 33,590
================================================================================
TOTAL REPURCHASE AGREEMENT
(COST $33,590) 33,590
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENT (0.0%)
- --------------------------------------------------------------------------------
BlackRock FedFund, Institutional Shares 820 $ 1
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $1) 1
================================================================================
TOTAL INVESTMENTS (99.8%)
(COST $174,197) 174,702
================================================================================
OTHER ASSETS AND LIABILITIES, NET (0.2%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser (48)
Payable due to Administrator (22)
Payable due to Shareholder Servicing Agent (1)
Other assets and liabilities, net 485
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 414
================================================================================
NET ASSETS (100%) $175,116
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization - no par value)
based on 17,151,216 outstanding shares
of beneficial interest $174,073
Portfolio capital of Class II Shares
(unlimited authorization - no par value)
based on 290,113 outstanding shares
of beneficial interest 2,645
Distributions in excess of net investment income (1)
Accumulated net realized loss on investments (2,106)
Net unrealized appreciation on investments 505
- --------------------------------------------------------------------------------
NET ASSETS $175,116
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS I SHARES
($172,212,555 / 17,151,216 SHARES) $ 10.04
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS II SHARES
($2,903,364 / 290,113 SHARES) $ 10.01
================================================================================
(A) Variable rate security - the rate reflected on the Statement of Net Assets
is the rate in effect on September 30, 2004.
(B) Tri-Party Repurchase Agreement
ARM -- Adjustable Rate Mortgage
Cl -- Class
CMO -- Collateralized Mortgage Obligation
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
MTN -- Medium Term Note
REMIC -- Real Estate Mortgage Investment Conduit
Ser -- Series
The accompanying notes are an integral part of the financial statements
64 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Chartwell High Yield Fund
September 30, 2004
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (91.2%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (30.7%)
- --------------------------------------------------------------------------------
Albritton Communications
7.750%, 12/15/12 $ 105 $ 109
Amscan Holdings (A)
8.750%, 05/01/14 70 71
Aztar (A)
7.875%, 06/15/14 140 148
Cablevision Systems (A)
8.000%, 04/15/12 100 104
Charter Communications (A)
8.000%, 04/30/12 50 50
Charter Communications
Holdings
10.750%, 10/01/09 50 41
Chattem
7.000%, 03/01/14 100 102
Courtyard by Marriott, Ser B
10.750%, 02/01/08 160 161
Denny's (A)
10.000%, 10/01/12 80 80
Echostar DBS (A)
6.625%, 10/01/14 100 99
Friendly Ice Cream
8.375%, 06/15/12 120 115
Gereral Nutrition Center
8.500%, 12/01/10 90 92
H&E Equipment
11.125%, 06/15/12 85 88
HLI Operating
10.500%, 06/15/10 29 32
Intrawest
7.500%, 10/15/13 100 104
Jean Countu Group (A)
8.500%, 08/01/14 105 104
LCE Aquisition (A)
9.000%, 08/01/14 115 119
Mandaly Resort Group
7.625%, 07/15/13 135 143
Mediacom Broadband
11.000%, 07/15/13 100 106
Mother's Work
11.250%, 08/01/10 100 98
NationsRent
9.500%, 10/15/10 120 130
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Norcraft (A)
9.000%, 11/01/11 $ 45 $ 49
Phillips Van-Heusen
7.250%, 02/15/11 100 104
Premier Entertainment
10.750%, 02/01/12 65 69
Service (A)
6.750%, 04/01/16 100 100
Sonic Automotive, Ser B
8.625%, 08/15/13 80 85
Tenneco Automotive, Ser B
10.250%, 07/15/13 100 114
Time Warner
9.750%, 07/15/08 135 134
Town Sports International
9.625%, 04/15/11 85 86
United Rentals
7.750%, 11/15/13 120 112
Vertis, Ser B
10.875%, 06/15/09 100 108
W.H. Holdings
9.500%, 04/01/11 60 65
-----
3,122
-----
- --------------------------------------------------------------------------------
CONSUMER STAPLES (4.6%)
- --------------------------------------------------------------------------------
Chiquita Brands (A)
7.500%, 11/01/14 125 125
Dole Foods
8.750%, 07/15/13 70 77
Merisant (A)
9.500%, 07/15/13 90 86
Stater Brothers Holdings (A)
8.125%, 06/15/12 85 89
United Agri Products (A)
8.250%, 12/15/11 85 92
-----
469
-----
- --------------------------------------------------------------------------------
ENERGY (2.6%)
- --------------------------------------------------------------------------------
Belden & Blake (A)
8.750%, 07/15/12 110 117
Chesapeake Energy
7.500%, 06/15/14 130 142
-----
259
-----
Constellation Funds 2004 Annual Report | 65
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Chartwell High Yield Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
FINANCIALS (4.3%)
- --------------------------------------------------------------------------------
BCP Caylux Holdings (A)
9.625%, 06/15/14 $ 100 $ 108
Bluewater Finance
10.250%, 02/15/12 100 109
E*Trade Financial (A)
8.000%, 06/15/11 105 109
Western Financial
9.625%, 05/15/12 100 113
------
439
------
- --------------------------------------------------------------------------------
HEALTH CARE (5.7%)
- --------------------------------------------------------------------------------
Bio-Rad Laboratories
7.500%, 08/15/13 115 124
Iasis Healthcare (A)
8.750%, 06/15/14 165 173
Norcross Safety Products, Ser B
9.875%, 08/15/11 100 108
Res-Care
10.625%, 11/15/08 65 70
VWR International (A)
8.000%, 04/15/14 100 106
------
581
------
- --------------------------------------------------------------------------------
INDUSTRIALS (24.8%)
- --------------------------------------------------------------------------------
Aearo
8.250%, 04/15/12 70 71
Ainsworth Lumber (A)
7.250%, 10/01/12 75 76
Allied Security (A)
11.375%, 07/15/11 70 73
American Achievement (A)
8.250%, 04/01/12 100 105
Buhrmann U.S. (A)
8.250%, 07/01/14 115 115
CE Generation
7.416%, 12/15/18 99 103
Cenveo
9.625%, 03/15/12 100 110
Coinmach
9.000%, 02/01/10 155 161
Danka Business Systems
11.000%, 06/15/10 100 105
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Gencorp
9.500%, 08/15/13 $ 70 $ 75
Geo Group
8.250%, 07/15/13 100 103
IMCO Recycling
10.375%, 10/15/10 100 110
Integrated Electrical Services,
Ser B
9.375%, 02/01/09 91 89
Jacuzzi Brands
9.625%, 07/01/10 100 110
Koppers Industries
9.875%, 10/15/13 100 110
Kraton Polymers (A)
8.125%, 01/15/14 125 123
Ply Gem Industries (A)
9.000%, 02/15/12 70 70
Rayovac
8.500%, 10/01/13 85 92
Sensus Metering
8.625%, 12/15/13 130 133
Sequa
9.000%, 08/01/09 100 110
Ship Finance International
8.500%, 12/15/13 145 144
THI Buildco (A)
8.500%, 09/01/14 100 105
Tech Olympic USA
9.000%, 07/01/10 100 110
Trinity Industries
6.500%, 03/15/14 125 123
-----
2,526
-----
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (0.5%)
- --------------------------------------------------------------------------------
FTD
7.750%, 02/15/14 50 50
-----
- --------------------------------------------------------------------------------
MATERIALS (10.8%)
- --------------------------------------------------------------------------------
Autocam (A)
10.875%, 06/15/14 70 70
California Steel
6.125%, 03/15/14 130 127
Crown Euro Holdings
9.500%, 03/01/11 100 111
66 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Chartwell High Yield Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Euromax International
8.500%, 08/15/11 $ 100 $ 107
Nalco
8.875%, 11/15/13 95 102
Nova Chemicals
6.500%, 01/15/12 85 88
Oregon Steel Mills
10.000%, 07/15/09 100 109
Owens-Brockway Glass
Container
8.750%, 11/15/12 100 111
Russel Metals
6.375%, 03/01/14 75 75
Solo Cup
8.500%, 02/15/14 125 123
Wolverine Tube
10.500%, 04/01/09 70 77
------
1,100
------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (4.4%)
- --------------------------------------------------------------------------------
Centennial Cellular
10.125%, 06/15/13 105 110
General Cable (A)
9.500%, 11/15/10 50 55
Nextel Communications
7.375%, 08/01/15 130 140
Sup Essx Communication (A)
9.000%, 04/15/12 100 100
Ubiquitel Operating (A)
9.875%, 03/01/11 40 42
------
447
------
- --------------------------------------------------------------------------------
UTILITIES (2.8%)
- --------------------------------------------------------------------------------
AES
9.500%, 06/01/09 125 141
NRG Energy (A)
8.000%, 12/15/13 130 139
------
280
------
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $9,185) 9,273
================================================================================
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.7%)
- --------------------------------------------------------------------------------
PNC Capital Markets 1.710%,
dated 09/30/04, to be
repurchased on 10/01/04,
repurchase price $785,037
(collateralized by U.S.
Government obligation,
1.850%, 11/17/05, par value
$781,000, total market value
$785,881) (B) $ 785 $ 785
------
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $785) 785
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (0.0%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 387 --
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $0)
================================================================================
TOTAL INVESTMENTS (98.9%)
(COST $9,970) 10,058
================================================================================
OTHER ASSETS AND LIABILITIES, NET (1.1%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser (4)
Payable due to Administrator (1)
Other assets and liabilities, net 118
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 113
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 10,171
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization - no par value)
based on 1,986,209 outstanding shares
of beneficial interest $ 25,239
Undistributed net investment income 2
Accumulated net realized loss on investments (15,158)
Net unrealized appreciation on investments 88
- --------------------------------------------------------------------------------
NET ASSETS $ 10,171
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS I SHARES $ 5.12
================================================================================
(A) Security sold within the terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in the program or other
"accredited investors". Security is considered liquid.
(B) Tri-Party Repurchase Agreement
Ser -- Series
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2004 Annual Report | 67
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation HLAM Large Cap Value Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (99.7%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (26.4%)
- --------------------------------------------------------------------------------
Comcast, Cl A* 1,940 $ 55
Gannett 425 36
Home Depot 2,045 80
Mattel 2,485 45
Nike, Cl B 380 30
Omnicom Group 630 46
TJX 1,950 43
Walt Disney 1,965 44
-----
379
-----
- --------------------------------------------------------------------------------
CONSUMER STAPLES (12.7%)
- --------------------------------------------------------------------------------
Costco Wholesale 715 30
CVS 1,140 48
Gillette 1,070 45
PepsiCo 1,225 59
-----
182
-----
- --------------------------------------------------------------------------------
FINANCIALS (34.2%)
- --------------------------------------------------------------------------------
American International Group 930 63
Berkshire Hathaway, Cl B* 35 100
Cincinnati Financial 2,270 94
Freddie Mac 1,115 73
Synovus Financial 1,910 50
US Bancorp 2,030 59
Washington Mutual 1,350 53
-----
492
-----
- --------------------------------------------------------------------------------
HEALTH CARE (15.2%)
- --------------------------------------------------------------------------------
Allergan 360 26
Cardinal Health 685 30
Johnson & Johnson 1,115 63
Waters* 1,455 64
Wyeth 935 35
-----
218
-----
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (9.0%)
- --------------------------------------------------------------------------------
Automatic Data Processing 1,630 67
First Data 1,445 63
-----
130
-----
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (2.2%)
- --------------------------------------------------------------------------------
CenturyTel 925 32
- --------------------------------------------------------------------------------
Value
Shares (000)
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $1,436) $1,433
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (0.6%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 8,391 8
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $8) 8
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $1,444) 1,441
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.3%)
- --------------------------------------------------------------------------------
Receivable due from Investment Adviser 1
Other assets and liabilities, net (5)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (4)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $1,437
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization - no par value)
based on 146,208 outstanding shares of beneficial interest $1,440
Net unrealized depreciation on investments (3)
- --------------------------------------------------------------------------------
NET ASSETS $1,437
================================================================================
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-CLASS II SHARES $ 9.83
================================================================================
* Non-income producing security.
Cl -- Class
The accompanying notes are an integral part of the financial statements
68 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Diversified Value Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (99.1%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (13.3%)
- --------------------------------------------------------------------------------
Fortune Brands 28,415 $ 2,105
Harrah's Entertainment 43,000 2,278
Home Depot 85,880 3,366
Kohl's* 36,100 1,740
Lear 29,175 1,589
Pulte Homes 25,580 1,570
Tribune 40,345 1,660
Viacom, Cl B 51,605 1,732
Walt Disney 184,800 4,167
-------
20,207
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (3.7%)
- --------------------------------------------------------------------------------
Anheuser-Busch 42,800 2,138
PepsiCo 71,750 3,490
-------
5,628
-------
- --------------------------------------------------------------------------------
ENERGY (11.5%)
- --------------------------------------------------------------------------------
ChevronTexaco 95,060 5,099
Exxon Mobil 193,200 9,338
Spinnaker Exploration* 88,050 3,085
-------
17,522
-------
- --------------------------------------------------------------------------------
FINANCIALS (37.2%)
- --------------------------------------------------------------------------------
American International Group 45,960 3,125
Bear Stearns 43,480 4,182
Boston Properties 33,190 1,838
Capital Automotive REIT 89,540 2,800
Capital One Financial 44,590 3,295
Citigroup 159,365 7,031
Everest Re Group 27,415 2,038
Hibernia, Cl A 140,655 3,715
MBNA 190,555 4,802
North Fork Bancorporation 97,440 4,331
Radian Group 36,540 1,689
State Street 82,592 3,528
TCF Financial 84,600 2,563
Torchmark 54,390 2,892
Washington Mutual 49,205 1,923
Wells Fargo 114,580 6,832
-------
56,584
-------
- --------------------------------------------------------------------------------
HEALTH CARE (3.2%)
- --------------------------------------------------------------------------------
Merck 91,300 3,013
UnitedHealth Group 25,640 1,890
-------
4,903
-------
Value
Shares (000)
- --------------------------------------------------------------------------------
INDUSTRIALS (9.7%)
- --------------------------------------------------------------------------------
3M 24,965 $ 1,996
Avery Dennison 33,770 2,221
General Dynamics 22,140 2,261
Norfolk Southern 68,670 2,042
Rockwell Automation 100,315 3,882
United Technologies 24,670 2,304
--------
14,706
--------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (6.8%)
- --------------------------------------------------------------------------------
Alliance Data Systems* 40,195 1,630
Dell* 42,500 1,513
Flextronics International* 131,255 1,739
Hewlett-Packard 61,215 1,148
Microsoft 103,925 2,874
Texas Instruments 66,020 1,405
--------
10,309
--------
- --------------------------------------------------------------------------------
MATERIALS (2.5%)
- --------------------------------------------------------------------------------
E.I. du Pont de Nemours 57,615 2,466
International Paper 35,010 1,415
--------
3,881
--------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (5.4%)
- --------------------------------------------------------------------------------
Alltel 25,980 1,427
CenturyTel 98,560 3,375
Sprint* 170,910 3,440
--------
8,242
--------
- --------------------------------------------------------------------------------
UTILITIES (5.8%)
- --------------------------------------------------------------------------------
Dominion Resources 36,460 2,379
Entergy 55,930 3,390
FPL Group 45,780 3,128
--------
8,897
--------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $133,442) 150,879
================================================================================
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUND (0.9%)
- --------------------------------------------------------------------------------
iShares Russell 1000 Value Index Fund* 21,520 1,303
- --------------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUND
(COST $1,278) 1,303
================================================================================
TOTAL INVESTMENTS (100.0%)
(COST $134,720) 152,182
================================================================================
Constellation Funds 2004 Annual Report | 69
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Diversified Value Fund
Value
(000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (0.0%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser $ (81)
Payable due to Administrator (19)
Payable due to Shareholder Servicing Agent (31)
Other assets and liabilities, net 151
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 20
================================================================================
NET ASSETS (100%) $152,202
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited
authorization - no par value) based on 13,568,699
outstanding shares of beneficial interest $134,917
Accumulated net realized loss on investments (177)
Net unrealized appreciation on investments 17,462
- --------------------------------------------------------------------------------
NET ASSETS $152,202
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE-CLASS II SHARES $ 11.22
================================================================================
* Non-income producing security.
Cl -- Class
REIT -- Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements
70 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Select Value Fund
September 30, 2004
Value
Shares (000)
- -----------------------------------------------------------------------------
COMMON STOCK (99.2%)
- -----------------------------------------------------------------------------
CONSUMER DISCRETIONARY (8.3%)
- -----------------------------------------------------------------------------
Lowe's 32,150 $ 1,747
Walt Disney 150,180 3,387
-------
5,134
-------
- -----------------------------------------------------------------------------
CONSUMER STAPLES (8.4%)
- -----------------------------------------------------------------------------
Anheuser-Busch 40,100 2,003
PepsiCo 31,735 1,544
Wal-Mart Stores 30,500 1,623
-------
5,170
-------
- -----------------------------------------------------------------------------
ENERGY (12.0%)
- -----------------------------------------------------------------------------
ChevronTexaco 59,430 3,188
Devon Energy 32,090 2,279
Spinnaker Exploration* 55,325 1,938
-------
7,405
-------
- -----------------------------------------------------------------------------
FINANCIALS (35.7%)
- -----------------------------------------------------------------------------
Capital Automotive REIT 72,255 2,260
Capital One Financial 35,160 2,598
Citigroup 45,715 2,017
Everest Re Group 20,360 1,513
MBNA 122,270 3,081
North Fork Bancorporation 81,430 3,620
Radian Group 49,830 2,304
Stancorp Financial Group 47,825 3,405
Wells Fargo 21,900 1,306
-------
22,104
-------
- -----------------------------------------------------------------------------
HEALTH CARE (3.6%)
- -----------------------------------------------------------------------------
Pfizer 72,800 2,228
- -----------------------------------------------------------------------------
INDUSTRIALS (9.0%)
- -----------------------------------------------------------------------------
Avery Dennison 31,620 2,080
Rockwell Automation 60,580 2,345
Yellow Roadway* 23,785 1,115
-------
5,540
-------
- -----------------------------------------------------------------------------
INFORMATION TECHNOLOGY (10.0%)
- -----------------------------------------------------------------------------
Alliance Data Systems* 38,545 1,563
Hewlett-Packard 117,045 2,195
International Business Machines 10,850 930
Micron Technology* 126,775 1,525
-------
6,213
-------
Value
Shares (000)
- -----------------------------------------------------------------------------
MATERIALS (1.9%)
- -----------------------------------------------------------------------------
International Paper 29,965 $ 1,211
- -----------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (4.7%)
- -----------------------------------------------------------------------------
Sprint* 143,085 2,880
- -----------------------------------------------------------------------------
UTILITIES (5.6%)
- -----------------------------------------------------------------------------
Dominion Resources 23,780 1,550
FPL Group 27,705 1,893
-------
3,443
-------
- -----------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $53,280) 61,328
=============================================================================
- -----------------------------------------------------------------------------
EXCHANGE TRADED FUND (0.6%)
- -----------------------------------------------------------------------------
iShares Russell 1000 Value Index
Fund* 6,020 365
- -----------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUND
(COST $355) 365
=============================================================================
- -----------------------------------------------------------------------------
CASH EQUIVALENT (0.4%)
- -----------------------------------------------------------------------------
PNC Bank Money Market Fund 234,264 234
- -----------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $234) 234
=============================================================================
TOTAL INVESTMENTS (100.2%)
(COST $53,869) 61,927
=============================================================================
Constellation Funds 2004 Annual Report | 71
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Select Value Fund
Value
(000)
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.2%)
- -----------------------------------------------------------------------------
Payable due to Investment Adviser $ (34)
Payable due to Shareholder Servicing Agent (13)
Payable due to Administrator (7)
Other assets and liabilities, net (56)
- -----------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (110)
=============================================================================
NET ASSETS (100%) $61,817
=============================================================================
- -----------------------------------------------------------------------------
NET ASSETS CONSIST OF:
----------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization - no par
value) based on 5,689,389
outstanding shares of beneficial interest $53,453
Accumulated net realized gain on investments 306
Net unrealized appreciation on investments 8,058
- -----------------------------------------------------------------------------
NET ASSETS $61,817
=============================================================================
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-CLASS II SHARES $ 10.87
=============================================================================
* Non-income producing security.
REIT -- Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements
72 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Diversified Growth Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (98.5%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (17.9%)
- --------------------------------------------------------------------------------
Aeropostale* 43,270 $ 1,134
Best Buy 28,135 1,526
Dollar Tree Stores* 43,362 1,169
eBay* 22,517 2,070
Fortune Brands 28,580 2,117
Harrah's Entertainment 24,215 1,283
Home Depot 70,740 2,773
Kohl's* 22,300 1,075
Regis 18,605 748
Standard-Pacific 17,455 984
Starbucks* 30,101 1,368
Tribune 19,730 812
Walt Disney 73,630 1,660
-------
18,719
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (10.3%)
- --------------------------------------------------------------------------------
Altria Group 32,100 1,510
Anheuser-Busch 19,187 958
PepsiCo 63,975 3,112
Procter & Gamble 44,585 2,413
Wal-Mart Stores 52,792 2,809
-------
10,802
-------
- --------------------------------------------------------------------------------
ENERGY (1.4%)
- --------------------------------------------------------------------------------
Halliburton 43,335 1,460
-------
- --------------------------------------------------------------------------------
FINANCIALS (9.4%)
- --------------------------------------------------------------------------------
American International Group 28,210 1,918
Bear Stearns 11,690 1,124
Capital One Financial 25,965 1,919
Everest Re Group 10,145 754
Fifth Third Bancorp 25,350 1,248
MBNA 112,666 2,839
-------
9,802
-------
- --------------------------------------------------------------------------------
HEALTH CARE (24.5%)
- --------------------------------------------------------------------------------
Abbott Laboratories 43,913 1,860
Amgen* 38,962 2,208
Cephalon* 26,725 1,280
Health Management Associates, Cl A 50,953 1,041
Hospira* 43,020 1,317
Johnson & Johnson 93,776 5,282
Medtronic 59,527 3,090
Mylan Laboratories 99,635 1,794
Value
Shares (000)
- --------------------------------------------------------------------------------
Pfizer 194,481 $ 5,951
UnitedHealth Group 23,665 1,745
--------
25,568
--------
- --------------------------------------------------------------------------------
INDUSTRIALS (7.0%)
- --------------------------------------------------------------------------------
Avery Dennison 21,650 1,424
General Electric 1 --
L-3 Communications Holdings 21,320 1,428
Pentair 37,085 1,295
Rockwell Automation 41,595 1,610
United Parcel Service, Cl B 20,230 1,536
--------
7,293
--------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (26.0%)
- --------------------------------------------------------------------------------
Affiliated Computer Services, Cl A* 28,945 1,611
Alliance Data Systems* 47,620 1,931
Applied Materials* 71,065 1,172
Cisco Systems* 168,337 3,047
Citrix Systems* 63,820 1,118
Dell* 57,949 2,063
Flextronics International* 78,515 1,040
Intel 117,688 2,361
Lexmark International, Cl A* 12,470 1,048
Micron Technology* 62,735 755
Microsoft 195,979 5,419
Qualcomm 50,834 1,985
Texas Instruments 68,050 1,448
Veritas Software* 56,750 1,010
Xilinx 43,271 1,168
--------
27,176
--------
- --------------------------------------------------------------------------------
MATERIALS (1.0%)
- --------------------------------------------------------------------------------
Worthington Industries 48,480 1,035
--------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (1.0%)
- --------------------------------------------------------------------------------
Sprint* 53,430 1,076
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $111,236) 102,931
================================================================================
Constellation Funds 2004 Annual Report | 73
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Diversified Growth Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUND (1.4%)
- --------------------------------------------------------------------------------
iShares S&P MidCap
400/BARRA Growth Index Fund* 12,480 $ 1,499
- --------------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUND
(COST $1,553) 1,499
--------
================================================================================
CASH EQUIVALENT (0.2%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 197,238 197
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $197) 197
================================================================================
TOTAL INVESTMENTS (100.1%)
(COST $112,986) 104,627
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.1%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser (54)
Payable due to Shareholder Servicing Agent (22)
Payable due to Administrator (13)
Other assets and liabilities, net (10)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (99)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $104,528
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited authorization -
no par value) based on 19,510,329 outstanding shares of
beneficial interest $185,527
Accumulated net realized loss on investments (72,640)
Net unrealized depreciation on investments (8,359)
- --------------------------------------------------------------------------------
NET ASSETS $104,528
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE-CLASS
II SHARES $ 5.36
================================================================================
* Non-income producing security.
Cl -- Class
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements
74 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Small Cap Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (97.1%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (12.8%)
- --------------------------------------------------------------------------------
Advance Auto Parts* 30,834 $ 1,061
Aeropostale* 91,759 2,404
California Pizza Kitchen* 122,130 2,669
Furniture Brands International 27,964 701
GameStop, Cl A* 73,599 1,362
Lin TV, Cl A* 23,355 455
Modine Manufacturing 30,190 909
Standard-Pacific 15,332 864
Wolverine World Wide 56,380 1,421
-------
11,846
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (4.1%)
- --------------------------------------------------------------------------------
Cott 50,425 1,454
Pantry* 75,953 1,912
Peet's Coffee & Tea* 18,852 441
-------
3,807
-------
- --------------------------------------------------------------------------------
ENERGY (5.6%)
- --------------------------------------------------------------------------------
Cimarex Energy* 44,963 1,571
Maverick Tube* 29,032 895
Spinnaker Exploration* 44,103 1,545
W-H Energy Services* 58,401 1,212
-------
5,223
-------
- --------------------------------------------------------------------------------
FINANCIALS (21.0%)
- --------------------------------------------------------------------------------
Capital Automotive REIT 97,621 3,053
Central Pacific Financial 64,172 1,766
Commercial Capital Bancorp* 87,630 1,988
Flagstar Bancorp 38,760 825
Flushing Financial 105,128 1,998
IPC Holdings 32,636 1,241
Metris* 356,938 3,491
R&G Financial Corporation, Cl B 46,205 1,786
SL Green Realty 31,842 1,650
Stancorp Financial Group 13,443 957
Trico Bancshares 37,396 782
-------
19,537
-------
- --------------------------------------------------------------------------------
HEALTH CARE (12.8%)
- --------------------------------------------------------------------------------
Collagenex Pharmaceuticals* 170,166 1,115
Diagnostic Products 10,992 449
Enzon Pharmaceuticals* 117,979 1,882
LabOne* 64,793 1,894
Merit Medical Systems* 142,960 2,160
OSI Pharmaceuticals 66 4
Value
Shares (000)
- --------------------------------------------------------------------------------
Serologicals* 106,823 $ 2,492
Synovis Life Technologies* 200,729 1,919
-------
11,915
-------
- --------------------------------------------------------------------------------
INDUSTRIALS (10.1%)
- --------------------------------------------------------------------------------
Applied Films* 59,727 1,076
Applied Industrial Technologies 32,369 1,157
Cubic 38,095 872
Genesee & Wyoming, Cl A* 32,349 819
Laureate Education* 65,823 2,450
Trex* 34,610 1,533
Werner Enterprises 75,841 1,464
-------
9,371
-------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (21.9%)
- --------------------------------------------------------------------------------
Aeroflex* 250,813 2,651
Anteon International* 31,318 1,148
Belden CDT* 109,680 2,391
CACI International, Cl A* 10,498 554
Corillian* 351,120 1,619
Cypress Semiconductor* 30,346 268
Hyperion Solutions* 94,805 3,222
Kronos* 39,720 1,759
Lionbridge Technologies* 293,458 2,521
Micrel* 47,438 494
Startek 44,337 1,390
Tech Data* 14,814 571
Veeco Instruments* 81,728 1,714
-------
20,302
-------
- --------------------------------------------------------------------------------
MATERIALS (5.1%)
- --------------------------------------------------------------------------------
Gibraltar Steel 28,036 1,014
Myers Industries 38,570 422
NN 38,221 438
Penford 46,895 816
RPM International 116,226 2,051
-------
4,741
-------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (1.4%)
- --------------------------------------------------------------------------------
US LEC, Cl A* 431,338 1,294
-------
- --------------------------------------------------------------------------------
UTILITIES (2.3%)
- --------------------------------------------------------------------------------
Idacorp 41,446 1,204
New Jersey Resources 22,623 937
-------
2,141
-------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $74,795) 90,177
================================================================================
Constellation Funds 2004 Annual Report | 75
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Small Cap Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS (0.8%)
- --------------------------------------------------------------------------------
iShares Russell 2000 Growth Index Fund* 3,463 $ 203
iShares Russell 2000 Index Fund* 4,934 562
- --------------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUNDS
(COST $696) 765
================================================================================
WARRANTS (0.0%)
- --------------------------------------------------------------------------------
Imperial Credit Industries,
Expires 01/31/08* 17,236 --
- --------------------------------------------------------------------------------
TOTAL WARRANTS
(COST $0) --
-------
================================================================================
RIGHTS (0.0%)
- --------------------------------------------------------------------------------
OSI Pharmaceuticals (A)* 1,169 --
- --------------------------------------------------------------------------------
TOTAL RIGHTS
(COST $0) --
================================================================================
SHORT-TERM INVESTMENT HELD AS COLLATERAL
FOR LOANED SECURITIES (0.5%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust -- Quality Portfolio (B) 434,700 435
-------
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR LOANED
SECURITIES (COST $435) 435
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (0.4%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 346,985 347
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $347) 347
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.8%)
(COST $76,273) 91,724
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.2%)
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (435)
Payable due to Investment Adviser (55)
Payable due to Shareholder Servicing Agent (19)
Payable due to Administrator (11)
Other assets and liabilities, net 1,644
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 1,124
- --------------------------------------------------------------------------------
NET ASSETS (100%) $92,848
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited authorization -
no par value) based on 6,067,679 outstanding shares of
beneficial interest $76,666
Accumulated net realized gain on investments 731
Net unrealized appreciation on investments 15,451
- --------------------------------------------------------------------------------
NET ASSETS $92,848
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE-
CLASS II SHARES $ 15.30
================================================================================
* Non-income producing security.
(A) This security was issued for possible settlement of pending litigation and
does not have an expiration date.
(B) Security purchased as collateral for loaned securities. The securities
currently on loan include pending transactions.
Cl -- Class
REIT -- Real Estate Investment Trust
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements
76 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Family Heritage(R) Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (95.2%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (10.8%)
- --------------------------------------------------------------------------------
American Axle & Manufacturing Holdings 22,898 $ 670
Carnival 33,489 1,584
COX Communications, Cl A* 36,642 1,214
International Speedway, Cl A 16,767 837
Marriott International, Cl A 10,328 536
Nike, Cl B 22,058 1,738
Toll Brothers* 21,789 1,009
Viacom, Cl B 24,483 822
-------
8,410
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (9.7%)
- --------------------------------------------------------------------------------
Estee Lauder, Cl A 19,415 811
JM Smucker 34,494 1,532
Lancaster Colony 20,814 878
Wal-Mart Stores 51,335 2,731
Wm. Wrigley Jr. 26,078 1,651
-------
7,603
-------
- --------------------------------------------------------------------------------
ENERGY (6.4%)
- --------------------------------------------------------------------------------
Apache 30,948 1,551
Devon Energy 20,087 1,427
Kerr-McGee 34,941 2,000
-------
4,978
-------
- --------------------------------------------------------------------------------
FINANCIALS (23.5%)
- --------------------------------------------------------------------------------
Berkshire Hathaway, Cl B* 725 2,081
Capital One Financial 20,530 1,517
Commerce Bancshares 33,332 1,603
Commercial Capital Bancorp* 67,470 1,531
Federated Investors, Cl B 60,820 1,730
Flagstar Bancorp 92,614 1,971
MBNA 99,715 2,513
Philadelphia Consolidated Holding* 9,614 530
Progressive 10,163 861
SL Green Realty 29,719 1,540
TCF Financial 82,750 2,506
-------
18,383
-------
- --------------------------------------------------------------------------------
HEALTH CARE (12.3%)
- --------------------------------------------------------------------------------
Cephalon* 15,280 732
Eli Lilly 45,768 2,748
Hillenbrand Industries 11,095 561
Medicis Pharmaceutical, Cl A 47,698 1,862
Stryker 54,055 2,599
Universal Health Services, Cl B 25,918 1,127
-------
9,629
-------
Value
Shares (000)
- --------------------------------------------------------------------------------
INDUSTRIALS (10.1%)
- --------------------------------------------------------------------------------
Danaher 20,270 $ 1,039
Fastenal 21,239 1,223
General Dynamics 16,166 1,651
Illinois Tool Works 16,740 1,560
Molex, Cl A 57,245 1,506
Werner Enterprises 46,018 889
-------
7,868
-------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (18.8%)
- --------------------------------------------------------------------------------
Dell* 65,170 2,320
Fiserv* 33,300 1,161
Marvell Technology Group* 55,708 1,456
Microsoft 162,906 4,504
Paychex 37,253 1,123
Qualcomm 51,030 1,992
Vishay Intertechnology* 58,143 750
Yahoo!* 40,235 1,365
-------
14,671
-------
- --------------------------------------------------------------------------------
MATERIALS (2.9%)
- --------------------------------------------------------------------------------
Sigma-Aldrich 21,514 1,248
Worthington Industries 47,088 1,005
-------
2,253
-------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (0.7%)
- --------------------------------------------------------------------------------
Telephone & Data Systems 6,571 553
-------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $60,299) 74,348
================================================================================
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS (4.6%)
- --------------------------------------------------------------------------------
iShares Dow Jones US Telecommunications Sector Index Fund* 57,531 1,303
iShares Dow Jones US Utilities Sector Index Fund* 36,324 2,247
- --------------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUNDS
(COST $3,676) 3,550
================================================================================
CASH EQUIVALENT (0.3%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 264,466 264
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $264) 264
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(COST $64,239) 78,162
================================================================================
Constellation Funds 2004 Annual Report | 77
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Family Heritage(R) Fund
Value
(000)
- -------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.1)%
- -------------------------------------------------------------------------
Payable due to Investment Adviser $ (53)
Payable due to Shareholder Servicing Agent (16)
Payable due to Administrator (9)
Other assets and liabilities, net 19
- -------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (59)
- -------------------------------------------------------------------------
NET ASSETS (100%) $ 78,103
=========================================================================
- -------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization - no par value) based on
8,324,058 outstanding shares of beneficial interest $ 83,237
Accumulated net realized loss on investments (19,057)
Net unrealized appreciation on investments 13,923
- -------------------------------------------------------------------------
NET ASSETS $ 78,103
=========================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE-CLASS II SHARES $ 9.38
=========================================================================
* Non-income producing security.
Cl -- Class
The accompanying notes are an integral part of the financial statements
78 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Taxable Bond Fund
September 30, 2004
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (55.4%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (4.3%)
- --------------------------------------------------------------------------------
Harman International
7.320%, 07/01/07 $ 1,143 $ 1,249
May Department Stores
7.450%, 09/15/11 550 625
-------
1,874
-------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.9%)
- --------------------------------------------------------------------------------
H.J. Heinz
6.000%, 03/15/08 750 811
-------
- --------------------------------------------------------------------------------
ENERGY (4.7%)
- --------------------------------------------------------------------------------
BP Capital Markets
2.625%, 03/15/07 1,000 991
Burlington Resources Finance
5.600%, 12/01/06 1,000 1,049
-------
2,040
-------
- --------------------------------------------------------------------------------
FINANCIALS (27.8%)
- --------------------------------------------------------------------------------
Bank of America
5.375%, 06/15/14 1,000 1,038
Block Financial
8.500%, 04/15/07 235 263
CIT Group
7.750%, 04/02/12 1,000 1,183
Colonial Realty
8.050%, 07/15/06 400 434
Ford Motor Credit
7.600%, 08/01/05 600 623
7.375%, 10/28/09 904 990
General Motors Acceptance
6.875%, 09/15/11 1,537 1,612
Heller Financial
7.375%, 11/01/09 500 578
Household Finance
4.750%, 05/15/09 1,000 1,032
Kimco Realty, MTN, Ser B
7.900%, 12/07/07 450 511
7.620%, 10/20/04 465 466
Lehman Brothers Holdings 7.000%, 02/01/08 1,316 1,452
Merrill Lynch, MTN, Ser P 4.000%, 09/15/08 750 752
St. Paul
8.125%, 04/15/10 904 1,074
-------
12,008
-------
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
HEALTH CARE (2.4%)
- --------------------------------------------------------------------------------
Bristol-Myers Squibb
4.750%, 10/01/06 $ 1,000 $ 1,033
-------
- --------------------------------------------------------------------------------
INDUSTRIALS (8.1%)
- --------------------------------------------------------------------------------
Honeywell International
7.500%, 03/01/10 1,052 1,226
Tyco International Group
7.000%, 06/15/28 2,000 2,257
-------
3,483
-------
- --------------------------------------------------------------------------------
SOVERIGN BOND (1.2%)
- --------------------------------------------------------------------------------
Aid-Israel
5.500%, 04/26/24 500 516
-------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (2.6%)
- --------------------------------------------------------------------------------
Verizon Communications
7.510%, 04/01/09 1,000 1,135
-------
- --------------------------------------------------------------------------------
UTILITIES (2.4%)
- --------------------------------------------------------------------------------
Florida Power & Light
6.875%, 12/01/05 1,000 1,049
-------
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $22,932) 23,949
================================================================================
U.S. GOVERNMENT AGENCY OBLIGATIONS (20.2%)
- --------------------------------------------------------------------------------
FHLB, Ser TV06
4.875%, 11/15/06 1,500 1,560
FHLB, Ser XY07 (A)
2.250%, 10/29/07 500 500
FHLMC
6.250%, 03/05/12 1,500 1,582
5.200%, 03/05/19 1,000 981
FNMA
8.200%, 03/10/16 1,000 1,305
5.000%, 01/15/07 500 523
4.750%, 11/26/10 1,000 1,003
TVA, Ser B
6.235%, 07/15/45 1,175 1,286
-------
8,740
-------
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $8,262) 8,740
================================================================================
Constellation Funds 2004 Annual Report | 79
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Taxable Bond Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (14.6%)
- --------------------------------------------------------------------------------
U.S. Treasury Bonds
8.750%, 05/15/17 $ 815 $1,150
8.125%, 08/15/19 1,500 2,054
7.875%, 02/15/21 615 832
7.625%, 11/15/22 913 1,219
7.500%, 11/15/16 830 1,067
------
6,322
------
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $5,472) 6,322
================================================================================
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (5.1%)
- --------------------------------------------------------------------------------
American Express Credit Account, Ser 2000-1, Cl A
7.200%, 09/17/07 904 921
Standard Credit Card Master Trust, Ser 1994-2, Cl A
7.250%, 04/07/06 1,199 1,279
------
2,200
------
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $2,130) 2,200
================================================================================
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (1.9%)
- --------------------------------------------------------------------------------
FHLMC CMO/REMIC
Ser 2430, Cl QB
5.500%, 02/15/15 805 822
------
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(COST $796) $ 822
================================================================================
Value
Shares (000)
- -----------------------------------------------------------------------------
CASH EQUIVALENT (1.7%)
- -----------------------------------------------------------------------------
PNC Bank Money Market Fund 716,113 $ 716
- -----------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $716) 716
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS (98.9%)
(COST $40,308) 42,749
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.1)%
- -----------------------------------------------------------------------------
Payable due to Investment Adviser (12)
Payable due to Shareholder Servicing Agent (9)
Payable due to Administrator (5)
Other assets and liabilities, net 516
- -----------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 490
- -----------------------------------------------------------------------------
NET ASSETS (100%) $43,239
=============================================================================
- -----------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited
authorization - no par value) based on 4,013,594
outstanding shares of beneficial interest $41,321
Accumulated net realized loss on investments (523)
Net unrealized appreciation on investments 2,441
- -----------------------------------------------------------------------------
NET ASSETS $43,239
=============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE-CLASS II SHARES $ 10.77
=============================================================================
(A) Delayed Interest (Step Bonds) -- The interest rate disclosed represents the
effective yield at time of purchase.
Cl -- Class
CMO -- Collateralized Mortgage Obligation
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
MTN -- Medium Term Note
REMIC -- Real Estate Mortgage Investment Conduit
Ser -- Series
TVA -- Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements
80 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Pitcairn Tax-Exempt Bond Fund
September 30, 2004
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (97.7%)
- --------------------------------------------------------------------------------
ALABAMA (0.9%)
- --------------------------------------------------------------------------------
Bessemer RB, AMBAC,
Callable 02/01/10 @ 102
5.600%, 02/01/30 $ 1,000 $ 1,074
-------
- --------------------------------------------------------------------------------
CALIFORNIA (10.1%)
- --------------------------------------------------------------------------------
California State GO, AMBAC,
Callable 04/01/14 @ 100
5.000%, 04/01/31 3,000 3,064
Community College Finance Authority RB, Mission
Community College, MBIA Callable 05/01/07 @ 102
5.500%, 05/01/17 1,000 1,096
Health Facilities Finance Authority
RB, St. Francis Memorial Hospital,
Ser C, ETM
5.875%, 11/01/23 2,000 2,407
San Jose, Liberty Parks and Public Safety Projects GO
Callable 9/1/12 @ 100 5.000%, 09/01/17 1,000 1,082
State Economic Recovery,
Ser A, GO, Callable
04/01/14 @ 100
5.000%, 07/01/17 2,000 2,130
Stockton Housing Facility RB, O'Connor Woods Project,
Ser A, ETM, GNMA Callable
11/08/04 @ 101
5.200%, 09/20/09 675 684
University of California RB, Multi-Purpose Projects,
Ser F, FGIC Callable
09/01/06 @ 101
5.000%, 09/01/12 1,000 1,068
-------
11,531
-------
- --------------------------------------------------------------------------------
COLORADO (0.9%)
- --------------------------------------------------------------------------------
South Suburban Park & Recreation District GO, AMBAC,
Callable
09/15/10 @ 100
5.375%, 09/15/18 1,000 1,087
-------
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
DELAWARE (1.0%)
- --------------------------------------------------------------------------------
Delaware State, Economic Development Authority,
Pollution Control RB, Delmarva Power, AMBAC, Callable
05/01/11 @ 100 4.900%, 05/01/26 $ 1,000 $ 1,089
-------
- --------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (1.2%)
- --------------------------------------------------------------------------------
District of Columbia RB, Howard University Project RB,
MBIA 5.500%, 10/01/16 1,000 1,155
Washington D.C., Convention Center Authority RB,
Dedicated Tax Revenue, Senior Lien, AMBAC,
Callable 10/01/08 @ 101
5.250%, 10/01/09 200 224
-------
1,379
-------
- --------------------------------------------------------------------------------
FLORIDA (1.3%)
- --------------------------------------------------------------------------------
Tampa Water & Sewer Revenue RB, Pre-refunded
10/01/09 @ 101
5.500%, 10/01/29 1,300 1,486
-------
- --------------------------------------------------------------------------------
GEORGIA (2.2%)
- --------------------------------------------------------------------------------
Henry County, Water & Sewer Authority RB, AMBAC
6.150%, 02/01/20 2,000 2,476
-------
- --------------------------------------------------------------------------------
HAWAII (4.2%)
- --------------------------------------------------------------------------------
Honolulu, City & County GO,
Ser B, ETM
8.000%, 10/01/10 1,680 2,142
University of Hawaii RB, Ser A, FGIC, Callable
07/15/12 @ 100
5.500%, 07/15/21 2,385 2,639
-------
4,781
-------
Constellation Funds 2004 Annual Report | 81
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
ILLINOIS (10.2%)
- --------------------------------------------------------------------------------
Chicago GO, FGIC,
Callable 01/01/08 @ 102
5.500%, 01/01/21 $ 1,500 $ 1,627
Chicago, O'Hare International Airport RB, 2nd Lien,
Ser C, MBIA, Callable
11/08/04 @ 102
4.900%, 01/01/07 1,000 1,019
Chicago, Park District GO, Aquarium & Museum Project,
FGIC, Callable 01/01/08 @ 100
5.500%, 01/01/10 1,000 1,090
Health Facilities Authority RB, Hospital Sisters
Services Project, Ser A, MBIA,
Callable 06/01/08 @ 101
5.250%, 06/01/12 1,000 1,090
Metropolitan Pier & Exposition Authority RB, Illinois
Dedicated State Tax Revenue, AMBAC, Callable 06/01/07
@ 101 5.125%, 06/01/13 1,200 1,286
Metropolitan Pier & Exposition Authority RB, Illinois
Dedicated State Tax Revenue,
FGIC, ETM
5.500%, 12/15/23 500 578
Metropolitan Pier & Exposition Authority RB, Illinois
Dedicated State Tax Revenue, Ser A, FGIC
5.500%, 12/15/23 500 575
Regional Transportation Authority GO, FSA
5.750%, 06/01/23 1,500 1,769
Southern Illinois University RB, Medical Facilities
System Project, MBIA, Callable
04/01/07 @ 102
5.875%, 04/01/23 1,000 1,100
Will County, Community School District GO, FSA (A)
5.230%, 11/01/12 2,000 1,450
-------
11,584
-------
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
INDIANA (2.1%)
- --------------------------------------------------------------------------------
Indianapolis, Public Improvement Authority RB, Ser A,
Callable 01/01/10 @ 101
6.000%, 01/01/25 $ 1,000 $ 1,114
Transportation Finance Authority RB, Ser A, MBIA
6.800%, 12/01/16 1,000 1,231
-------
2,345
-------
- --------------------------------------------------------------------------------
KENTUCKY (1.1%)
- --------------------------------------------------------------------------------
State Property & Buildings Commission RB, Project
Number 67, Pre-refunded
09/01/10 @ 100
5.625%, 09/01/13 1,050 1,204
-------
- --------------------------------------------------------------------------------
LOUISIANA (3.1%)
- --------------------------------------------------------------------------------
New Orleans GO, FGIC
5.500%, 12/01/17 1,000 1,167
Public Facilities Authority RB, Franciscan
Missionaries Project, Ser A, FSA
5.500%, 07/01/11 2,115 2,387
-------
3,554
-------
- --------------------------------------------------------------------------------
MASSACHUSETTS (3.0%)
- --------------------------------------------------------------------------------
State Housing Finance Agency RB, Ser B, MBIA, Callable
06/01/08 @ 101
5.300%, 12/01/17 1,000 1,035
State Special Obligation RB, Consolidated Loan, Ser A,
Callable 06/01/08 @ 101 5.000%, 06/01/15 70 74
State Special Obligation RB, Consolidated Loan, Ser A,
Pre-refunded 06/01/08 @ 101 5.000%, 06/01/15 930 1,007
State Water Resources Authority RB, Ser D, MBIA, GOA
6.000%, 08/01/14 1,060 1,268
-------
3,384
-------
82 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
MICHIGAN (2.0%)
- --------------------------------------------------------------------------------
State Building Authority RB, Facilities Program, Ser
II, MBIA, Callable 10/15/13 @ 100
5.000%, 10/15/23 $ 1,000 $ 1,046
State Hospital Finance Authority RB, Genesys Health
System Project, Ser A, Pre-refunded
10/01/05 @ 102
8.100%, 10/01/13 1,175 1,272
-------
2,318
-------
- --------------------------------------------------------------------------------
MISSISSIPPI (0.9%)
- --------------------------------------------------------------------------------
Developing Bank RB, Capital Project & Equipment
Acquisition, Ser A2, AMBAC
5.000%, 07/01/24 1,000 1,073
-------
- --------------------------------------------------------------------------------
NEVADA (4.3%)
- --------------------------------------------------------------------------------
Clark County, Industrial Development Nevada Power RB,
AMBAC, Callable
11/08/04 @ 100
7.200%, 10/01/22 2,000 2,007
Las Vegas, New Convention & Visitors Center RB, AMBAC,
Callable 07/01/09 @ 101
6.000%, 07/01/13 2,500 2,862
-------
4,869
-------
- --------------------------------------------------------------------------------
NEW JERSEY (2.4%)
- --------------------------------------------------------------------------------
Cape May County, Municipal Utilities Authority RB, FSA
5.750%, 01/01/12 2,000 2,323
State GO, Ser D
6.000%, 02/15/11 150 174
State, Transportation System RB, Ser A
5.625%, 06/15/14 250 288
-------
2,785
-------
- --------------------------------------------------------------------------------
NEW MEXICO (1.6%)
- --------------------------------------------------------------------------------
Santa Fe County RB, Correctional Facilities Project, FSA
6.000%, 02/01/27 1,500 1,784
-------
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
NEW YORK (8.0%)
- --------------------------------------------------------------------------------
Nassau County, Comb Sewer Districts GO, Ser F, MBIA
5.300%, 07/01/06 $ 250 $ 265
New York City, Municipal Assistance Authority RB, Ser
G 6.000%, 07/01/07 1,800 1,986
New York City, Municipal Water & Sewer Authority RB,
Ser A, Pre-refunded 06/15/05 @ 101 6.000%, 06/15/25 190 198
New York City, Transitional Finance Authority RB, Ser
A, Callable 11/01/11 @ 100 (B) 5.500%, 11/01/26 2,000 2,270
New York City, Transportation Authority RB, Livingston
Plaza Project, ETM, FSA
5.400%, 01/01/18 1,000 1,127
New York State Thruway Authority RB, Highway and
Bridge Project, Callable
04/01/12 @ 100
5.500%, 04/01/15 2,000 2,228
New York State, Mortgage Agency RB, Homeowner
Mortgage, Ser 80, Callable
03/01/09 @ 101
5.100%, 10/01/17 1,000 1,028
-------
9,102
-------
Constellation Funds 2004 Annual Report | 83
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
NORTH CAROLINA (5.1%)
- --------------------------------------------------------------------------------
Charlotte, Water & Sewer Authority RB, Callable
06/01/10 @101
5.125%, 06/01/13 $ 1,000 $ 1,098
North Carolina State, Eastern Municipal Power
Authority RB, Ser B, AMBAC, Callable
01/01/06 @ 102
5.125%, 01/01/12 2,000 2,122
North Carolina State, Eastern Municipal Power
Authority RB, Ser B, MBIA,
Callable 01/01/07 @ 102 5.800%, 01/01/16 1,000 1,094
University of North Carolina Wilmington, RB, AMBAC,
Callable 01/01/13 @ 100 5.250%, 01/01/21 1,380 1,499
-------
5,813
-------
- --------------------------------------------------------------------------------
OHIO (1.1%)
- --------------------------------------------------------------------------------
State, Building Authority RB, Sports Building Project,
Ser A, Callable 04/01/11 @ 100 5.500%, 04/01/12 1,095 1,235
-------
- --------------------------------------------------------------------------------
OKLAHOMA (4.5%)
- --------------------------------------------------------------------------------
Oklahoma City, Water Utilities Authority RB, Ser A,
Callable 07/01/09 @ 100
5.000%, 07/01/24 3,000 3,063
Oklahoma State, Health Systems Industries Authority
RB, Integris Baptist Project, Ser D, AMBAC, Callable
08/15/06 @ 102 5.000%, 08/15/14 2,000 2,101
-------
5,164
-------
- --------------------------------------------------------------------------------
PENNSYLVANIA (12.5%)
- --------------------------------------------------------------------------------
Allegheny County, Pittsburgh International Airport RB,
Ser B, MBIA, Callable 01/01/08 @ 101 5.000%, 01/01/17 2,000 2,088
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Derry Township, Industrial & Commercial Development
RB, Arena Project, Ser A (LOC: PNC Bank)
5.375%, 11/01/30 $ 1,700 $ 1,749
Pennsbury Penn School District GO, FSA, Callable
08/01/14 @ 100
5.000%, 08/01/25 2,000 2,075
Pennsylvania State, Higher Educational Facilities
Authority RB, Saint Joseph's University, Callable 05/
01/06 @ 100 (LOC: Allied Irish Bank PLC)
5.000%, 05/01/11 1,500 1,556
Pennsylvania State, Third Series GO
5.000%, 09/01/13 1,000 1,116
Philadelphia, Authority for Industrial Development
Lease Revenue RB, Ser B, FSA, Callable 10/01/11 @ 101
5.500%, 10/01/12 1,500 1,717
Philadelphia, Hospital & Higher Education Authority
RB, Presbyterian Medical Center Project, ETM
6.500%, 12/01/11 1,300 1,491
Philadelphia, Water & Waste Water RB, FGIC
10.000%, 06/15/05 700 740
Philadelphia, Water & Waste Water RB, MBIA
6.250%, 08/01/09 525 606
State Public School Building Authority RB, Harrisburg
Area Community College Project, AMBAC, Callable
04/01/14 @ 100
5.250%, 04/01/24 1,000 1,070
-------
14,208
-------
84 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
RHODE ISLAND (1.1%)
- --------------------------------------------------------------------------------
Rhode Island State, Depositors Economic Protection
Authority RB, Special Obligation, Ser A, ETM
6.375%, 08/01/22 $ 1,000 $ 1,266
-------
- --------------------------------------------------------------------------------
SOUTH CAROLINA (1.0%)
- --------------------------------------------------------------------------------
Piedmont, Municipal Power Agency Authority RB, South
Carolina Electric Project, MBIA, ETM
6.250%, 01/01/09 1,000 1,149
-------
- --------------------------------------------------------------------------------
TEXAS (8.0%)
- --------------------------------------------------------------------------------
Duncanville Independent School District, GO, PSF-GTD,
Callable 02/15/13 @ 100
5.650%, 02/15/28 1,350 1,452
Fort Worth Water & Sewer RB, Callable 02/15/12 @ 100
5.625%, 02/15/15 1,000 1,129
Fort Worth Water & Sewer RB, Callable 08/15/10 @ 100
5.750%, 02/15/14 2,000 2,265
Harris County, Healthcare Facilities Development
Authority RB, Christus Health Project, Ser A,
MBIA, Callable
07/01/09 @ 101
5.375%, 07/01/24 1,850 1,935
Houston, Water & Sewer Systems Authority RB,
Junior Lien,
Ser C, FGIC, Pre-refunded
12/01/07 @ 101
5.375%, 12/01/27 1,140 1,263
San Antonio GO
5.000%, 08/01/07 985 1,061
San Antonio GO, ETM
5.000%, 08/01/07 15 16
-------
9,121
-------
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
WASHINGTON (2.9%)
- --------------------------------------------------------------------------------
Central Puget Sound, Regional Transportation
Authority RB, Sales Tax & Motor Project, FGIC
5.250%, 02/01/21 $ 1,000 $ 1,123
Clark County, School District
No. 177 GO, AMBAC
5.250%, 12/01/14 1,000 1,139
Washington State GO,
Ser A, FSA
5.000%, 07/01/20 1,000 1,065
-------
3,327
-------
- --------------------------------------------------------------------------------
WISCONSIN (1.0%)
- --------------------------------------------------------------------------------
Milwaukee County GO, Ser A, MBIA, Pre-refunded
10/01/07 @ 100
5.250%, 10/01/08 1,000 1,092
-------
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $103,059) 111,280
-------
================================================================================
CASH EQUIVALENT (1.1%)
- --------------------------------------------------------------------------------
ABN Amro Tax Exempt Money Market Fund 1,244,473 1,244
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $1,244) 1,244
================================================================================
TOTAL INVESTMENTS (98.8%)
(COST $104,303) 112,524
================================================================================
OTHER ASSETS AND LIABILITIES, NET (1.2%)
- --------------------------------------------------------------------------------
Payable due to Shareholder Servicing Agent (23)
Payable due to Investment Adviser (20)
Payable due to Administrator (14)
Other assets and liabilities, net 1,413
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 1,356
================================================================================
NET ASSETS (100%) $113,880
================================================================================
Constellation Funds 2004 Annual Report | 85
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
Value
(000)
- --------------------------------------------------------------------------------
NET ASSETS CONSISTS OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited authorization
- no par value) based on 10,560,695 outstanding shares of
beneficial interest $104,814
Undistributed net investment income 129
Accumulated net realized gain on investments 716
Net unrealized appreciation on investments 8,221
- --------------------------------------------------------------------------------
NET ASSETS $113,880
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE-CLASS II SHARES $ 10.78
================================================================================
(A) Zero coupon security. The rate reported on the Statement of Net Assets is
the effective yield at time of purchase.
(B) Delayed Interest (Step Bonds) -- The interest rate disclosed represents the
effective yield at time of purchase.
AMBAC -- American Municipal Bond Assurance Corporation
ETM -- Escrowed to Maturity
FGIC -- Financial Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
GOA -- General Obligation of Authority
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
PSF-GTD -- Permanent School Fund - Guaranteed
RB -- Revenue Bond
Ser -- Series
The accompanying notes are an integral part of the financial statements
86 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Sands Capital Select Growth Fund
September 30, 2004
Value
Shares (000)
- -----------------------------------------------------------------------------
COMMON STOCK (95.0%)
- -----------------------------------------------------------------------------
CONSUMER DISCRETIONARY (32.4%)
- -----------------------------------------------------------------------------
Bed Bath & Beyond* 77,500 $ 2,876
eBay* 106,700 9,810
Harley-Davidson 73,800 4,387
Kohl's* 54,400 2,621
Lowe's 90,400 4,913
Starbucks* 133,800 6,083
Tiffany 44,000 1,353
Weight Watchers International* 31,000 1,203
-------
33,246
-------
- -----------------------------------------------------------------------------
CONSUMER STAPLES (4.4%)
- -----------------------------------------------------------------------------
Wal-Mart Stores 39,700 2,112
Walgreen 66,400 2,379
-------
4,491
-------
- -----------------------------------------------------------------------------
FINANCIALS (8.1%)
- -----------------------------------------------------------------------------
Capital One Financial 76,500 5,653
Moody's 35,900 2,630
-------
8,283
-------
- -----------------------------------------------------------------------------
HEALTH CARE (26.5%)
- -----------------------------------------------------------------------------
Allergan 40,300 2,924
Amgen* 54,600 3,095
Genentech* 115,800 6,070
Genzyme* 59,000 3,210
Medtronic 80,000 4,152
Patterson* 22,000 1,684
Stryker 53,700 2,582
Teva Pharmaceutical Industries ADR 135,700 3,521
-------
27,238
-------
- -----------------------------------------------------------------------------
INDUSTRIALS (5.3%)
- -----------------------------------------------------------------------------
Apollo Group, Cl A* 74,300 5,451
-------
- -----------------------------------------------------------------------------
INFORMATION TECHNOLOGY (18.3%)
- -----------------------------------------------------------------------------
Cisco Systems* 216,000 3,910
Dell* 151,100 5,379
Microsoft 117,500 3,249
Qualcomm 124,100 4,845
Red Hat* 113,900 1,394
-------
18,777
-------
- -----------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $88,177) 97,486
=============================================================================
Value
Shares (000)
- -----------------------------------------------------------------------------
CASH EQUIVALENT (2.4%)
-----------------------------------------------------------------------------
PNC Bank Money Market Fund 2,463,665 $ 2,464
- -----------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $2,464) 2,464
=============================================================================
TOTAL INVESTMENTS (97.4%)
(COST $90,641) 99,950
=============================================================================
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (2.6%)
- -----------------------------------------------------------------------------
Payable due to Investment Adviser (71)
Payable due to Shareholder Servicing Agent (25)
Payable due to Administrator (12)
Other assets and liabilities, net 2,776
- -----------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 2,668
- -----------------------------------------------------------------------------
NET ASSETS (100%) $102,618
=============================================================================
- -----------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------
Portfolio capital of Class I Shares (unlimited
authorization - no par value) based on 4,791,799
outstanding shares of beneficial interest $ 32,429
Portfolio capital of Class II Shares (unlimited
authorization - no par value) based on 10,293,254
outstanding shares of beneficial interest 87,817
Accumulated net realized loss on investments (26,937)
Net unrealized appreciation on investments 9,309
- -----------------------------------------------------------------------------
NET ASSETS $102,618
=============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS I SHARES
($32,590,749 / 4,791,799 SHARES) $ 6.80
=============================================================================
- -----------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS II SHARES
($70,027,656 / 10,293,254 SHARES) $ 6.80
=============================================================================
* Non-income producing security.
ADR -- American Depositary Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements
Constellation Funds 2004 Annual Report | 87
FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENTS
Constellation TIP Small Cap Value Opportunities Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (96.0%)
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (7.1%)
- --------------------------------------------------------------------------------
4Kids Entertainment (A)* 5,680 $ 115
Blockbuster, Cl A (A) 8,420 64
Childrens Place* 3,340 80
Dick's Sporting Goods (A)* 4,170 149
Genesco (A)* 6,390 151
Goodyear Tire & Rubber (A)* 16,060 172
Rush Enterprises, Cl B (A)* 6,160 72
Warnaco Group* 5,990 133
Zale* 3,500 98
------
1,034
------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (2.2%)
- --------------------------------------------------------------------------------
BJ's Wholesale Club* 3,980 109
Ralcorp Holdings* 5,950 215
------
324
------
- --------------------------------------------------------------------------------
ENERGY (6.1%)
- --------------------------------------------------------------------------------
Cal Dive International* 3,550 126
Consol Energy 5,470 191
Key Energy Services* 18,750 207
Lone Star Technologies* 5,860 222
Western Gas Resources 5,010 143
------
889
------
- --------------------------------------------------------------------------------
FINANCIALS (27.7%)
- --------------------------------------------------------------------------------
Accredited Home Lenders Holding* 3,800 146
Advanta, Cl B (A) 7,330 177
Alexandria Real Estate Equities (A) 2,630 173
American Financial Group 6,050 181
BankAtlantic Bancorp, Cl A 7,830 144
Capital Automotive REIT (A) 8,460 265
Commercial Capital Bancorp* 8,600 195
First Republic Bank (A) 3,130 144
Heritage Commerce* 9,400 155
Maguire Properties 2,870 70
Mi Developments, Cl A 5,820 147
New Century Financial 1,880 113
Pan Pacific Retail Properties 3,390 183
People's Bank (A) 5,260 188
Provident Bancorp (A) 15,140 178
Reckson Associates Realty 7,010 202
SL Green Realty 3,360 174
South Financial Group 6,000 169
Southwest Bancorp of Texas 5,270 106
Sterling Financial* 6,736 237
Umpqua Holdings (A) 7,360 166
Value
Shares (000)
- --------------------------------------------------------------------------------
Ventas 7,160 $ 186
Virginia Commerce Bancorp (A)* 5,290 143
Webster Financial 3,870 191
------
4,033
------
- --------------------------------------------------------------------------------
HEALTH CARE (6.0%)
- --------------------------------------------------------------------------------
Analogic 4,270 178
Digene* 3,990 104
Endo Pharmaceuticals Holdings* 7,830 144
Genesis HealthCare (A)* 4,810 146
Magellan Health Services* 4,200 153
PolyMedica 4,620 142
------
867
------
- --------------------------------------------------------------------------------
INDUSTRIALS (25.3%)
- --------------------------------------------------------------------------------
Albany International, Cl A 4,030 120
Amerco* 6,400 243
Beazer Homes USA (A) 1,620 173
Brink's 6,405 193
Bucyrus International, Cl A* 4,360 146
General Maritime (A)* 4,770 166
GrafTech International* 10,240 143
Laidlaw International* 16,570 273
McDermott International* 13,960 165
Measurement Specialties* 8,720 217
OMI 21,310 341
Roper Industries 3,640 209
School Specialty* 3,050 120
SCS Transportation* 7,770 147
Terex* 5,730 249
Timken 6,140 151
USG (A)* 7,980 145
Washington Group International* 6,030 209
Waste Connections* 2,390 76
Watts Water Technologies, Cl A (A) 7,000 188
------
3,674
------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (5.5%)
- --------------------------------------------------------------------------------
Exar* 8,060 114
Imation 5,130 183
Intergraph (A)* 5,415 147
Lipman Electronic Engineering 7,050 166
NAM TAI Electronics (A) 9,050 193
------
803
------
88 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Schedule of Investments
Constellation TIP Small Cap Value Opportunities Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
MATERIALS (8.2%)
- --------------------------------------------------------------------------------
Agrium 9,620 $ 171
Apex Silver Mines (A)* 8,850 192
Arch Coal 5,000 178
Carpenter Technology 2,110 101
FMC* 4,200 204
Georgia Gulf 1,410 63
Metals USA (A)* 8,800 156
RPM International 6,880 121
-------
1,186
-------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (5.6%)
- --------------------------------------------------------------------------------
Alamosa Holdings (A)* 26,350 201
SBA Communications, Cl A* 27,410 192
Spectrasite* 4,420 205
US Unwired (A)* 77,820 209
-------
807
-------
- --------------------------------------------------------------------------------
UTILITIES (2.3%)
- --------------------------------------------------------------------------------
AGL Resources 4,780 147
Southern Union* 8,883 182
-------
329
-------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK (COST $12,098) 13,946
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR
LOANED SECURITIES (23.5%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust --
Quality Portfolio 3,421,700 3,422
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD
AS COLLATERAL FOR LOANED SECURITIES
(COST $3,422) 3,422
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (1.0%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund,
Institutional Shares 150,095 150
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT (COST $150) 150
================================================================================
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (120.5%) (COST $15,670) $17,518
================================================================================
Percentages are based on net assets of $14,533,421.
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $3,309,691.
Cl -- Class
REIT -- Real Estate Investment Trusts
The accompanying notes are an integral part of the financial statements
Constellation Funds 2004 Annual Report | 89
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation TIP Financial Services Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (99.2%)
- --------------------------------------------------------------------------------
FINANCIALS (88.8%)
- --------------------------------------------------------------------------------
Affiliated Managers Group (A)* 10,530 $ 564
Allstate 9,700 466
American Express 13,200 679
American International Group 10,534 716
Aspen Insurance Holdings (A)* 15,350 353
CapitalSource (A)* 14,370 321
Charles Schwab 34,020 313
CIT Group 13,220 494
Citigroup 16,940 747
City National 4,770 310
CoBiz (A) 11,860 196
East-West Bancorp 9,160 308
Fidelity National Financial 8,600 328
Genworth Financial, Cl A* 13,500 315
Golden West Financial 4,840 537
Goldman Sachs Group 7,430 693
Investors Financial Services (A) 7,470 337
Jackson Hewitt Tax Service* 13,790 279
Lehman Brothers Holdings 6,050 482
MBNA 18,130 457
Merrill Lynch 9,290 462
MGIC Investment 2,980 198
Morgan Stanley 13,530 667
Northern Trust 14,570 594
Silicon Valley Bancshares (A)* 14,720 547
Sovereign Bancorp 23,410 511
T. Rowe Price Group 4,620 235
Texas Regional Bancshares, Cl A 5,430 169
UCBH Holdings 10,610 415
Wells Fargo 9,325 556
Zions Bancorporation 5,130 313
-------
13,562
-------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (10.4%)
- --------------------------------------------------------------------------------
Checkfree* 11,820 328
First Data 8,890 387
Global Payments (A) 9,850 527
Paychex 11,480 346
-------
1,588
-------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $13,202) 15,150
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR LOANED
SECURITIES (14.4%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust --
Quality Portfolio 2,190,300 $ 2,190
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD
AS COLLATERAL FOR LOANED SECURITIES
(COST $2,190) 2,190
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (3.1%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund,
Institutional Shares 479,316 479
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $479) 479
================================================================================
TOTAL INVESTMENTS (116.7%)
(COST $15,871) 17,819
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-16.7%)
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (2,190)
Payable due to Investment Adviser (11)
Payable due to Administrator (2)
Other assets and liabilities, net (347)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (2,550)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $15,269
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares (unlimited
authorization - no par value) based
on 1,100,352 outstanding shares of
beneficial interest $12,332
Accumulated net realized gain on investments 989
Net unrealized appreciation on investments 1,948
- --------------------------------------------------------------------------------
NET ASSETS $15,269
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE-CLASS I SHARES $ 13.88
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $2,116,049.
Cl -- Class
The accompanying notes are an integral part of the financial statements
90 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation TIP Healthcare & Biotechnology Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (98.1%)
- --------------------------------------------------------------------------------
HEALTH CARE (98.1%)
- --------------------------------------------------------------------------------
Aetna 12,350 $1,234
Amedisys* 12,000 359
Amgen* 15,720 891
Anika Therapeutics* 17,930 247
Anthem* 17,650 1,540
Biogen Idec* 14,270 873
Biosite (A)* 9,220 451
Boston Scientific* 38,700 1,538
C.R. Bard 14,780 837
Caremark Rx* 40,950 1,313
Charles River Laboratories International* 24,980 1,144
Community Health Systems* 15,440 412
Cooper 15,300 1,049
Dade Behring Holdings* 7,110 396
Digene (A)* 20,170 524
Elan ADR* 41,060 961
Endo Pharmaceuticals Holdings (A)* 41,910 770
Fisher Scientific International* 17,890 1,044
Genesis HealthCare (A)* 14,570 443
Gilead Sciences* 30,240 1,130
Impax Laboratories* 33,370 513
Inamed* 16,850 803
IVAX* 33,637 644
Kindred Healthcare (A)* 16,360 399
Magellan Health Services* 15,780 577
Manor Care 9,590 287
Martek Biosciences* 5,300 258
MGI Pharma (A)* 31,080 830
NeighborCare (A)* 14,900 378
Nektar Therapeutics (A)* 18,260 264
Neurocrine Biosciences (A)* 6,430 303
OSI Pharmaceuticals* 9,970 613
PacifiCare Health Systems* 16,430 603
Patterson (A)* 6,080 466
Pfizer 55,040 1,684
Pharmion (A)* 17,740 917
Salix Pharmaceuticals (A)* 9,895 213
Select Medical 56,830 763
Sepracor (A)* 9,970 486
Sierra Health Services* 5,450 261
Teva Pharmaceutical Industries ADR 24,480 635
Value
Shares (000)
- -----------------------------------------------------------------------------
UnitedHealth Group 16,979 $ 1,252
Varian* 10,220 387
Waters* 16,590 732
WellCare Health Plans (A)* 30,000 569
Wyeth 31,710 1,186
Xenogen* 23,740 146
Zimmer Holdings* 17,140 1,355
-------
34,680
-------
- -----------------------------------------------------------------------------
TOTAL COMMON STOCK (COST $33,496) 34,680
-------
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR
LOANED SECURITIES (12.0%)
- -----------------------------------------------------------------------------
Boston Global Investment Trust -- Quality Portfolio 4,252,500 4,253
-------
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD AS COLLATERAL FOR
LOANED SECURITIES (COST $4,253) 4,253
-------
=============================================================================
CASH EQUIVALENTS (6.7%)
- -----------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 1,752,720 1,753
BlackRock TempFund, Institutional Shares 633,533 633
- -----------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS (COST $2,386) 2,386
-------
=============================================================================
TOTAL INVESTMENTS (116.8%) (COST $40,135) 41,319
=============================================================================
OTHER ASSETS AND LIABILITIES, NET (-16.8)%
- -----------------------------------------------------------------------------
Obligation to return securities lending collateral (4,253)
Payable for investment securities purchased (1,790)
Payable due to Investment Adviser (21)
Payable due to Shareholder Servicing Agent (6)
Payable due to Administrator (4)
Other assets and liabilities, net 126
- -----------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (5,948)
- -----------------------------------------------------------------------------
NET ASSETS (100%) $35,371
=============================================================================
Constellation Funds 2004 Annual Report | 91
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation TIP Healthcare & Biotechnology Fund
Value
(000)
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited authorization
- no par value) based on 2,565,402 outstanding shares of
beneficial interest $33,148
Accumulated net realized gain on investments 1,039
Net unrealized appreciation on investments 1,184
- --------------------------------------------------------------------------------
NET ASSETS $35,371
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-
CLASS II SHARES $ 13.79
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $4,141,963.
ADR -- American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
92 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation TIP Tax Managed U.S. Equity Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK--100.3%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--10.3%
- --------------------------------------------------------------------------------
Autoliv 700 $ 28
Best Buy 800 43
Coach* 800 34
Comcast, Cl A* 1,400 40
eBay* 780 72
Marriott International, Cl A 700 36
News Corp ADR 900 30
Nike, Cl B 500 40
Starbucks* 990 45
Starwood Hotels & Resorts Worldwide 500 23
Target 1,900 86
Time Warner* 2,870 46
------
523
------
- --------------------------------------------------------------------------------
CONSUMER STAPLES (9.6%)
- --------------------------------------------------------------------------------
Archer-Daniels-Midland 2,630 45
Avon Products 800 35
Clorox 1,110 59
PepsiCo 1,810 88
Procter & Gamble 2,280 123
Wal-Mart Stores 770 41
Walgreen 1,600 57
Whole Foods Market (A) 440 38
------
486
------
- --------------------------------------------------------------------------------
ENERGY (8.0%)
- --------------------------------------------------------------------------------
Apache 1,424 71
ConocoPhillips 400 33
Kinder Morgan 440 28
Murphy Oil 280 24
Pioneer Natural Resources (A) 1,500 52
Smith International* 1,260 77
Western Gas Resources 1,520 43
XTO Energy 2,375 77
------
405
------
- --------------------------------------------------------------------------------
FINANCIALS (17.9%)
- --------------------------------------------------------------------------------
Allstate 1,550 74
American Express 2,150 111
American International Group 2,100 143
Charles Schwab 4,000 37
CIT Group 1,150 43
Citigroup 1,360 60
Goldman Sachs Group 1,190 111
MGIC Investment 440 29
Morgan Stanley 1,960 97
Value
Shares (000)
- --------------------------------------------------------------------------------
T. Rowe Price Group 2,170 $ 110
Wells Fargo 1,580 94
------
909
------
- --------------------------------------------------------------------------------
HEALTH CARE (15.0%)
- --------------------------------------------------------------------------------
Amgen* 1,570 89
Anthem* 700 61
Biogen Idec* 1,060 65
Boston Scientific* 1,200 48
Caremark Rx* 2,400 77
Fisher Scientific International* 480 28
Forest Laboratories* 800 36
Genentech* 940 49
Gilead Sciences* 1,400 52
Medtronic 800 42
Pfizer 4,190 128
St. Jude Medical* 690 52
Zimmer Holdings* 420 33
------
760
------
- --------------------------------------------------------------------------------
INDUSTRIALS (10.3%)
- --------------------------------------------------------------------------------
3M 380 30
Caterpillar 650 52
Danaher 800 41
General Electric 6,000 202
Monster Worldwide* 1,200 30
Southwest Airlines 2,350 32
Tyco International 3,060 94
United Parcel Service, Cl B 590 45
------
526
------
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (21.2%)
- --------------------------------------------------------------------------------
Alliance Data Systems* 1,400 57
Apple Computer* 800 31
Applied Materials* 3,420 56
CDW 610 35
Cisco Systems* 5,770 104
Dell* 2,470 88
EMC* 2,800 32
First Data 2,440 106
Fiserv* 750 26
Google, Cl A (A)* 200 26
Intel 1,920 39
Juniper Networks* 2,600 61
Microsoft 2,750 76
Constellation Funds 2004 Annual Report | 93
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation TIP Tax Managed U.S. Equity Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
Polycom* 1,750 $ 35
Research In Motion* 350 27
Sanmina-SCI* 4,200 30
SAP ADR* 1,700 66
Silicon Laboratories* 400 13
Sun Microsystems* 8,800 36
Symantec* 840 46
Texas Instruments 700 15
VeriSign* 1,300 26
Yahoo!* 1,360 46
------
1,077
------
- --------------------------------------------------------------------------------
MATERIALS (3.9%)
- --------------------------------------------------------------------------------
Alcoa 2,220 75
Ecolab (A) 950 30
Monsanto 950 35
Peabody Energy 1,000 59
------
199
------
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (2.3%)
- --------------------------------------------------------------------------------
America Movil ADR* 2,200 86
Western Wireless, Cl A* 1,300 33
------
119
------
- --------------------------------------------------------------------------------
UTILITIES (1.8%)
- --------------------------------------------------------------------------------
AES* 4,860 49
Questar 900 41
------
90
------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $4,379) 5,094
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT HELD AS
COLLATERAL FOR LOANED SECURITIES (1.0%)
- --------------------------------------------------------------------------------
Boston Global Investment Trust--
Quality Portfolio 51,200 $ 51
-------
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT HELD
AS COLLATERAL FOR LOANED SECURITIES
(COST $51) 51
================================================================================
- --------------------------------------------------------------------------------
CASH EQUIVALENT (0.2%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 10,121 10
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $10) 10
================================================================================
TOTAL INVESTMENTS (101.5%)
(COST $4,440) 5,155
================================================================================
OTHER ASSETS AND LIABILITIES, NET (-1.5%)
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (51)
Payable due to Investment Adviser (1)
Payable due to Administrator (1)
Payable due to Shareholder Servicing Agent (1)
Other assets and liabilities, net (21)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (75)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 5,080
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value)
based on 574,753 outstanding shares
of beneficial interest $ 6,377
Accumulated net realized loss on investments (2,012)
Net unrealized appreciation on investments 715
- --------------------------------------------------------------------------------
NET ASSETS $ 5,080
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS II SHARES $8.84
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30, 2004
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2004 was $50,139.
ADR -- American Depositary Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
94 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation International Equity Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK (96.3%)
- --------------------------------------------------------------------------------
AUSTRALIA (0.7%)
- --------------------------------------------------------------------------------
Amcor 25,442 $ 133
National Australia Bank 11,486 226
Rio Tinto 13,900 384
Santos 10,000 53
------
796
------
- --------------------------------------------------------------------------------
BELGIUM (0.3%)
- --------------------------------------------------------------------------------
Fortis* 14,700 350
------
- --------------------------------------------------------------------------------
BERMUDA (0.3%)
- --------------------------------------------------------------------------------
Axis Capital Holdings 13,800 359
------
- --------------------------------------------------------------------------------
BRAZIL (1.4%)
- --------------------------------------------------------------------------------
Banco Bradesco ADR* 7,400 390
Banco Itau Holding Financeira ADR* 3,600 200
Petroleo Brasileiro ADR* 18,117 638
Tele Celular Sul Participacoes ADR* 676 10
Telecomunicacoes Brasileiras ADR* 7,300 201
------
1,439
------
- --------------------------------------------------------------------------------
CANADA (1.1%)
- --------------------------------------------------------------------------------
Canadian Pacific Railway 14,800 383
Quebecor World 15,600 349
Sobeys 16,500 414
------
1,146
------
- --------------------------------------------------------------------------------
CHINA (0.5%)
- --------------------------------------------------------------------------------
China Telecom, Cl H 119,000 38
Huadian Power International, Cl H 569,400 186
People's Food Holdings 438,000 302
------
526
------
- --------------------------------------------------------------------------------
CROATIA (0.1%)
- --------------------------------------------------------------------------------
Pliva GDR* 4,000 60
------
- --------------------------------------------------------------------------------
DENMARK (0.2%)
- --------------------------------------------------------------------------------
Danske Bank 6,700 176
------
- --------------------------------------------------------------------------------
Value
Shares (000)
- --------------------------------------------------------------------------------
FINLAND (0.7%)
- --------------------------------------------------------------------------------
M-Real, Cl V* 19,300 $ 112
Nokia* 1,800 25
Nokia ADR* 12,500 171
Sampo, Cl A 17,600 195
UPM-Kymmene* 11,600 221
-------
724
-------
- --------------------------------------------------------------------------------
FRANCE (10.0%)
- --------------------------------------------------------------------------------
Accor 8,106 316
AXA 24,500 496
BNP Paribas 4,350 281
Carrefour* 14,953 704
Club Mediterranee* 11,000 521
Credit Agricole 1,000 27
France Telecom* 55,796 1,392
Lafarge* 8,050 705
Lagardere* 5,396 335
Pernod-Ricard 1,792 238
Pinault-Printemps-Redoute* 5,631 518
Sanofi-Aventis* 17,874 1,317
Schneider Electric 3,204 207
SNECMA* 9,600 196
Technip* 5,700 922
Thomson 19,200 403
Total 6,489 1,324
Valeo 4,600 169
Veolia Environnement 11,443 330
Vivendi Universal* 11,978 307
-------
10,708
-------
Constellation Funds 2004 Annual Report | 95
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation International Equity Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
GERMANY (5.7%)
- --------------------------------------------------------------------------------
Adidas-Salomon 3,165 $ 442
Altana* 11,600 676
Bayerische Hypo-und Vereinsbank* 25,700 494
Deutsche Bank* 3,620 261
Deutsche Boerse* 13,630 690
Deutsche Lufthansa* 19,800 231
Deutsche Post* 16,830 327
Deutsche Postbank* 3,900 152
E.ON* 3,730 276
Fresenius Medical Care* 14,500 1,112
Heidelberger Druckmaschinen* 3,500 104
KarstadtQuelle* 11,700 183
Medion* 3,850 77
Rhoen Klinikum* 4,000 199
Schering* 5,607 355
Siemens* 2,600 191
Volkswagen* 8,048 310
------
6,080
------
- --------------------------------------------------------------------------------
GREECE (0.2%)
- --------------------------------------------------------------------------------
Hellenic Telecommunications
Organization* 13,240 178
------
- --------------------------------------------------------------------------------
GUERNSEY (0.9%)
- --------------------------------------------------------------------------------
Amdocs* 42,600 930
------
- --------------------------------------------------------------------------------
HONG KONG (3.1%)
- --------------------------------------------------------------------------------
Bank of East Asia 34,138 96
Cafe de Coral Holdings 192,000 208
China Mobile Hong Kong 77,592 236
Citic Pacific 8,800 23
Denway Motors 416,000 139
Glorious Sun Enterprises 810,000 265
Hung Hing Printing Group 398,000 306
MTR 9,218 14
PCCW* 462,000 305
Sun Hung Kai Properties 77,000 726
Swire Pacific, Cl A 71,500 497
TPV Technology 172,000 109
Yue Yuen Industrial Holdings 170,000 439
------
3,363
------
Value
Shares (000)
- --------------------------------------------------------------------------------
HUNGARY (0.1%)
- --------------------------------------------------------------------------------
Matav Magyar Tavkozlesi* 19,700 $ 83
Matav Magyar Tavkozlesi ADR* 3,200 65
------
148
------
- --------------------------------------------------------------------------------
INDIA (0.6%)
- --------------------------------------------------------------------------------
Hindalco Industries GDR* 6,700 195
Mahanagar Telephone Nigam ADR* 22,200 157
Reliance Industries GDR* 10,500 245
------
597
------
- --------------------------------------------------------------------------------
INDONESIA (0.1%)
- --------------------------------------------------------------------------------
Gudang Garam* 78,500 112
------
- --------------------------------------------------------------------------------
IRELAND (0.9%)
- --------------------------------------------------------------------------------
Bank of Ireland 35,000 472
Ryanair Holdings ADR* 16,400 479
------
951
------
- --------------------------------------------------------------------------------
ITALY (4.1%)
- --------------------------------------------------------------------------------
Banca Intesa* 170,892 650
Banche Popolari Unite 5,950 99
Benetton Group* 10,600 128
ENI 63,379 1,422
Finmeccanica* 422,500 298
Mediaset 58,693 667
Sanpaolo IMI 7,400 84
Telecom Italia* 286,530 657
UniCredito Italiano* 80,700 408
------
4,413
------
- --------------------------------------------------------------------------------
JAPAN (21.3%)
- --------------------------------------------------------------------------------
77 Bank 37,900 213
Aiful 2,700 265
Alps Electric 15,700 187
Bridgestone 31,000 576
Canon 12,000 565
Coca-Cola West Japan 14,600 356
Credit Saison 11,100 342
Daiwa House Industry 31,000 304
Daiwa Securities Group 47,000 298
Denso 24,000 568
Dentsu 57 153
96 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation International Equity Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
Electric Power Development (A)* 1,000 $ 27
Fuji Heavy Industries 108,000 547
Fuji Machine Manufacturing 3,400 32
Fuji Photo Film 18,600 612
Fujirebio 51,000 700
Funai Electric 1,150 155
Honda Motor 8,727 424
Kao 10,500 232
KDDI 29 141
Kuraray 20,800 156
Lawson 6,000 208
Mabuchi Motor 3,900 280
Matsumotokiyoshi 7,700 195
Matsushita Electric Industrial 36,000 481
Meitec 10,100 364
Millea Holdings 82 1,059
Minebea 55,000 225
Misawa Homes Holdings* 9,000 27
Mitsubishi Estate 93,000 972
Mitsubishi Tokyo Financial Group 51 426
Murata Manufacturing 4,000 193
Nippon Express 68,000 330
Nippon Shinpan* 135,000 399
Nippon Telegraph & Telephone 36 144
Nipponkoa Insurance 174,000 976
Nissan Motor 36,600 399
Nomura Holdings 20,000 257
Olympus 5,300 102
ORIX 4,648 478
Ricoh 17,000 321
Rinnai 8,900 272
Rohm 2,500 252
Secom 14,000 487
Sekisui House 20,000 191
Seven-Eleven Japan 11,000 315
SFCG 1,250 246
Shin-Etsu Chemical 9,178 330
Shiseido 14,000 172
Skylark 12,300 204
Sohgo Security Services 8,500 112
Sumitomo Bakelite 27,200 164
Sumitomo Chemical 50,500 240
Sumitomo Mitsui Financial Group 20 115
T&D Holdings* 10,350 454
Taisho Pharmaceutical 9,000 167
Value
Shares (000)
- --------------------------------------------------------------------------------
Takeda Pharmaceutical 25,200 $ 1,145
TDK 15,300 1,021
Tokyo Electron 6,300 308
Toyota Motor 4,800 184
Yamada Denki 19,200 663
Yamaguchi Bank 42,000 419
Yamaha Motor 17,400 264
Yamanouchi Pharmaceutical 11,200 363
-------
22,777
-------
- --------------------------------------------------------------------------------
MALAYSIA (0.2%)
- --------------------------------------------------------------------------------
Malayan Banking 28,300 82
Sime Darby 116,000 175
-------
257
-------
- --------------------------------------------------------------------------------
MEXICO (2.0%)
- --------------------------------------------------------------------------------
Cemex ADR* 22,211 625
Cifra* 44,746 152
Coca-Cola Femsa ADR* 25,100 489
Grupo Televisa ADR* 3,662 193
Kimberly-Clark de Mexico, Cl A* 38,900 114
Telefonos de Mexico ADR* 18,800 607
-------
2,180
-------
- --------------------------------------------------------------------------------
NETHERLANDS (5.4%)
- --------------------------------------------------------------------------------
ABN AMRO Holding* 7,994 182
Aegon* 24,469 264
Akzo Nobel* 30,460 1,077
DSM* 12,350 645
Fortis Bank Nederland* 3,125 --
Heineken* 30,565 921
Heineken Holding, Cl A* 2,125 57
ING Groep* 16,082 406
Koninklijke Ahold* 66,200 423
Koninklijke Philips Electronics* 25,280 580
Koninklijke Philips Electronics, NY Shares* 6,800 156
Royal Dutch Petroleum* 5,100 263
VNU* 20,508 528
Wolters Kluwer* 15,163 256
-------
5,758
-------
Constellation Funds 2004 Annual Report | 97
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation International Equity Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
NEW ZEALAND (0.0%)
- --------------------------------------------------------------------------------
Carter Holt Harvey 30,900 $ 47
------
- --------------------------------------------------------------------------------
NORWAY (0.1%)
- --------------------------------------------------------------------------------
Norsk Hydro 1,150 84
------
- --------------------------------------------------------------------------------
PORTUGAL (0.9%)
- --------------------------------------------------------------------------------
Banco Comercial Portugues* 67,121 146
Electricidade de Portugal* 57,225 167
Portugal Telecom SGPS* 62,599 691
------
1,004
------
- --------------------------------------------------------------------------------
SINGAPORE (0.7%)
- --------------------------------------------------------------------------------
DBS Group Holdings 69,400 659
MobileOne 11,200 11
Singapore Technologies
Engineering 68,000 85
------
755
------
- --------------------------------------------------------------------------------
SOUTH AFRICA (0.4%)
- --------------------------------------------------------------------------------
Nampak 89,300 196
Nedcor 24,072 223
------
419
------
- --------------------------------------------------------------------------------
SOUTH KOREA (3.6%)
- --------------------------------------------------------------------------------
Hyundai Motor 6,720 310
Kookmin Bank ADR* 39,797 1,267
Korea Electric Power 13,200 250
KT ADR* 13,300 240
POSCO ADR* 3,400 129
Samsung Electronics 1,566 623
Shinsegae 820 218
SK Telecom ADR* 39,274 764
------
3,801
------
- --------------------------------------------------------------------------------
SPAIN (3.1%)
- --------------------------------------------------------------------------------
Acerinox 11,680 161
Banco Sabadell* 5,700 121
Endesa* 19,600 374
Iberdrola* 24,032 499
Repsol YPF* 56,514 1,243
Telefonica* 62,719 940
------
3,338
------
Value
Shares (000)
- --------------------------------------------------------------------------------
SWEDEN (1.1%)
- --------------------------------------------------------------------------------
Autoliv* 4,811 $ 192
Electrolux, Cl B 13,990 256
Skandia Forsakrings 88,213 349
Volvo, Cl B 10,224 361
------
1,158
------
- --------------------------------------------------------------------------------
SWITZERLAND (5.3%)
- --------------------------------------------------------------------------------
Clariant* 13,650 164
Compagnie Financiere Richemont, Cl A* 12,582 349
Credit Suisse Group* 22,413 718
Forbo Holding* 700 155
Julius Baer Holding, Cl B* 590 162
Lonza Group 12,800 581
Nestle 8,024 1,843
Novartis* 11,100 519
Roche Holding* 4,626 479
Swiss Reinsurance* 4,800 277
UBS* 3,800 268
Zurich Financial Services* 1,410 202
------
5,717
------
- --------------------------------------------------------------------------------
TAIWAN (1.0%)
- --------------------------------------------------------------------------------
Chunghwa Telecom ADR* 26,900 474
Compal Electronics GDR* 51,900 259
Taiwan Semiconductor Manufacturing ADR* 18,245 130
United Microelectronics ADR* 75,047 254
------
1,117
------
- --------------------------------------------------------------------------------
THAILAND (0.2%)
- --------------------------------------------------------------------------------
PTT* 44,900 184
------
- --------------------------------------------------------------------------------
UNITED KINGDOM (19.5%)
- --------------------------------------------------------------------------------
Aegis Group 307,500 539
Anglo American 23,996 576
AstraZeneca 17,608 723
BAA 16,100 161
BAE Systems 65,500 267
Barclays 33,044 317
BOC Group 11,000 176
BP 92,589 885
98 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Statement of Net Assets
Constellation International Equity Fund
Value
Shares (000)
- --------------------------------------------------------------------------------
British Sky Broadcasting 27,245 $ 237
BT Group 79,300 258
Bunzl 35,205 265
Cadbury Schweppes 33,600 259
Capita Group 23,816 142
Centrica 45,300 206
Compass Group 84,817 339
Diageo 119,740 1,497
easyJet* 43,100 99
GKN 88,900 346
GlaxoSmithKline 70,567 1,523
HBOS 52,577 711
Imperial Tobacco Group 28,362 619
International Power* 385,844 1,012
J. Sainsbury 43,548 201
Kingfisher 108,170 604
Lloyds TSB Group 25,300 198
Marks & Spencer Group 16,800 104
Michael Page International 101,400 340
Next 19,395 574
Old Mutual 87,500 181
Pearson 104,027 1,114
Reed Elsevier 38,300 337
Rexam 102,572 787
Rio Tinto 16,100 433
Rolls-Royce Group* 76,815 352
Royal Bank of Scotland Group 33,375 965
SABMiller 41,086 543
Scottish & Southern Energy 14,441 204
Shell Transport & Trading 69,009 507
Shire Pharmaceuticals* 78,200 741
Smith & Nephew 55,225 508
Unilever* 25,800 210
Vodafone Group 49,600 119
WPP Group 73,100 681
--------
20,860
--------
- --------------------------------------------------------------------------------
UNITED STATES (0.5%)
- --------------------------------------------------------------------------------
Royal Caribbean Cruises* 11,200 493
--------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $89,610) 103,005
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
PREFERRED STOCK (0.2%)
- --------------------------------------------------------------------------------
GERMANY (0.2%)
- --------------------------------------------------------------------------------
Rhoen Klinikum* 4,800 $ 237
--------
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(COST $230) 237
- --------------------------------------------------------------------------------
TOTAL INVESTMENT (96.5%)
(COST $89,840) 103,242
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (3.5%)
- --------------------------------------------------------------------------------
Payable due to Investment Adviser (56)
Payable due to Administrator (13)
Payable due to Shareholder Servicing Agent (22)
Other assets and liabilities, net 3,850
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET 3,759
- --------------------------------------------------------------------------------
NET ASSETS (100%) $107,001
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization - no par value)
based on 15,149,388 outstanding shares
of beneficial interest $132,473
Distributions in excess of net investment income (491)
Accumulated net realized loss on investments (38,410)
Net unrealized appreciation on investments 13,402
Net unrealized appreciation on foreign
currency and translation of other
assets and liabilities in foreign
currency investments 27
- --------------------------------------------------------------------------------
NET ASSETS $107,001
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-CLASS II SHARES $ 7.06
================================================================================
* Non-income producing security.
(A) Security fair valued using methods determined in good faith by the
Valuation Committee of the Board of Trustees. The total value of such
securities as of September 30, 2004 was $26,557.
ADR -- American Depositary Receipt
Cl -- Class
GDR -- Global Depositary Receipt
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements
Constellation Funds 2004 Annual Report | 99
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
Constellation Strategic Value and High Income Fund
September 30, 2004
Value
Shares (000)
- --------------------------------------------------------------------------------
EQUITY FUNDS (59.8%)
- --------------------------------------------------------------------------------
Constellation HLAM Large Cap Value
Fund, Class II Shares 14,039 $ 138
Constellation TIP Small Cap Value
Opportunities Fund, Class II Shares 17,512 284
------
422
- --------------------------------------------------------------------------------
TOTAL EQUITY FUNDS
(COST $348) 422
================================================================================
- --------------------------------------------------------------------------------
FIXED INCOME FUND (40.5%)
- --------------------------------------------------------------------------------
Constellation Chartwell High Yield
Fund, Class I Shares 55,936 286
- --------------------------------------------------------------------------------
TOTAL FIXED INCOME FUND
(COST $274) 286
================================================================================
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $622) 708
================================================================================
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.3%)
- --------------------------------------------------------------------------------
Receivable due from Investment Adviser 2
Other assets and liabilities, net (4)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (2)
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 706
================================================================================
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization - no par
value) based on 50,408 outstanding
shares of beneficial interest $ 400
Accumulated net realized gain on investments 220
Net unrealized appreciation on investments 86
- --------------------------------------------------------------------------------
NET ASSETS $ 706
================================================================================
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-
CLASS I SHARES $14.01
================================================================================
The accompanying notes are an integral part of the financial statements
100 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES (000)
Constellation
TIP Small Cap
Value Opportunities
Fund
-------------------
09/30/04
- ---------------------------------------------------------------------------------------------------
Assets:
===================================================================================================
Investment securities at cost $ 15,670
- ---------------------------------------------------------------------------------------------------
Investment securities at value(1) $ 17,518
Receivable for investment securities sold 1,051
Receivable for capital shares sold 15
Receivable for dividend and interest income 10
- ---------------------------------------------------------------------------------------------------
Total assets 18,594
===================================================================================================
Liabilities:
Obligation to return securities lending collateral 3,422
Payable for investment securities purchased 589
Payable for capital shares redeemed 25
Payable due to Investment Adviser 8
Payable due to Shareholder Servicing Agent(2) 3
Payable due to Administrator 2
Accrued expenses 12
- ---------------------------------------------------------------------------------------------------
Total liabilities 4,061
- ---------------------------------------------------------------------------------------------------
Net assets $ 14,533
===================================================================================================
Net assets consist of:
Portfolio capital, Class II Shares $ 10,823
Undistributed net investment income 2
Accumulated net realized gain on investments 1,860
Net unrealized appreciation on investments 1,848
- ---------------------------------------------------------------------------------------------------
Net assets $ 14,533
===================================================================================================
Outstanding shares of beneficial interest:(3)
Class II Shares(4) 896,376
===================================================================================================
Net asset value, offering and redemption price per share, Class II Shares $ 16.21
===================================================================================================
(1) The total value of securities on loan at September 30, 2004 was
$3,309,691.
(2) Attributable to Class II Shares only.
(3) Unlimited authorization - no par value.
(4) Shares have not been rounded.
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2004 Annual Report | 101
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS (000)(1)
Constellation Constellation
Clover Large Constellation Constellation Clover Core
Cap Value Clover Core Clover Small Fixed Income
Fund Value Fund Cap Value Fund Fund
----------------------------------------------------------------
year ended year ended year ended year ended
9/30/04 9/30/04 9/30/04 9/30/04
- ------------------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $117 $ 829 $ 5,244 $ 7
Interest -- 1 17 1,721
Securities lending 1 8 378 4
Foreign taxes withheld (1) (9) -- --
- ------------------------------------------------------------------------------------------------------------------
Total Investment Income 117 829 5,639 1,732
- ------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 44 418 4,223 165
Administrator fees 9 81 715 52
Shareholder servicing fees(3) -- -- -- --
Trustees' fees -- 4 39 3
Transfer agent fees 26 57 664 51
Custodian fees 7 10 76 7
Professional fees 2 18 163 11
Printing fees 1 9 81 5
Registration fees 1 9 78 7
Insurance and other fees 1 3 23 10
- ------------------------------------------------------------------------------------------------------------------
Total expenses 91 609 6,062 311
Less:
Investment advisory fees waived (16) -- -- (20)
Reimbursement from adviser -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net expenses 75 609 6,062 291
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 42 220 (423) 1,441
- ------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from securities sold 422 4,878 54,685 859
Net change in unrealized appreciation
(depreciation) of investment securities 212 4,420 40,856 (1,401)
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 634 9,298 95,541 (542)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $676 $9,518 $95,118 $ 899
==================================================================================================================
- --------------
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) Commencement of operations.
(3) Attributable to Class II Shares only.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
102 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation
Chartwell Ultra Constellation
Short Duration Chartwell Short Constellation Constellation
Fixed Income Duration Fixed Chartwell High HLAM Large Cap Constellation Pitcairn
Fund Income Fund Yield Fund Value Fund Diversified Value Fund
- ---------------------------------------------------------------------------------------------------------------
year ended year ended year ended 4/30/04(2) thru 11/1/03 thru 11/1/02 thru
9/30/04 9/30/04 9/30/04 9/30/04 9/30/04 10/31/03
- ---------------------------------------------------------------------------------------------------------------
$ 67 $ 25 $ 4 $ 8 $ 2,820 $ 2,912
10,520 6,128 835 -- -- 2
8 1 9 -- 5 12
-- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
10,595 6,154 848 8 2,825 2,926
- ---------------------------------------------------------------------------------------------------------------
1,043 522 59 4 951 878
599 300 15 1 126 100
17 7 -- 1 340 314
32 16 1 -- 16 12
451 245 26 11 20 20
52 32 9 3 7 10
119 51 3 -- 55 67
56 26 2 -- 12 9
91 47 2 -- 10 5
24 13 6 -- 16 18
- ---------------------------------------------------------------------------------------------------------------
2,484 1,259 123 20 1,553 1,433
(544) (293) (29) (4) (164) (166)
-- -- -- (10) -- --
- ---------------------------------------------------------------------------------------------------------------
1,940 966 94 6 1,389 1,267
- ---------------------------------------------------------------------------------------------------------------
8,655 5,188 754 2 1,436 1,659
- ---------------------------------------------------------------------------------------------------------------
(90) 489 650 -- 7,037 (4,189)
(1,750) (2,013) (479) (3) 6,166 29,045
- ---------------------------------------------------------------------------------------------------------------
(1,840) (1,524) 171 (3) 13,203 24,856
- ---------------------------------------------------------------------------------------------------------------
$ 6,815 $ 3,664 $ 925 $ (1) $14,639 $26,515
===============================================================================================================
Constellation Funds 2004 Annual Report | 103
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS (000)(1)
Constellation Pitcairn Constellation Pitcairn
Select Value Fund Diversified Growth Fund
-----------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/03 thru 11/1/02 thru
9/30/04 10/31/03 9/30/04 10/31/03
- ---------------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 1,029 $ 908 $ 947 $ 881
Interest -- 1 -- 2
Securities lending 2 8 2 8
Foreign taxes withheld -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Investment Income 1,031 917 949 891
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 386 341 651 587
Administrator fees 67 70 86 71
Shareholder servicing fees(2) 138 122 233 210
Trustees' fees 6 5 11 8
Transfer agent fees 19 19 19 19
Custodian fees 4 6 6 11
Professional fees 22 26 38 44
Printing fees 5 3 8 6
Registration fees 4 2 7 4
Insurance and other fees 6 7 10 12
- ---------------------------------------------------------------------------------------------------------------
Total expenses 657 601 1,069 972
Less:
Investment advisory fees waived (89) (106) (120) (125)
Custody offsets -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net operating expenses 568 495 949 847
Interest expense -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net expenses 568 495 949 847
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 463 422 -- 44
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from securities sold 5,939 (1,877) 644 (11,325)
Net realized gain from securities sold short -- -- -- --
Net change in unrealized appreciation
(depreciation) of investment securities (2,360) 13,361 1,228 26,682
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 3,579 11,484 1,872 15,357
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 4,042 $11,906 $1,872 $ 15,401
===============================================================================================================
- ---------------
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) Attributable to Class II Shares only.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
104 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation Pitcairn Constellation Pitcairn Constellation Pitcairn
Small Cap Fund Family Heritage(R) Fund Taxable Bond Fund
- ------------------------------------------------------------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/03 thru 11/1/02 thru 11/1/03 thru 11/1/02 thru
9/30/04 10/31/03 9/30/04 10/31/03 9/30/04 10/31/03
- ------------------------------------------------------------------------------------------------------------
$ 641 $ 636 $ 858 $ 830 $ -- $ --
1 82 -- 1 2,032 2,133
46 70 6 20 5 10
(1) (3) -- -- -- --
- ------------------------------------------------------------------------------------------------------------
687 785 864 851 2,037 2,143
- ------------------------------------------------------------------------------------------------------------
588 513 630 595 159 157
78 70 71 70 63 70
210 183 175 165 100 98
10 7 8 6 5 4
20 20 19 19 19 19
7 12 5 6 2 4
34 31 29 35 16 20
7 5 6 4 4 2
6 3 5 3 2 2
10 11 9 10 6 5
- ------------------------------------------------------------------------------------------------------------
970 855 957 913 376 381
(63) (52) (97) (101) (74) (97)
(4) -- -- -- (4) --
- ------------------------------------------------------------------------------------------------------------
903 803 860 812 298 284
-- 76 -- -- -- --
- ------------------------------------------------------------------------------------------------------------
903 879 860 812 298 284
- ------------------------------------------------------------------------------------------------------------
(216) (94) 4 39 1,739 1,859
- ------------------------------------------------------------------------------------------------------------
13,756 8,217 (6,033) (4,941) 658 234
-- 2,894 -- -- -- --
(4,005) 14,082 13,076 18,782 (473) 852
- ------------------------------------------------------------------------------------------------------------
9,751 25,193 7,043 13,841 185 1,086
- ------------------------------------------------------------------------------------------------------------
$ 9,535 $25,099 $ 7,047 $13,880 $1,924 $2,945
============================================================================================================
Constellation Funds 2004 Annual Report | 105
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS (000)(1)
Constellation Pitcairn Constellation Sands Capital
Tax-Exempt Bond Fund Select Growth Fund
-----------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/03 thru 11/1/02 thru
9/30/04 10/31/03 9/30/04 10/31/03
- -----------------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ -- $ -- $ 159 $ 120
Interest 4,696 5,343 3 3
Securities lending -- -- 2 6
Foreign taxes withheld -- -- (1) --
- -----------------------------------------------------------------------------------------------------------------
Total Investment Income 4,696 5,343 163 129
- -----------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 307 344 569 308
Administrator fees 95 92 77 70
Shareholder servicing fees(2) 256 286 165 91
Distribution fees(2) -- -- -- --
Trustees' fees 12 11 7 4
Transfer agent fees 19 19 23 19
Custodian fees 7 10 7 6
Professional fees 42 58 29 20
Printing fees 8 7 7 3
Registration fees 8 5 4 1
Interest expense -- -- -- --
Insurance and other fees 14 16 13 4
- -----------------------------------------------------------------------------------------------------------------
Total expenses 768 848 901 526
Less:
Investment advisory fees waived (135) (160) (87) (103)
Reimbursement from adviser -- -- -- --
Custody offset -- -- (13) --
- -----------------------------------------------------------------------------------------------------------------
Net expenses 633 688 801 423
- -----------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4,063 4,655 (638) (294)
- -----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from securities sold 716 432 730 (6,078)
Net realized loss from foreign
currency transactions -- -- -- --
Net change in unrealized appreciation
(depreciation) of investment securities (314) 273 4,953 15,475
Net change in unrealized appreciation
(depreciation) on translation of foreign
currency and other assets and liabilities
denominated in foreign currency -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments 402 705 5,683 9,397
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $4,465 $5,360 $5,045 $ 9,103
=================================================================================================================
- ---------------
* Dividend income, net realized gain from securities sold and net change in
unrealized appreciation of investment securities are attributable to the
underlying investments in affiliated investment companies.
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) Attributable to Class II Shares only.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
106 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation Constellation Constellation Constellation
TIP Small Cap TIP TIP Tax Strategic
Value Constellation Healthcare & Managed U.S. Value and
Opportunities TIP Financial Biotechnology Equity Constellation International High Income
Fund Services Fund Fund Fund Equity Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
year ended year ended year ended year ended 11/1/03 thru 11/1/02 thru year ended
9/30/04 9/30/04 9/30/04 9/30/04 9/30/04 10/31/03 9/30/04
- -----------------------------------------------------------------------------------------------------------------------------------
$ 213 $ 198 $ 118 $ 54 $ 2,338 $ 2,125 $124*
1 1 2 -- 11 43 --
1 1 1 1 43 38 --
(1) -- (1) -- (239) (176) --
- -----------------------------------------------------------------------------------------------------------------------------------
214 200 120 55 2,153 2,030 124
- -----------------------------------------------------------------------------------------------------------------------------------
166 184 251 42 911 787 4
25 24 34 8 89 80 5
17 -- 58 14 240 207 --
27 -- -- -- -- -- --
1 1 2 -- 11 8 --
49 27 60 36 22 19 38
24 5 7 6 151 148 1
4 4 8 1 40 45 --
3 3 5 1 11 6 --
1 3 3 1 16 4 --
-- -- -- -- 14 -- --
1 1 2 1 29 24 --
- -----------------------------------------------------------------------------------------------------------------------------------
318 252 430 110 1,534 1,328 48
(65) (12) (54) (40) (222) (254) (4)
-- -- -- -- -- -- (36)
-- -- -- -- (20) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
253 240 376 70 1,292 1,074 8
- -----------------------------------------------------------------------------------------------------------------------------------
(39) (40) (256) (15) 861 956 116
- -----------------------------------------------------------------------------------------------------------------------------------
2,070 1,782 1,403 709 12,637 (9,048) 524*
-- -- -- -- (62) (116) --
1,494 256 (540) (162) (2,756) 27,564 64*
-- -- -- -- (15) 29 --
- -----------------------------------------------------------------------------------------------------------------------------------
3,564 2,038 863 547 9,804 18,429 588
- -----------------------------------------------------------------------------------------------------------------------------------
$3,525 $1,998 $ 607 $ 532 $10,665 $19,385 $704
===================================================================================================================================
Constellation Funds 2004 Annual Report | 107
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS (000)(1)
Constellation Clover Constellation Clover
Large Cap Value Fund Core Value Fund
---------------------------------------------------
year ended year ended year ended year ended
9/30/04 9/30/03 9/30/04 9/30/03
- -----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 42 $ 39 $ 220 $ 189
Net realized gain (loss) from securities sold 422 (265) 4,878 2,570
Net change in unrealized appreciation (depreciation) of investments 212 1,138 4,420 6,105
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 676 912 9,518 8,864
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares (42) (39) (213) (189)
Class II Shares -- -- -- --
Realized capital gains
Class I Shares -- -- (1,697) --
Class II Shares -- -- -- --
Return of capital
Class I Shares -- -- -- --
Class II Shares -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (42) (39) (1,910) (189)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 2,944 642 23,355 15,143
Proceeds from shares issued in lieu of cash distributions 41 37 1,838 178
Cost of shares redeemed (2,160) (1,015) (19,760) (20,894)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class I Shares transactions 825 (336) 5,433 (5,573)
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued -- -- -- --
Proceeds from shares issued in lieu of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares transactions -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital share transactions 825 (336) 5,433 (5,573)
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,459 537 13,041 3,102
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of year 4,792 4,255 46,673 43,571
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $ 6,251 $ 4,792 $ 59,714 $ 46,673
===================================================================================================================================
Undistributed net investment income (Distributions in excess of net
investment income) $ -- $ -- $ 6 $ --
===================================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued 272 71 1,446 1,199
Issued in lieu of cash distributions 4 4 120 14
Redeemed (200) (116) (1,240) (1,643)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares 76 (41) 326 (430)
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Issued -- -- -- --
Issued in lieu of cash distributions -- -- -- --
Redeemed -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions 76 (41) 326 (430)
===================================================================================================================================
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
108 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation Chartwell
Constellation Clover Constellation Clover Ultra Short Duration
Small Cap Value Fund Core Fixed Income Fund Fixed Income Fund
- ----------------------------------------------------------------------------------------------
year ended year ended year ended year ended year ended year ended
9/30/04 9/30/03 9/30/04 9/30/03 9/30/04 9/30/03
- ----------------------------------------------------------------------------------------------
$ (423) $ 352 $ 1,441 $ 1,820 $ 8,655 $ 4,318
54,685 (43,910) 859 (236) (90) (232)
40,856 126,137 (1,401) (114) (1,750) 2,667
- ----------------------------------------------------------------------------------------------
95,118 82,579 899 1,470 6,815 6,753
- ----------------------------------------------------------------------------------------------
(652) (315) (1,530) (1,934) (8,654) (10,253)
-- -- -- -- (125) (172)
-- -- -- (108) -- (630)
-- -- -- -- -- (12)
-- (109) -- -- -- --
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------
(652) (424) (1,530) (2,042) (8,779) (11,067)
- ----------------------------------------------------------------------------------------------
230,219 144,143 12,793 28,705 169,703 432,951
593 389 1,389 1,908 8,365 10,488
(179,946) (296,317) (24,608) (29,574) (246,769) (446,668)
- ----------------------------------------------------------------------------------------------
50,866 (151,785) (10,426) 1,039 (68,701) (3,229)
- ----------------------------------------------------------------------------------------------
-- -- -- -- 6,182 19,631
-- -- -- -- 101 149
-- -- -- -- (3,320) (22,615)
- ----------------------------------------------------------------------------------------------
-- -- -- -- 2,963 (2,835)
- ----------------------------------------------------------------------------------------------
50,866 (151,785) (10,426) 1,039 (65,738) (6,064)
- ----------------------------------------------------------------------------------------------
145,332 (69,630) (11,057) 467 (67,702) (10,378)
- ----------------------------------------------------------------------------------------------
394,946 464,576 43,391 42,924 468,531 478,909
- ----------------------------------------------------------------------------------------------
$ 540,278 $ 394,946 $ 32,334 $ 43,391 $ 400,829 $ 468,531
==============================================================================================
$ 46 $ -- $ -- $ (2) $ (2) $ (185)
==============================================================================================
10,042 8,838 1,247 2,758 16,728 42,479
26 26 136 183 825 1,031
(7,868) (18,889) (2,407) (2,836) (24,310) (43,959)
- ----------------------------------------------------------------------------------------------
2,200 (10,025) (1,024) 105 (6,757) (449)
- ----------------------------------------------------------------------------------------------
-- -- -- -- 607 1,914
-- -- -- -- 10 15
-- -- -- -- (325) (2,210)
- ----------------------------------------------------------------------------------------------
-- -- -- -- 292 (281)
- ----------------------------------------------------------------------------------------------
2,200 (10,025) (1,024) 105 (6,465) (730)
==============================================================================================
Constellation Funds 2004 Annual Report | 109
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS (000)(1)
Constellation Chartwell
Short Duration Constellation Chartwell
Fixed Income Fund High Yield Fund
---------------------------------------------------
year ended year ended year ended year ended
9/30/04 9/30/03 9/30/04 9/30/03
- -----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income $ 5,188 $ 4,748 $ 754 $ 725
Net realized gain (loss) from securities sold 489 1,172 650 231
Net change in unrealized appreciation (depreciation) of investments (2,013) (128) (479) 889
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 3,664 5,792 925 1,845
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares (5,741) (6,947) (753) (709)
Class II Shares (69) (139) -- --
Realized capital gains
Class I Shares -- (1,892) -- --
Class II Shares -- (60) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (5,810) (9,038) (753) (709)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 30,025 148,936 10,285 4,524
Proceeds from shares issued in lieu of cash distributions 5,666 8,702 171 99
Cost of shares redeemed (114,133) (165,718) (9,865) (5,783)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class I Shares transactions (78,442) (8,080) 591 (1,160)
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 5,502 5,134 -- --
Proceeds from shares issued in lieu of cash distributions 66 194 -- --
Cost of shares redeemed (4,882) (11,350) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares transactions 686 (6,022) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital share transactions (77,756) (14,102) 591 (1,160)
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (79,902) (17,348) 763 (24)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 255,018 272,366 9,408 9,432
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $ 175,116 $ 255,018 $10,171 $ 9,408
===================================================================================================================================
Undistributed net investment income (Distributions in excess of net
investment income) $ (1) $ (22) $ 2 $ 1
===================================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued 2,975 14,645 2,010 960
Issued in lieu of cash distributions 562 857 33 21
Redeemed (11,321) (16,343) (1,930) (1,226)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares (7,784) (841) 113 (245)
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Issued 547 508 -- --
Issued in lieu of cash distributions 6 19 -- --
Redeemed (485) (1,124) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares 68 (597) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions (7,716) (1,438) 113 (245)
===================================================================================================================================
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) Commencement of operations.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
110 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation
HLAM Large Cap
Value Fund Constellation Pitcairn Diversified Value Fund Constellation Pitcairn Select Value Fund
- -----------------------------------------------------------------------------------------------------------------------------------
4/30/04(2)thru 11/1/03 thru 11/1/02 thru 11/1/01 thru 11/1/03 thru 11/1/02 thru 11/1/01 thru
9/30/04 9/30/04 10/31/03 10/31/02 9/30/04 10/31/03 10/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
$ 2 $ 1,436 $ 1,659 $ 1,612 $ 463 $ 422 $ 546
-- 7,037 (4,189) (2,869) 5,939 (1,877) (2,697)
(3) 6,166 29,045 (6,801) (2,360) 13,361 (6,939)
- -----------------------------------------------------------------------------------------------------------------------------------
(1) 14,639 26,515 (8,058) 4,042 11,906 (9,090)
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- --
(2) (1,559) (1,782) (1,613) (492) (509) (516)
-- -- -- -- -- -- --
-- -- -- -- (902) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(2) (1,559) (1,782) (1,613) (1,394) (509) (516)
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
1,517 7,361 6,443 7,317 5,616 6,080 6,016
1 134 168 154 529 90 92
(78) (12,014) (10,094) (15,176) (5,109) (7,889) (9,033)
- -----------------------------------------------------------------------------------------------------------------------------------
1,440 (4,519) (3,483) (7,705) 1,036 (1,719) (2,925)
- -----------------------------------------------------------------------------------------------------------------------------------
1,440 (4,519) (3,483) (7,705) 1,036 (1,719) (2,925)
- -----------------------------------------------------------------------------------------------------------------------------------
1,437 8,561 21,250 (17,376) 3,684 9,678 (12,531)
- -----------------------------------------------------------------------------------------------------------------------------------
-- 143,641 122,391 139,767 58,133 48,455 60,986
- -----------------------------------------------------------------------------------------------------------------------------------
$1,437 $152,202 $143,641 $122,391 $61,817 $58,133 $ 48,455
===================================================================================================================================
$ -- $ -- $ 154 $ 277 $ - $ 29 $ 116
===================================================================================================================================
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
154 679 720 793 519 685 594
-- 12 19 17 50 10 9
(8) (1,117) (1,148) (1,621) (478) (895) (899)
- -----------------------------------------------------------------------------------------------------------------------------------
146 (426) (409) (811) 91 (200) (296)
- -----------------------------------------------------------------------------------------------------------------------------------
146 (426) (409) (811) 91 (200) (296)
===================================================================================================================================
Constellation Funds 2004 Annual Report | 111
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS (000)(1)
Constellation Pitcairn Diversified Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/01 thru
9/30/04 10/31/03 10/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ -- $ 44 $ (149)
Net realized gain (loss) from securities sold and securities sold short 644 (11,325) (35,541)
Net change in unrealized appreciation (depreciation) of investments 1,228 26,682 12,098
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 1,872 15,401 (23,592)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares (46) -- --
Realized capital gains
Class II Shares -- -- --
Return of capital
Class II Shares -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (46) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class II Shares
Proceeds from shares issued 13,230 17,450 7,978
Proceeds from shares issued in lieu of cash distributions 5 -- --
Proceeds from shares issued in connection with Fund Reorganization(2) -- -- --
Cost of shares redeemed (6,257) (19,495) (9,159)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares transactions 6,978 (2,045) (1,181)
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 8,804 13,356 (24,773)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 95,724 82,368 107,141
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $104,528 $ 95,724 $ 82,368
====================================================================================================================================
Undistributed net investment income $ -- $ 44 $ --
====================================================================================================================================
Class II Shares
Issued 2,434 3,773 1,530
Issued in lieu of cash distributions 1 -- --
Issued in connection with Fund Reorganization(2) -- -- --
Redeemed (1,168) (4,232) (1,750)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares 1,267 (459) (220)
====================================================================================================================================
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) See Note 10 in Notes to Financial Statements for additional information.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
112 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation Pitcairn Small Cap Fund Constellation Pitcairn Family Heritage(R) Fund
- ----------------------------------------------------------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/01 thru 11/1/03 thru 11/1/02 thru 11/1/01 thru
9/30/04 10/31/03 10/31/02 9/30/04 10/31/03 10/31/02
- ----------------------------------------------------------------------------------------------------------
$ (216) $ (94) $ 358 $ 4 $ 39 $ (137)
13,756 11,111 (956) (6,033) (4,941) (2,721)
(4,005) 14,082 (2,239) 13,076 18,782 (5,068)
- ----------------------------------------------------------------------------------------------------------
9,535 25,099 (2,837) 7,047 13,880 (7,926)
- ----------------------------------------------------------------------------------------------------------
(3) (17) (494) (38) -- --
-- -- -- -- -- --
-- -- -- (2) -- --
- ----------------------------------------------------------------------------------------------------------
(3) (17) (494) (40) -- --
- ----------------------------------------------------------------------------------------------------------
3,348 3,024 1,381 4,564 3,668 4,396
-- 2 -- 5 -- --
-- 25,687 48 -- -- --
(7,552) (16,371) (10,229) (6,963) (10,184) (7,639)
- ----------------------------------------------------------------------------------------------------------
(4,204) 12,342 (8,800) (2,394) (6,516) (3,243)
- ----------------------------------------------------------------------------------------------------------
5,328 37,424 (12,131) 4,613 7,364 (11,169)
- ----------------------------------------------------------------------------------------------------------
87,520 50,096 62,227 73,490 66,126 77,295
- ----------------------------------------------------------------------------------------------------------
$92,848 $ 87,520 $ 50,096 $78,103 $ 73,490 $ 66,126
==========================================================================================================
$ -- $ -- $ 17 $ -- $ 39 $ --
==========================================================================================================
226 280 119 501 490 553
-- -- 4 1 -- --
-- 2,603 -- -- -- --
(509) (1,610) (877) (769) (1,388) (948)
- ----------------------------------------------------------------------------------------------------------
(283) 1,273 (754) (267) (898) (395)
==========================================================================================================
Constellation Funds 2004 Annual Report | 113
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS (000)(1)
Constellation Pitcairn Taxable Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/01 thru
9/30/04 10/31/03 10/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 1,739 $ 1,859 $ 1,984
Net realized gain (loss) from securities sold 658 234 (1,404)
Net change in unrealized appreciation (depreciation) of investments (473) 852 82
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 1,924 2,945 662
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares (1,725) (1,858) (1,990)
Realized capital gains
Class II Shares -- -- (285)
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1,725) (1,858) (2,275)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares (2)
Proceeds from shares issued -- -- --
Proceeds from shares issued in lieu of cash distributions -- -- --
Cost of shares redeemed -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Class I Shares transactions -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 4,881 10,661 11,993
Proceeds from shares issued in lieu of cash distributions 301 384 548
Cost of shares redeemed (5,574) (8,758) (6,432)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares transactions (392) 2,287 6,109
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital share transactions (392) 2,287 6,109
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (193) 3,374 4,496
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 43,432 40,058 35,562
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $43,239 $43,432 $40,058
===================================================================================================================================
Undistributed net investment income $ -- $ -- $ --
===================================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued -- -- --
Issued in lieu of cash distributions -- -- --
Redeemed -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Class I Shares -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Issued 458 1,003 1,150
Issued in lieu of cash distributions 28 36 53
Redeemed (520) (818) (616)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares (34) 221 587
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions (34) 221 587
===================================================================================================================================
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) Class I Shares were offered beginning on August 27, 2004 for the
Constellation Sands Capital Select Growth Fund.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
114 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation Pitcairn Tax-Exempt Bond Fund Constellation Sands Capital Select Growth Fund
- ------------------------------------------------------------------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/01 thru 11/1/03 thru 11/1/02 thru 11/1/01 thru
9/30/04 10/31/03 10/31/02 9/30/04 10/31/03 10/31/02
- ------------------------------------------------------------------------------------------------------------------
$ 4,063 $ 4,655 $ 4,695 $ (638) $ (294) $ (272)
716 432 295 730 (6,078) (11,995)
(314) 273 1,012 4,953 15,475 7,148
- ------------------------------------------------------------------------------------------------------------------
4,465 5,360 6,002 5,045 9,103 (5,119)
- ------------------------------------------------------------------------------------------------------------------
(4,075) (4,623) (4,690) -- -- --
(432) (294) (61) -- -- --
- ------------------------------------------------------------------------------------------------------------------
(4,507) (4,917) (4,751) -- -- --
- ------------------------------------------------------------------------------------------------------------------
-- -- -- 32,632 -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
-- -- -- 32,632 -- --
- ------------------------------------------------------------------------------------------------------------------
14,164 11,201 10,287 54,888 6,476 7,021
222 174 79 -- -- --
(11,934) (16,253) (8,783) (33,825) (4,519) (8,410)
- ------------------------------------------------------------------------------------------------------------------
2,452 (4,878) 1,583 21,063 1,957 (1,389)
- ------------------------------------------------------------------------------------------------------------------
2,452 (4,878) 1,583 53,695 1,957 (1,389)
- ------------------------------------------------------------------------------------------------------------------
2,410 (4,435) 2,834 58,740 11,060 (6,508)
- ------------------------------------------------------------------------------------------------------------------
111,470 115,905 113,071 43,878 32,818 39,326
- ------------------------------------------------------------------------------------------------------------------
$113,880 $111,470 $115,905 $102,618 $43,878 $ 32,818
==================================================================================================================
$ 129 $ 141 $ 109 $ -- $ -- $ --
==================================================================================================================
-- -- -- 4,792 -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
-- -- -- 4,792 -- --
- ------------------------------------------------------------------------------------------------------------------
1,309 1,034 979 8,136 1,225 1,201
21 15 7 -- -- --
(1,121) (1,516) (837) (5,007) (882) (1,468)
- ------------------------------------------------------------------------------------------------------------------
209 (467) 149 3,129 343 (267)
- ------------------------------------------------------------------------------------------------------------------
209 (467) 149 7,921 343 (267)
==================================================================================================================
Constellation Funds 2004 Annual Report | 115
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS (000)(1)
Constellation TIP Small Cap
Value Opportunities Fund
---------------------------
year ended year ended
9/30/04 9/30/03
- ----------------------------------------------------------------------------------
Investment activities:
Net investment loss $ (39) $ (4)
Net realized gain from securities sold 2,070 129
Net change in unrealized appreciation
(depreciation) of investments 1,494 420
- ----------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,525 545
- ----------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares -- --
Class II Shares -- (1)
Realized capital gains
Class I Shares -- --
Class II Shares (223) --
- ----------------------------------------------------------------------------------
Total dividends and distributions (223) (1)
- ----------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued -- --
Proceeds from shares issued in lieu of cash
distributions -- --
Cost of shares redeemed -- --
- ----------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class I
Shares transactions -- --
- ----------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 29,439 5,909
Proceeds from shares issued in lieu of cash
distributions 221 1
Cost of shares redeemed (24,169) (1,627)
- ----------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II
Shares transactions 5,491 4,283
- ----------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital
share transactions 5,491 4,283
- ----------------------------------------------------------------------------------
Total increase (decrease) in net assets 8,793 4,827
- ----------------------------------------------------------------------------------
Net assets:
Beginning of year 5,740 913
- ----------------------------------------------------------------------------------
End of year $ 14,533 $ 5,740
==================================================================================
Undistributed net investment income $ 2 $ --
==================================================================================
Shares issued and redeemed:
Class I Shares
Issued -- --
Issued in lieu of cash distributions -- --
Redeemed -- --
- ----------------------------------------------------------------------------------
Increase (decrease) in Class I Shares -- --
- ----------------------------------------------------------------------------------
Class II Shares
Issued 1,999 500
Issued in lieu of cash distributions 15 --
Redeemed (1,569) (147)
- ----------------------------------------------------------------------------------
Increase (decrease) in Class II Shares 445 353
- ----------------------------------------------------------------------------------
Net increase (decrease) in share transactions 445 353
==================================================================================
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
116 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation TIP
Constellation TIP Healthcare & Constellation TIP Tax
Financial Services Fund Biotechnology Fund Managed U.S. Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------
year ended year ended year ended year ended year ended year ended
9/30/04 9/30/03 9/30/04 9/30/03 9/30/04 9/30/03
- -----------------------------------------------------------------------------------------------------------------------------
$ (40) $ (29) $ (256) $ (136) $ (15) $ (18)
1,782 1,106 1,403 1,068 709 91
256 3,052 (540) 1,770 (162) 1,212
- -----------------------------------------------------------------------------------------------------------------------------
1,998 4,129 607 2,702 532 1,285
- -----------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- --
-- -- -- -- -- --
(1,753) (136) -- --
-- -- (14) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(1,753) (136) (14) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
1,131 3,947 -- -- -- --
1,671 129 -- -- -- --
(5,087) (2,909) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(2,285) 1,167 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 32,296 6,326 341 1,071
-- -- 13 -- -- --
-- -- (12,384) (3,463) (1,321) (1,575)
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 19,925 2,863 (980) (504)
- -----------------------------------------------------------------------------------------------------------------------------
(2,285) 1,167 19,925 2,863 (980) (504)
- -----------------------------------------------------------------------------------------------------------------------------
(2,040) 5,160 20,518 5,565 (448) 781
- -----------------------------------------------------------------------------------------------------------------------------
17,309 12,149 14,853 9,288 5,528 4,747
- -----------------------------------------------------------------------------------------------------------------------------
$15,269 $17,309 $ 35,371 $14,853 $ 5,080 $ 5,528
=============================================================================================================================
$ -- $ -- $ -- $ -- $ -- $ --
=============================================================================================================================
78 305 -- -- -- --
122 12 -- -- -- --
(373) (246) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(173) 71 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 2,265 592 39 157
-- -- 1 -- -- --
-- -- (907) (331) (152) (223)
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 1,359 261 (113) (66)
- -----------------------------------------------------------------------------------------------------------------------------
(173) 71 1,359 261 (113) (66)
=============================================================================================================================
Constellation Funds 2004 Annual Report | 117
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS (000)(1)
Constellation International Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
11/1/03 thru 11/1/02 thru 11/1/01 thru
9/30/04 10/31/03 10/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income $ 861 $ 956 $ 631
Net realized gain (loss) from securities sold 12,637 (9,048) (24,989)
Net realized loss from foreign currency transactions (62) (116) (64)
Net change in unrealized appreciation (depreciation) of investments (2,756) 27,564 10,252
Net change in unrealized appreciation (depreciation) on translation of foreign
currency and other assets and liabilities denominated in foreign currency (15) 29 17
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 10,665 19,385 (14,153)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares -- -- --
Class II Shares (2,621) (459) (1,095)
Realized capital gains
Class I Shares -- -- --
Class II Shares -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (2,621) (459) (1,095)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued -- -- --
Proceeds from shares issued in lieu of cash distributions -- -- --
Cost of shares redeemed -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class I Shares transactions -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 29,752 10,740 11,630
Proceeds from shares issued in lieu of cash distributions 340 62 112
Cost of shares redeemed (28,952) (15,424) (21,758)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares transactions 1,140 (4,622) (10,016)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital share transactions 1,140 (4,622) (10,016)
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 9,184 14,304 (25,264)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 97,817 83,513 108,777
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $107,001 $ 97,817 $ 83,513
===================================================================================================================================
Undistributed net investment income (Distributions in excess of net investment
income) $ (491) $ 898 $ 455
===================================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued -- -- --
Issued in lieu of cash distributions -- -- --
Redeemed -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Class I Shares -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Issued 4,201 2,016 1,925
Issued in lieu of cash distributions 51 12 18
Redeemed (4,219) (2,869) (3,561)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares 33 (841) (1,618)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions 33 (841) (1,618)
===================================================================================================================================
* Dividend income, net realized gain (loss) from securities sold and net
change in unrealized appreciation of investment securities are attributable
to the underlying investments in affiliated investment companies.
(1) On May 10, 2004 and August 2, 2004 the Constellation Funds acquired the
assets of certain Turner Funds and the Pitcairn Funds, respectively, in a
tax-free reorganization. See Note 1 in Notes to Financial Statements for
additional information.
(2) Commencement of operations.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
118 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Constellation Strategic Value
and High Income Fund
- -------------------------------------------------------------------
year ended 10/31/02(2)
9/30/04 thru 9/30/03
- -------------------------------------------------------------------
$ 116* $ 4*
524* (1)*
-- --
64* 22*
-- --
- -------------------------------------------------------------------
704 25
- -------------------------------------------------------------------
(116) (4)
-- --
(9) --
-- --
- -------------------------------------------------------------------
(125) (4)
- -------------------------------------------------------------------
13,524 912
123 4
(13,963) (494)
- -------------------------------------------------------------------
(316) 422
- -------------------------------------------------------------------
-- --
-- --
-- --
- -------------------------------------------------------------------
-- --
- -------------------------------------------------------------------
(316) 422
- -------------------------------------------------------------------
263 443
- -------------------------------------------------------------------
443 --
- -------------------------------------------------------------------
$ 706 $ 443
===================================================================
$ -- $ --
===================================================================
985 75
9 --
(979) (40)
- -------------------------------------------------------------------
15 35
- -------------------------------------------------------------------
-- --
-- --
-- --
- -------------------------------------------------------------------
-- --
- -------------------------------------------------------------------
15 35
===================================================================
Constellation Funds 2004 Annual Report | 119
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Realized and
Net asset Net unrealized Dividends Distributions Net asset
value, investment gains from net from value,
beginning income (losses) on investment capital end
of period (loss) investments income gains of period
- -------------------------------------------------------------------------------------------------------------------------------
Constellation Clover Large Cap Value Fund(1) --Class I Shares
- -------------------------------------------------------------
2004 $ 9.56 0.08 1.27 (0.08) -- $10.83
2003 $ 7.86 0.08 1.70 (0.08) -- $ 9.56
2002 $ 9.89 0.10 (2.03) (0.10) -- $ 7.86
2001(2) $12.44 0.11 (1.93) (0.11) (0.62) $ 9.89
2000 $11.43 0.08 2.06 (0.09) (1.04) $12.44
- ---------------------------------------------------------
Constellation Clover Core Value Fund(1) -- Class I Shares
- ---------------------------------------------------------
2004 $14.18 0.06 2.84 (0.06) (0.51) $16.51
2003(3) $11.71 0.05 2.47 (0.05) -- $14.18
2002 $14.85 0.08 (0.61) (0.08) (2.53) $11.71
2001(4) $14.23 0.05 0.59 (0.02) -- $14.85
2000 $15.92 0.05 1.79 (0.07) (3.46) $14.23
- --------------------------------------------------------------
Constellation Clover Small Cap Value Fund(1) -- Class I Shares
- --------------------------------------------------------------
2004 $19.23 (0.01) 4.57 (0.03) -- $23.76
2003 $15.20 0.01 4.04 (0.02)(5) -- $19.23
2002 $16.69 0.06 (1.50) (0.05) -- $15.20
2001(6) $16.36 0.10 1.67 (0.05) (1.39) $16.69
2000 $13.71 (0.02) 3.91 -- (1.24) $16.36
- ----------------------------------------------------------------
Constellation Clover Core Fixed Income Fund(1) -- Class I Shares
- ----------------------------------------------------------------
2004 $10.40 0.43 (0.13) (0.43) -- $10.27
2003 $10.55 0.45 (0.10) (0.47) (0.03) $10.40
2002 $10.20 0.52 0.35 (0.52) -- $10.55
2001(7) $ 9.62 0.54 0.58 (0.54) -- $10.20
2000 $ 9.50 0.54 0.12 (0.54) -- $ 9.62
- -----------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration Fixed Income Fund(1) -- Class I Shares
- -----------------------------------------------------------------------------------
2004 $10.17 0.21 (0.05) (0.21) -- $10.12
2003 $10.23 0.08(8) 0.06 (0.19) (0.01) $10.17
2002 $10.22 0.25 0.05 (0.29) -- $10.23
2001 $10.05 0.54 0.15 (0.52) -- $10.22
2000 $10.05 0.61 0.01 (0.62) -- $10.05
- ------------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration Fixed Income Fund(1) -- Class II Shares
- ------------------------------------------------------------------------------------
2004 $10.21 0.20 (0.06) (0.19) -- $10.16
2003 $10.27 0.05(8) 0.07 (0.17) (0.01) $10.21
2002 $10.26 0.25 0.02 (0.26) -- $10.27
2001 $10.09 0.50 0.17 (0.50) -- $10.26
2000 $10.10 0.57 0.02 (0.60) -- $10.09
- -----------------------------------------------------------------------------
Constellation Chartwell Short Duration Fixed Income Fund(1) -- Class I Shares
- -----------------------------------------------------------------------------
2004 $10.14 0.28 (0.10) (0.28) -- $10.04
2003 $10.24 0.17(8) 0.05 (0.25) (0.07) $10.14
2002 $10.16 0.35 0.12 (0.39) -- $10.24
2001 $ 9.82 0.57 0.32 (0.55) -- $10.16
2000 $ 9.84 0.58 (0.01) (0.59) -- $ 9.82
+ Inclusive of directed brokerage arrangements, waivers and reimbursements.
++ Excludes effect of in-kind transfers and mergers.
(1) Effective May 10, 2004 and August 2, 2004, the Constellation Funds acquired
the assets of certain Turner Funds and the Pitcairn Funds, respectively, in
a tax-free reorganization. In connection with the reorganization, CIMCO
became the investment adviser to the Funds. See Note 1 in Notes to
Financial Statements for additional information.
(2) On April 30, 2001, shareholders of the Clover Max Cap Value Fund approved a
change in the adviser from Clover Capital Management, Inc. to Turner
Investment Partners, Inc., with Clover Capital becoming the Fund's
sub-adviser. In connection with the change in adviser, the Fund changed its
name to the Turner Large Cap Value Fund effective May 1, 2001.
(3) Effective April 15, 2003, the Board of Trustees of Turner Fund approved a
resolution to change the name of the Turner Midcap Value Fund to the Turner
Core Value Fund and to change its principal investment strategy to a "core"
approach.
(4) On April 30, 2001, shareholders of the Clover Equity Value Fund approved a
change in the adviser from Clover Capital Management, Inc. to Turner
Investment Partners, Inc., with Clover Capital becoming the Fund's
sub-adviser. In connection with the change in adviser, the Fund changed its
name to the Turner Midcap Value Fund effective May 1, 2001.
120 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Ratio of net
Net Ratio of Ratio of total investment
assets end net expenses expenses income (loss) Portfolio
Total of period to average to average to average turnover
return (000) net assets+ net assets net assets+ rate++
- ----------------------------------------------------------------------------------------------------------
14.07% $ 6,251 1.25% 1.52% 0.72% 78%
22.72% $ 4,792 1.15% 1.70% 0.89% 59%
(19.66)% $ 4,255 0.95% 1.54% 1.06% 70%
(15.47)% $ 5,152 0.95% 3.56% 1.00% 121%
19.84% $ 5,163 0.95% 3.98% 0.75% 154%
20.75% $ 59,714 1.08% 1.08% 0.39% 55%
21.61% $ 46,673 1.13% 1.13% 0.43% 67%
(6.37)% $ 43,571 1.10% 1.13% 0.56% 103%
4.50% $ 41,715 1.10% 1.16% 0.30% 128%
13.67% $ 45,657 1.10% 1.11% 0.34% 90%
23.72% $540,278 1.22% 1.22% (0.09)% 61%
26.66% $394,946 1.27% 1.27% 0.08% 52%
(8.69)% $464,576 1.26% 1.26% 0.31% 38%
12.15% $178,164 1.28% 1.28% 0.37% 120%
29.59% $ 36,254 1.40% 1.47% (0.11)% 86%
2.97% $ 32,334 0.80% 0.85% 3.94% 45%
3.37% $ 43,391 0.78% 0.87% 4.25% 46%
8.85% $ 42,924 0.75% 0.87% 5.03% 49%
11.99% $ 34,074 0.75% 1.01% 5.50% 34%
7.21% $ 31,486 0.75% 1.02% 5.72% 42%
1.63% $391,934 0.46% 0.58% 2.08% 44%
1.40% $462,567 0.41% 0.62% 0.78% 222%
2.95% $470,021 0.36% 0.60% 2.27% 71%
7.09% $ 93,531 0.36% 0.87% 5.09% 119%
6.34% $ 30,365 0.36% 1.25% 6.15% 141%
1.38% $ 8,895 0.71% 0.83% 1.83% 44%
1.15% $ 5,964 0.66% 0.87% 0.51% 222%
2.69% $ 8,888 0.61% 0.85% 2.11% 71%
6.82% $ 6,106 0.61% 1.10% 5.19% 119%
6.00% $ 8,934 0.61% 1.48% 5.72% 141%
1.84% $172,213 0.46% 0.60% 2.49% 84%
2.15% $252,772 0.41% 0.62% 1.65% 200%
4.69% $264,010 0.36% 0.60% 3.27% 178%
9.35% $ 68,405 0.36% 0.72% 5.65% 104%
6.00% $ 42,092 0.36% 0.74% 5.94% 136%
(5) Includes return of capital of $0.004.
(6) On April 30, 2001, shareholder of the Clover Small Cap Value Fund approved
a change in the adviser from Clover Capital Management, Inc. to Turner
Investment Partners, Inc., with Clover Capital becoming the Fund's
sub-adviser. In connection with the change in adviser, the Fund changed its
name to the Turner Small Cap Value Fund effective May 1, 2001.
(7) On April 30, 2001, shareholder of the Clover Fixed Income Fund approved a
change in the adviser from Clover Capital Management, Inc. to Turner
Investment Partners, Inc., with Clover Capital Management, Inc. becoming
the Fund's sub-adviser. In connection with the change in adviser, the Fund
changed its name to the Turner Core Fixed Income Fund effective May 1,
2001.
(8) Based on average shares outstanding.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2004 Annual Report | 121
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Realized and
Net asset Net unrealized Dividends Distributions Net asset
value, investment gains from net from value,
beginning income (losses) on investment capital end
of period (loss) investments income gains of period
- -------------------------------------------------------------------------------------------------------------------------------
Constellation Chartwell Short Duration Fixed Income Fund(1) -- Class II Shares
- ------------------------------------------------------------------------------
2004 $10.10 0.25 (0.08) (0.26) -- $10.01
2003 $10.21 0.14(2) 0.04 (0.22) (0.07) $10.10
2002 $10.12 0.32 0.13 (0.36) -- $10.21
2001 $ 9.78 0.54 0.33 (0.53) -- $10.12
2000 $ 9.80 0.58 (0.02) (0.58) -- $ 9.78
- ------------------------------------------------------------
Constellation Chartwell High Yield Fund(1) -- Class I Shares
- ------------------------------------------------------------
2004 $ 5.02 0.35 0.10 (0.35) -- $ 5.12
2003 $ 4.45 0.37 0.56 (0.36) -- $ 5.02
2002(3) $ 5.49 0.64 (1.04) (0.64) -- $ 4.45
2001 $ 8.10 0.78 (2.61) (0.78) -- $ 5.49
2000 $ 8.82 0.79 (0.72) (0.79) -- $ 8.10
- ----------------------------------------------------------
Constellation HLAM Large Cap Value Fund -- Class II Shares
- ----------------------------------------------------------
2004(4) $10.00 0.01 (0.17) (0.01) -- $ 9.83
- -------------------------------------------------------------------
Constellation Pitcairn Diversified Value Fund(1) -- Class II Shares
- -------------------------------------------------------------------
2004(5) $10.26 0.10 0.97 (0.11) -- $11.22
2003 $ 8.50 0.12 1.77 (0.13) -- $10.26
2002 $ 9.19 0.10 (0.69) (0.10) -- $ 8.50
2001 $10.52 0.09 (1.33) (0.09) -- $ 9.19
2000(6) $10.00 0.01(2) 0.51 -- -- $10.52
- --------------------------------------------------------------
Constellation Pitcairn Select Value Fund(1) -- Class II Shares
- --------------------------------------------------------------
2004(5) $10.38 0.08 0.66 (0.09) (0.16) $10.87
2003 $ 8.36 0.08 2.03 (0.09) -- $10.38
2002 $10.01 0.09 (1.65) (0.09) -- $ 8.36
2001 $10.96 0.09 (0.95) (0.09) -- $10.01
2000(7) $10.00 0.02 0.95 (0.01) -- $10.96
- --------------------------------------------------------------------
Constellation Pitcairn Diversified Growth Fund(1) -- Class II Shares
- --------------------------------------------------------------------
2004(5) $ 5.25 -- 0.11 --(8) -- $ 5.36
2003 $ 4.40 -- 0.85 -- -- $ 5.25
2002 $ 5.66 (0.01) (1.25) -- -- $ 4.40
2001 $ 9.18 (0.03) (3.49) -- -- $ 5.66
2000(6) $10.00 (0.01) (0.81) -- -- $ 9.18
- -----------------------------------------------------------
Constellation Pitcairn Small Cap Fund(1) -- Class II Shares
- -----------------------------------------------------------
2004(5) $13.78 (0.04) 1.56 --(8) -- $15.30
2003 $ 9.87 -- (2) 3.91 --(8) -- $13.78
2002 $10.67 0.07 (0.78) (0.09) -- $ 9.87
2001 $10.18 0.10 0.49 (0.10) -- $10.67
2000(9) $10.00 0.02 0.16 -- -- $10.18
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of directed brokerage arrangements, waivers and reimbursements.
(1) Effective May 10, 2004 and August 2, 2004, the Constellation Funds acquired
the assets of certain Turner Funds and the Pitcairn Funds, respectively, in
a tax-free reorganization. In connection with the reorganization, CIMCO
became the investment adviser to the Funds. See Note 1 in Notes to
Financial Statements for additional information.
(2) Based on average shares outstanding.
(3) The information set forth in this table for the periods prior to May 1,
2002, is the financial data of the Penn Capital Strategic High Yield Bond
Fund. Effective May 1, 2002, Turner Investment Partners, Inc. became the
Fund's adviser.
(4) Commenced operations on April 30, 2004. All ratios for the period have been
annualized.
(5) For the eleven-month period ended September 30, 2004. All ratios for the
period have been annualized. The Fund changed its fiscal year end from
October 31 to September 30.
(6) Commenced operations on August 4, 2000. All ratios for the period have been
annualized.
122 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Ratio of net
Net Ratio of Ratio of total investment
assets end net expenses expenses income (loss) Portfolio
Total of period to average to average to average turnover
return (000) net assets++ net assets net assets++ rate
- -----------------------------------------------------------------------------------------------------------
1.68% $ 2,903 0.71% 0.85% 2.29% 84%
1.79% $ 2,246 0.66% 0.87% 1.41% 200%
4.53% $ 8,356 0.61% 0.85% 3.21% 178%
9.10% $ 8,130 0.61% 0.96% 5.40% 104%
5.92% $ 6,479 0.61% 0.95% 5.90% 136%
9.34% $ 10,171 0.86% 1.14% 6.98% 199%
21.61% $ 9,408 0.76% 1.16% 7.71% 241%
(8.05)% $ 9,432 0.68% 1.47% 12.78% 171%
(23.66)% $ 13,977 0.68% 1.38% 11.18% 86%
0.56% $ 32,560 0.68% 1.04% 8.94% 76%
(1.58)%+ $ 1,437 1.20% 3.91% 0.33% 4%
10.50%+ $152,202 1.02% 1.14% 1.06% 75%
22.43% $143,641 1.01% 1.14% 1.32% 59%
(6.43)% $122,391 1.02% 1.13% 1.17% 26%
(11.87)% $139,767 1.00% 1.16% 0.92% 48%
5.24%+ $165,823 1.00% 1.22% 0.73% 12%
7.16%+ $ 61,817 1.03% 1.19% 0.84% 111%
25.48% $ 58,133 1.02% 1.23% 0.86% 104%
(15.77)% $ 48,455 1.02% 1.19% 0.92% 110%
(7.90)% $ 60,986 1.00% 1.19% 0.85% 104%
9.70%+ $ 62,392 1.00% 1.33% 0.95% 27%
2.14%+ $104,528 1.02% 1.15% --% 53%
19.32% $ 95,724 1.01% 1.16% 0.05% 70%
(22.26)% $ 82,368 1.01% 1.14% (0.15)% 35%
(38.34)% $107,141 1.00% 1.17% (0.44)% 37%
(8.20)%+ $174,960 1.00% 1.22% (0.68)% 6%
11.03%+ $ 92,848 1.08% 1.15% (0.26)% 72%
39.65% $ 87,520 1.20%(10) 1.17% (0.04)% 149%
(6.78)% $ 50,096 1.28%(10) 1.38% 0.58% 93%
5.80% $ 62,227 1.16%(10) 1.19% 0.93% 96%
1.80%+ $ 67,651 1.22%(10) 1.33% 1.11% 10%
(7) Commenced operations on August 11, 2000. All ratios for the period have
been annualized.
(8) Amount represents less than $0.01 per share.
(9) Commenced operations on August 25, 2000. All ratios for the period have
been annualized.
(10) The ratio of expenses excluding interest expense to average net assets
for the periods ended October 31, 2003, October 31, 2002, October 31,
2001 and October 31, 2000 were 1.10%, 1.19%, 1.00% and 1.00%, respectively.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2004 Annual Report | 123
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Realized and
Net asset Net unrealized Dividends Distributions Net asset
value, investment gains from net from value,
beginning income (losses) on investment capital end
of period (loss) investments income gains of period
- -------------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R) Fund(1) -- Class II Shares
- --------------------------------------------------------------------
2004(2) $ 8.55 -- 0.83 --(3)* -- $ 9.38
2003 $ 6.97 -- 1.58 -- -- $ 8.55
2002 $ 7.82 (0.01) (0.84) -- -- $ 6.97
2001 $ 9.87 (0.02) (2.03) -- -- $ 7.82
2000(4) $10.00 (0.01) (0.12) -- -- $ 9.87
- --------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund(1) -- Class II Shares
- --------------------------------------------------------------
2004(2) $10.73 0.43 0.04 (0.43) -- $10.77
2003 $10.47 0.51 0.26 (0.51) -- $10.73
2002 $10.98 0.56 (0.42) (0.56) (0.09) $10.47
2001 $10.09 0.59 0.90 (0.60) -- $10.98
2000(4) $10.00 0.15 0.09 (0.15) -- $10.09
- -----------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Bond Fund(1) -- Class II Shares
- -----------------------------------------------------------------
2004(2) $10.77 0.39 0.05 (0.39) (0.04) $10.78
2003 $10.71 0.44 0.09 (0.44) (0.03) $10.77
2002 $10.60 0.44 0.12 (0.44) (0.01) $10.71
2001 $10.04 0.45 0.57 (0.46) -- $10.60
2000(5) $10.00 0.10 0.04 (0.10) -- $10.04
- -------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund(1) -- Class I Shares
- -------------------------------------------------------------------
2004(6) $ 6.74 -- 0.06 -- -- $ 6.80
- --------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund(1) -- Class II Shares
- --------------------------------------------------------------------
2004(2) $ 6.13 (0.06) 0.73 -- -- $ 6.80
2003 $ 4.81 (0.04)(7) 1.36 -- -- $ 6.13
2002 $ 5.55 (0.04) (0.70) -- -- $ 4.81
2001 $ 9.02 (0.04) (3.43) -- -- $ 5.55
2000(5) $10.00 (0.01) (0.97) -- -- $ 9.02
- --------------------------------------------------------------------------
Constellation TIP Small Cap Value Opportunities Fund(1) -- Class II Shares
- --------------------------------------------------------------------------
2004 $12.72 (0.04) 3.75 -- (0.22) $16.21
2003 $ 9.27 (0.01) 3.47 (0.01) -- $12.72
2002(8) $10.00 -- (0.73) -- -- $ 9.27
- -----------------------------------------------------------------
Constellation TIP Financial Services Fund(1)(9) -- Class I Shares
- -----------------------------------------------------------------
2004 $13.60 (0.04) 1.69 -- (1.37) $13.88
2003 $10.11 (0.02) 3.62 -- (0.11) $13.60
2002 $16.67 (0.02) (1.12) -- (5.42) $10.11
2001(10) $19.76 (0.13) (2.96) -- -- $16.67
2001 $17.19 (0.14) 3.30 -- (0.59) $19.76
2000 $18.01 (0.17) (0.65) -- -- $17.19
* Includes return of capital of $0.0003.
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of directed brokerage arrangements, waivers and reimbursements.
+++ Excludes effect of in-kind transfers and mergers.
(1) Effective May 10, 2004 and August 2, 2004, the Constellation Funds acquired
the assets of certain Turner Funds and the Pitcairn Funds, respectively, in
a tax-free reorganization. In connection with the reorganization, CIMCO
became the investment adviser to the Funds. See Note 1 in Notes to
Financial Statements for additional information.
(2) For the eleven-month period ended September 30, 2004. All ratios for the
period have been annualized. The Fund changed its fiscal year end from
October 31 to September 30.
(3) Amount represents less than $0.01 per share.
(4) Commenced operations on August 4, 2000. All ratios for the period have been
annualized.
(5) Commenced operations on August 11, 2000. All ratios for the period have
been annualized.
(6) Commenced operations on August 27, 2004. All ratios for the period have
been annualized.
(7) Based on average shares outstanding.
(8) Commenced operations on March 4, 2002. All ratios for the period have been
annualized.
124 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Ratio of net
Net Ratio of Ratio of total investment
assets end net expenses expenses income (loss) Portfolio
Total of period to average to average to average turnover
return (000) net assets++ net assets net assets++ rate+++
- ----------------------------------------------------------------------------------------------------------
9.77%+ $ 78,103 1.23% 1.37% 0.01% 19%
22.67% $ 73,490 1.23% 1.38% 0.06% 12%
(10.87)% $ 66,126 1.27% 1.36% (0.18)% 24%
(20.77)% $ 77,295 1.20% 1.37% (0.19)% 37%
(1.30)%+ $ 98,420 1.20% 1.44% (0.29)% 1%
4.42%+ $ 43,239 0.75% 0.94% 4.36% 26%
7.44% $ 43,432 0.73% 0.97% 4.74% 24%
1.46% $ 40,058 0.78% 0.98% 5.35% 58%
15.19% $ 35,562 0.70% 0.99% 5.63% 54%
2.36%+ $ 37,212 0.70% 1.10% 6.51% 7%
4.20%+ $113,880 0.62% 0.75% 3.97% 25%
4.96% $111,470 0.60% 0.74% 4.06% 14%
5.41% $115,905 0.60% 0.74% 4.19% 14%
10.30% $113,071 0.60% 0.77% 4.35% 23%
1.43%+ $ 99,187 0.60% 0.86% 4.88% 10%
0.89%+ $ 32,591 1.10% 1.10% (0.79)% 11%
10.93%+ $ 70,027 1.20% 1.35% (0.95)% 11%
27.44% $ 43,878 1.17% 1.45% (0.81)% 28%
(13.33)% $ 32,818 1.16% 1.43% (0.69)% 24%
(38.44)% $ 39,326 1.15% 1.43% (0.63)% 37%
(9.80)%+ $ 54,794 1.15% 1.50% (0.61)% 13%
29.36% $ 14,533 1.45% 1.82% (0.23)% 272%
37.29% $ 5,740 1.40% 3.64% (0.26)% 245%
(7.30)%+ $ 913 1.45% 6.18% 0.08% 142%
12.31% $ 15,269 1.45% 1.52% (0.24)% 103%
35.95% $ 17,309 1.50% 1.82% (0.22)% 139%
(12.48)% $ 12,149 1.40% 2.16% (0.40)% 171%
(15.64)%+ $ 15,554 2.29% 2.33% (1.19)% 52%
18.20% $ 23,341 2.11% 2.11% (0.59)% 110%
(4.55)% $ 25,892 2.14% 2.14% (0.91)% 180%
(9) On November 12, 2001, the Titan Financial Services Fund (the "Titan Fund")
exchanged all of its assets and liabilities for shares of the Turner
Financial Services Fund. The Titan Fund is the accounting survivor in this
transaction, and as a result, the accounting history and operating results
for the periods prior to November 12, 2001 have been carried forward in
these financial highlights.
10) For the six month period ended October 31, 2001. All ratios for the period
have been annualized. The Titan Fund changed its fiscal year end from April
30 to October 31.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2004 Annual Report | 125
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Realized and
Net asset Net unrealized Dividends Distributions Net asset
value, investment gains from net from value,
beginning income (losses) on investment capital end
of period (loss) investments income gains of period
- -------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------
Constellation TIP Healthcare & Biotechnology Fund(1) -- Class II Shares
- -----------------------------------------------------------------------
2004 $12.31 (0.06) 1.55 -- (0.01) $13.79
2003 $ 9.83 (0.11) 2.59 -- -- $12.31
2002 $11.15 (0.10) (1.20) -- (0.02) $ 9.83
2001(2) $10.00 (0.03) 1.18 -- -- $11.15
- --------------------------------------------------------------------
Constellation TIP Tax Managed U.S. Equity Fund(1) -- Class II Shares
- --------------------------------------------------------------------
2004 $ 8.04 (0.03) 0.83 -- -- $ 8.84
2003 $ 6.29 (0.03) 1.78 -- -- $ 8.04
2002 $ 8.18 (0.03) (1.86) -- -- $ 6.29
2001(2) $10.00 -- (1.82) -- -- $ 8.18
- -------------------------------------------------------------
Constellation International Equity Fund(1) -- Class II Shares
- -------------------------------------------------------------
2004(3) $ 6.47 0.05 0.71 (0.17) -- $ 7.06
2003 $ 5.23 0.06 1.21 (0.03) -- $ 6.47
2002 $ 6.19 0.04 (0.94) (0.06) -- $ 5.23
2001 $ 9.28 0.01 (3.05) (0.02) (0.03) $ 6.19
2000(4) $10.00 (0.01) (0.71) -- -- $ 9.28
- --------------------------------------------------------------------------
Constellation Strategic Value and High Income Fund(1)(5) -- Class I Shares
- --------------------------------------------------------------------------
2004 $12.58 0.47 1.53 (0.47) (0.10) $14.01
2003(6) $10.00 0.25 2.58 (0.25) -- $12.58
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of directed brokerage arrangements, waivers and reimbursements.
+++ Excludes effect of in-kind transfers and mergers.
(1) Effective May 10, 2004 and August 2, 2004, the Constellation Funds acquired
the assets of certain Turner Funds and the Pitcairn Funds, respectively, in
a tax-free reorganization. In connection with the reorganization, CIMCO
became the investment adviser to the Funds. See Note 1 in Notes to
Financial Statements for additional information.
(2) Commenced operations on February 28, 2001. All ratios for the period have
been annualized.
(3) For the eleven-month period ended September 30, 2004. All ratios for the
period have been annualized. The Fund changed its fiscal year end from
October 31 to September 30.
(4) Commenced operations on August 4, 2000. All ratios for the period have been
annualized.
(5) The Constellation Strategic Value and High Income Fund and its shareholders
indirectly bear a pro rata share of the expenses of the underlying
Constellation Funds. The expense ratios do not include such expenses.
Recognition of net investment income is affected by the timing of the
declaration of dividends by the Constellation Funds in which the
Constellation Strategic Value and High Income Fund invests.
(6) Commenced operations on October 31, 2002. All ratios for the period have
been annualized.
Amounts designated as "-" are either $0 or have been rounded to $0
The accompanying notes are an integral part of the financial statements.
126 | Constellation Funds 2004 Annual Report
FINANCIAL STATEMENTS
Ratio of net
Net Ratio of Ratio of total investment
assets end net expenses expenses income (loss) Portfolio
Total of period to average to average to average turnover
return (000) net assets++ net assets net assets++ rate+++
- ----------------------------------------------------------------------------------------------------------
12.12% $ 35,371 1.61% 1.84% (1.10)% 163%
25.23% $ 14,853 1.47% 1.63% (1.16)% 274%
(11.66)% $ 9,288 1.87% 2.33% (1.44)% 202%
11.50%+ $ 1,192 1.50% 13.70% (0.79)% 95%
9.95% $ 5,080 1.25% 1.97% (0.27)% 104%
27.82% $ 5,528 1.25% 2.14% (0.34)% 187%
(23.11)% $ 4,747 1.25% 1.91% (0.33)% 313%
(18.20)%+ $ 6,949 1.25% 5.35% (0.20)% 91%
11.97%+ $107,001 1.35% 1.60% 0.90% 62%
24.40% $ 97,817 1.30% 1.60% 1.15% 128%
(14.68)% $ 83,513 1.32% 1.48% 0.63% 69%
(32.91)% $108,777 1.25% 1.45% 0.16% 44%
(7.20)%+ $175,029 1.25% 1.53% (0.37)% 10%
16.04% $ 706 0.25% 1.36% 3.23% 411%
28.57%+ $ 443 0.25% 21.93% 3.27% 397%
Constellation Funds 2004 Annual Report | 127
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
1. ORGANIZATION:
The Constellation Funds (the "Trust"), a Delaware business trust, is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company with 23 active portfolios. The
financial statements included herein are those of the Constellation Clover
Large Cap Value Fund (formerly the Turner Large Cap Value Fund), the
Constellation Clover Core Value Fund (formerly the Turner Core Value Fund),
the Constellation Clover Small Cap Value Fund (formerly the Turner Small Cap
Value Fund), the Constellation Clover Core Fixed Income Fund (formerly the
Turner Core Fixed Income Fund), the Constellation Chartwell Ultra Short
Duration Fixed Income Fund (formerly the Turner Ultra Short Duration Fixed
Income Fund), the Constellation Chartwell Short Duration Fixed Income Fund
(formerly the Turner Short Duration Fixed Income Fund), the Constellation
Chartwell High Yield Fund (formerly the Turner High Yield Fund), the
Constellation HLAM Large Cap Value Fund, the Constellation Pitcairn
Diversified Value Fund (formerly the Pitcairn Diversified Value Fund), the
Constellation Pitcairn Select Value Fund (formerly the Pitcairn Select Value
Fund), the Constellation Pitcairn Diversified Growth Fund (formerly the
Pitcairn Diversified Growth Fund), the Constellation Pitcairn Small Cap Fund
(formerly the Pitcairn Small Cap Fund), the Constellation Pitcairn Family
Heritage(R) Fund (formerly the Pitcairn Family Heritage(R) Fund), the
Constellation Pitcairn Taxable Bond Fund (formerly the Pitcairn Taxable Bond
Fund), the Constellation Pitcairn Tax-Exempt Bond Fund (formerly the Pitcairn
Tax-Exempt Bond Fund), the Constellation Sands Capital Select Growth Fund
(formerly the Pitcairn Select Growth Fund), the Constellation TIP Small Cap
Value Opportunities Fund (formerly the Turner Small Cap Value Opportunities
Fund), the Constellation TIP Financial Services Fund (formerly the Turner
Financial Services Fund), the Constellation TIP Healthcare & Biotechnology
Fund (formerly the Turner Healthcare & Biotechnology Fund), the Constellation
TIP Tax Managed U.S. Equity Fund (formerly the Turner Tax Managed U.S. Equity
Fund), the Constellation International Equity Fund (formerly the Pitcairn
International Equity Fund) and the Constellation Strategic Value and High
Income Fund (formerly the Turner Strategic Value and High Income Fund), each a
"Fund" and collectively the "Funds". The financial statements of the remaining
fund are presented separately.
Each Fund is registered as a diversified portfolio of the Trust with the
exception of the Constellation Pitcairn Select Value Fund, the Constellation
Pitcairn Family Heritage(R) Fund, the Constellation Pitcairn Taxable Bond
Fund, the Constellation Sands Capital Select Growth Fund, the Constellation
TIP Financial Services Fund, the Constellation TIP Healthcare & Biotechnology
Fund and the Constellation TIP Tax Managed U.S. Equity Fund, each of which are
non-diversified.
The Funds are registered to offer different classes of shares: Class I Shares,
Class II Shares, or both. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. The
Funds' prospectus provides a description of each Fund's investment objectives,
policies, and strategies along with information on the classes of shares
currently being offered.
The shareholders of the Turner Large Cap Value Fund, Turner Core Value Fund,
Turner Small Cap Value Fund, Turner Core Fixed Income Fund, Turner Ultra Short
Duration Fixed Income Fund, Turner Short Duration Fixed Income Fund, Turner
High Yield Fund, Turner Small Cap Value Opportunities Fund, Turner Financial
Services Fund, Turner Healthcare & Biotechnology Fund, Turner Tax Managed U.S.
Equity Fund and Turner Strategic Value and High Income Fund, (each a "Turner
Fund" and collectively the "Turner Funds") voted to reorganize each Turner
Fund into a substantially similar series (each a "Constellation Fund" and
collectively the "Constellation Funds") of Constellation Funds (the
"Constellation Trust") in a tax-free reorganization effective May 10, 2004.
Each shareholder received a number of shares of a Constellation Fund equal in
dollar value and in the number of shares of each Turner Fund as of May 7,
2004. Each Constellation Fund has the same investment objectives and policies,
and substantially the same risks, policies, restrictions and limitations, as a
Turner Fund.
The shareholders of the Pitcairn Diversified Value Fund, Pitcairn Select Value
Fund, Pitcairn Diversified Growth Fund, Pitcairn Small Cap Fund, Pitcairn
Family Heritage(R) Fund, Pitcairn Taxable Bond Fund, Pitcairn Tax-Exempt Bond
Fund, Pitcairn Select Growth Fund and Pitcairn International Equity Fund,
(each a "Pitcairn Fund" and collectively the "Pitcairn Funds") voted to
reorganize each Pitcairn Fund into a substantially similar series of
Constellation Funds in a tax-free reorganization effective August 2, 2004.
Each shareholder received a number of shares of a Constellation Fund equal in
dollar value and in the number of shares of each Pitcairn Fund as of July 30,
2004. Each Constellation Fund has the same investment objectives and policies,
and substantially the same risks, policies, restrictions and limitations, as a
Pitcairn Fund.
128 | Constellation Funds 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
Accordingly, following completion of the reorganizations, shareholders of each
Turner Fund and each Pitcairn Fund owned shares of the Corresponding Acquiring
Fund as set forth in the chart below:
TURNER/PITCAIRN FUND CORRESPONDING ACQUIRING FUND
- ---------------------------------------------- --------------------------------------------------------------
Turner Large Cap Value Fund Constellation Clover Large Cap Value Fund
Turner Core Value Fund Constellation Clover Core Value Fund
Turner Small Cap Value Fund Constellation Clover Small Cap Value Fund
Turner Core Fixed Income Fund Constellation Clover Core Fixed Income Fund
Turner Ultra Short Duration Fixed Income Fund Constellation Chartwell Ultra Short Duration Fixed Income Fund
Turner Short Duration Fixed Income Fund Constellation Chartwell Short Duration Fixed Income Fund
Turner High Yield Fund Constellation Chartwell High Yield Fund
Pitcairn Diversified Value Fund Constellation Pitcairn Diversified Value Fund
Pitcairn Select Value Fund Constellation Pitcairn Select Value Fund
Pitcairn Diversified Growth Fund Constellation Pitcairn Diversified Growth Fund
Pitcairn Small Cap Fund Constellation Pitcairn Small Cap Fund
Pitcairn Family Heritage(R) Fund Constellation Pitcairn Family Heritage(R) Fund
Pitcairn Taxable Bond Fund Constellation Pitcairn Taxable Bond Fund
Pitcairn Tax-Exempt Bond Fund Constellation Pitcairn Tax-Exempt Bond Fund
Pitcairn Select Growth Fund Constellation Sands Capital Select Growth Fund
Turner Small Cap Value Opportunities Fund Constellation TIP Small Cap Value Opportunities Fund
Turner Financial Services Fund Constellation TIP Financial Services Fund
Turner Healthcare & Biotechnology Fund Constellation TIP Healthcare & Biotechnology Fund
Turner Tax Managed U.S. Equity Fund Constellation TIP Tax Managed U.S. Equity Fund
Pitcairn International Equity Fund Constellation International Equity Fund
Turner Strategic Value and High Income Fund Constellation Strategic Value and High Income Fund
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Funds.
Use of Estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements, and the reported amounts of income and expenses during the
reported period. Actual results could differ from those estimates.
Security Valuation--Securities listed on a securities exchange, market or
automated quotation system for which quotations are readily available (except
for securities traded on NASDAQ) are valued at the last quoted sale price on
the primary exchange or market (foreign or domestic) on which they are
traded, or, if there is no such reported sale, at the most recent quoted bid
price. For securities traded on NASDAQ, the NASDAQ Official Closing Price
will be used. If available, debt securities are priced based upon valuations
provided by independent, third-party pricing agents. Such values generally
reflect the last reported sales price if the security is actively traded. The
third-party pricing agents may also value debt securities at an evaluated bid
price by employing methodologies that utilize actual market transactions,
broker-supplied valuations, or other methodologies designed to identify the
market value for such securities. Debt obligations with remaining maturities
of sixty days or less may be valued at their amortized cost, which
approximates market value. The prices for foreign securities are reported in
local currency and converted to U.S. dollars using currency exchange rates.
Prices for most securities held in the Funds are provided daily by recognized
independent pricing agents. If a security price cannot be obtained from an
independent, third-party pricing agent, the Funds seek to obtain and use the
average of the bid and ask price from at least two independent brokers.
Securities for which market prices are not "readily available" are valued in
accordance with Fair Value Procedures established by the Funds' Board of
Trustees. The Funds' Fair Value Procedures are implemented through a Fair
Value Committee (the "Committee") designated by the Funds' Board of
Trustees. Some of the more common reasons that may necessitate that a
security be valued using Fair Value Procedures include: the security's
trading has been halted or suspended; the security has been de-listed from a
national exchange; the security's primary trading market is temporarily
closed at a time when under normal conditions it would be open; the
security's primary pricing source is not able or willing to provide a price
or a significant event with respect to a security has occurred. When a
security is valued in accordance with the Fair Value Procedures, the
Committee will determine the value after taking into consideration relevant
information reasonably available to the Committee.
For securities that principally trade on a foreign market or exchange, a
significant gap in time can exist between the time of a particular
security's last trade and the time at which a Fund calculates its net asset
value. The closing prices of such securities may no longer reflect their
market value at the time the Fund calculates net asset value if an event
that could materially affect the value of those securities (a "Significant
Event") has occurred between the time of the security's last close and the
time that the Fund calculates net asset value. A Significant Event may
relate to a single issuer or to an entire market sector. If the Adviser or
Sub-Adviser of a Fund becomes aware of a Significant Event that has
Constellation Funds 2004 Annual Report | 129
NOTES TO FINANCIAL STATEMENTS
occurred with respect to a security or group of securities after the closing
of the exchange or market on which the security or securities principally
trade, but before the time at which the Fund calculates net asset value, it
may request that a Fair Value Committee Meeting be called. In addition, the
Funds' Administrator or Sub-Administrator monitors price movements among
certain selected indices, securities and/or baskets of securities that may
be an indicator that the closing prices received earlier from foreign
exchanges or markets may not reflect market value at the time the Fund
calculates net asset value. If price movements in a monitored index or
security exceed levels established by the Administrator, the Administrator
or Sub-Administrator notifies the Adviser or Sub-Adviser for any Fund
holding the relevant securities that such limits have been exceeded. In such
event, the Adviser or Sub-Adviser makes the determination whether a fair
value committee meeting should be called based on the information provided.
The assets of the Constellation Strategic Value and High Income Fund consist
of investments in underlying affiliated investment companies, which are
valued at their respective net asset value per share.
Security transactions and related income--Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date, and interest income
is recognized on the accrual basis subject to the recognition of certain
gains and losses on mortgage- and asset-backed securities. Costs used in
determining realized gains and losses on the sales of investment securities
are those of the specific securities sold during the respective holding
period. Purchase discounts and premiums on securities held by the Funds are
accreted and amortized to maturity using the effective interest method.
Repurchase agreements--Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market value
of the collateral, including accrued interest thereon, is not less than
100%. In the event of default of the counterparty and the value of the
collateral declines or if the counterparty enters an insolvency proceeding,
realization of the collateral by the Funds may be delayed or limited.
Securities sold short--A Fund may sell a security short that is identical to
a security held in the respective Fund's investment portfolio by borrowing
and selling the identical security in the secondary market. While a security
is sold short, the Fund recognizes rebate income, incurs interest expense on
certain amounts related to the securities sold short and reflects changes in
the value of the securities sold short as unrealized gains or losses in the
Statement of Operations of the Fund. The Constellation Pitcairn Small Cap
Fund had outstanding short sales positions which were closed prior to
October 31, 2003.
Margin loans with brokers--During the year ended October 31, 2003, the
Pitcairn Small Cap Fund had outstanding borrowings under margin loans with
brokers. The interest expense incurred, outstanding borrowings and interest
rate were as follows:
MAXIMUM
AVERAGE OUTSTANDING AVERAGE
INTEREST OUTSTANDING AT ANY INTEREST
EXPENSE BORROWINGS MONTH END RATE
-------- ----------- ----------- --------
Pitcairn Small Cap Fund $76,301 $2,104,701 $3,601,455 3.63%
Foreign currency translation--The books and records of the Constellation
International Equity Fund are maintained in U.S. dollars and translated into
U.S. dollars on the following basis:
(1)market value of investment securities, assets and liabilities at the
current rate of exchange on the valuation date: and
(2)purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The Constellation International Equity Fund does not isolate that portion of
gains and losses on investments in equity securities that is due to changes
in the foreign exchange rates from that which is due to changes in market
prices of equity securities.
Forward foreign currency contracts--The Constellation International Equity
Fund may enter into forward foreign currency contracts as hedges against
specific transactions. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate, and any resulting unrealized gains or
losses are recorded currently. The Constellation International Equity Fund
realizes gains or losses at the time forward contracts are extinguished.
Unrealized gains or losses on outstanding positions in forward foreign
currency contracts held at the close of the year are recognized as ordinary
income or loss for deferral tax purposes. As of September 30, 2004, the
Constellation International Equity Fund had the following foreign currency
contracts outstanding:
IN UNREALIZED
SETTLEMENT CONTRACTS TO EXCHANGE APPRECIATION
DATE RECEIVE (DELIVER) FOR (DEPRECIATION)
----------------------- ----------------- --------- --------------
FOREIGN CURRENCY PURCHASES:
10/1/2004 JP 13,541,593 $(121,547) $ 1,558
10/4/2004 JP 16,747,941 (151,155) 1,131
10/5/2004 JP 12,973,530 (117,429) 543
10/6/2004 JP 2,700,000 (24,278) 275
-------
3,507
-------
FOREIGN CURRENCY SALES:
10/1/2004 AU (15,257) $ 10,955 $ (153)
10/1/2004 EU (176,385) 217,059 (2,292)
10/1/2004 HK (21,870) 2,802 (3)
10/1/2004 JP (1,060,555) 9,570 (71)
10/1/2004 MX (150,533) 13,201 (29)
10/1/2004 NO (297,730) 43,958 (435)
10/4/2004 DK (62,244) 10,371 (34)
10/4/2004 EU (20) 24 --
10/4/2004 JP (353,398) 3,198 (15)
10/4/2004 NO (9,947) 1,483 (20)
-------
(3,052)
-------
$ 455
=======
CURRENCY LEGEND
AU - Australian Dollar JP - Japanese Yen
DK - Danish Krone MX - Mexican Peso
EU - Euro NO - Norwegian Krone
HK - Hong Kong Dollar
130 | Constellation Funds 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
Foreign withholding taxes--A Fund may be subject to taxes imposed by
countries in which it invests with respect to its investment in issuers
existing or operating in such countries. Such taxes are generally based on
income earned. A Fund accrues such taxes when the related income is earned.
Expenses--Expenses that are specifically attributed to one of the Funds are
charged to that Fund. Certain other expenses of the Funds are prorated among
the Trust on the basis of relative daily net assets. Other common expenses
of the Trust are allocated among the Funds on the basis of relative daily
net assets. In addition to the Funds' direct expenses, shareholders of the
Strategic Value and High Income Fund also bear a proportionate share of the
underlying funds' expenses.
Classes--Class specific expenses are borne by that class. Income, non-class
specific expenses and realized/unrealized gains and losses are allocated to
the respective classes on the basis of the relative daily net assets.
Dividends and distributions--The Constellation TIP Small Cap Value
Opportunities, Constellation TIP Financial Services, Constellation TIP
Healthcare & Biotechnology and Constellation TIP Tax Managed U.S. Equity
Funds declare and distribute net investment income, if any, annually, as a
dividend to shareholders. The Constellation Clover Large Cap Value,
Constellation Clover Core Value, Constellation Clover Small Cap Value,
Constellation HLAM Large Cap Value Fund, Constellation Pitcairn Diversified
Value, Constellation Pitcairn Diversified Growth, Constellation Pitcairn
Select Value, Constellation Pitcairn Small Cap Fund, Constellation Pitcairn
Family Heritage(R), Constellation Sands Capital Select, Constellation
International Equity and Constellation Strategic Value and High Income Funds
declare and distribute net investment income, if any, quarterly, as a
dividend to shareholders. The Constellation Clover Core Fixed Income,
Constellation Chartwell Ultra Short Duration Fixed Income, Constellation
Chartwell Short Duration Fixed Income, Chartwell High Yield, Constellation
Pitcairn Taxable Bond and Constellation Pitcairn Tax-Exempt Bond Funds
declare net investment income daily and distribute it monthly, as a dividend
to shareholders. Any net realized capital gains on sales of securities for
all Funds are distributed to shareholders at least annually.
Redemption fees--Each Fund, except for the Constellation Clover Large Cap
Value Fund, Constellation Clover Core Value Fund, Constellation Clover Small
Cap Value Fund, Constellation Clover Core Fixed Income Fund, Constellation
Chartwell Ultra Short Duration Fixed Income Fund and Constellation Chartwell
Short Duration Fixed Income Fund, may charge a redemption fee up to 2% of
redemption proceeds, which will automatically be paid to the Fund. Currently
only the Constellation TIP Tax Managed U.S. Equity Fund has implemented the
redemption fees. There were no redemption fees collected during the year or
period ended September 30, 2004.
Expense offset arrangement--Prior to August 2, 2004 the Former Pitcairn
Funds had an arrangement with their custodian bank whereby the Funds
received earnings credits from their custodian when positive cash balances
were maintained, which were to offset custody fees. Conversely, the Funds
were charged a fee (i.e. "earnings debits") by their custodian when negative
cash balances were maintained. For financial reporting purposes, the Funds
included net earnings debits in custody fees and net earnings credits as an
expense offset in the Statement of Operations.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers of the Trust are also officers of Constellation Investment
Management Company, LP ("CIMCO") and SEI Investments Global Funds Services
("SEI") and/or SEI Investments Distribution Co. Such officers are paid no fees
by the Trust for serving as officers and trustees of the Trust.
Certain Funds did effect trades through Constellation Investment Distribution
Company, Inc., ("CIDCO") the distributor for the Funds, when CIDCO was acting
as Turner Investment Distributors, Inc., for security purchases and sales
transactions. Commissions paid on those trades from the Trust for the year or
period ended September 30, 2004 were $87,549.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Funds engage in a "Manager-of-Managers" platform.
4. ADMINISTRATION, SHAREHOLDER SERVICING, AND
DISTRIBUTION AGREEMENTS:
Effective March 1, 2004, CIMCO began providing administrative services for the
Funds. For its services, CIMCO receives an annual fee of 0.15% of the
aggregate average daily net assets of the Trust up to $2 billion and 0.12% of
the aggregate average daily net assets of the Trust over $2 billion. The fee
is then allocated among the Funds on the basis of relative daily net assets.
Prior to May 10, 2004, Turner Investment Partners, Inc. ("Turner") provided
administrative services to the Constellation Clover Large Cap Value,
Constellation Clover Core Value, Constellation Clover Small Cap Value,
Constellation Clover Core Fixed Income, Constellation Chartwell Ultra Short
Duration Fixed Income, Constellation Chartwell Short Duration Fixed Income,
Constellation Chartwell High Yield, Constellation TIP Small Cap Value
Opportunities, Constellation TIP Financial Services, Constellation TIP
Healthcare & Biotechnology, Constellation TIP Tax Managed U.S. Equity and
Constellation Strategic Value and High Income Funds (the "Former Turner
Funds") under an administration agreement with the Trust. For its services,
Turner received an annual fee of 0.15% of the aggregate average daily net
assets of the Turner Trust up to $2 billion, 0.12% of the aggregate average
daily net assets of the Trust over $2 billion.
Prior to August 2, 2004, SEI Investments Global Funds Services ("SEI")
provided administrative services to the Constellation Pitcairn Diversified
Value, Constellation Pitcairn Select Value, Constellation Pitcairn Diversified
Growth, Constellation Pitcairn Small Cap, Constellation Pitcairn Family
Heritage(R), Constellation Pitcairn Taxable Bond, Constellation Pitcairn
Tax-Exempt Bond, Constellation Sands Capital Select Growth and Constellation
International Equity Funds (the "Former Pitcairn Funds") under an
administrative agreement with the Trust. For its services, SEI received a fee
calculated daily and paid monthly at an annual rate of 0.08% of the
Constellation Funds 2004 Annual Report | 131
NOTES TO FINANCIAL STATEMENTS
average daily net assets of each fund, subject to certain minimum fees.
Under a separate Sub-Administration Agreement between CIMCO and SEI, SEI
provides sub-administrative services to the Trust. For the year or period
ended September 30, 2004, SEI was paid $840,157 for its services.
Constellation Investment Distribution Company, Inc., (the "Distributor")
provides distribution services to the Funds under a Distribution Agreement.
The Distributor also provides shareholder servicing services to the Funds
under a Shareholder Servicing Plan and Agreement.
Prior to March 22, 2004, Turner Investment Distributors, Inc., provided
distribution services to the Former Turner Funds. Prior to August 2, 2004, SEI
Investments Distribution Co., provided distribution services to the Former
Pitcairn Funds.
The Constellation Chartwell Ultra Short Duration Fixed Income, Constellation
Chartwell Short Duration Fixed Income, HLAM Large Cap Value, Constellation
Pitcairn Diversified Value, Constellation Pitcairn Select Value, Constellation
Pitcairn Diversified Growth, Constellation Pitcairn Small Cap, Constellation
Pitcairn Family Heritage(R), Constellation Pitcairn Taxable Bond,
Constellation Pitcairn Tax-Exempt Bond, Constellation Sands Capital Select
Growth, Constellation TIP Small Cap Value Opportunities, Constellation TIP
Healthcare & Biotechnology, Constellation TIP Tax Managed U.S. Equity,
Constellation International Equity and Constellation Strategic Value and High
Income Funds have adopted a Distribution and Shareholder Service Plan for
their Class II Shares (the "Class II Plan"). Under the Class II Plan, a Plan
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended, the Distributor is entitled to receive aggregate fees not exceeding
0.75% of each Fund's Class II Shares' average daily net assets in return for
providing a broad range of distribution services. Prior to May 10, the
Distributor received aggregate fees of 0.25% of the Constellation TIP Small
Cap Value Opportunities Fund's Class II Shares' average daily net assets.
Subsequently no distribution fees have been charged. In addition, under the
Class II Plan, the Distributor receives aggregate fees of 0.25% of each Fund's
Class II Shares' average daily net assets in return for providing a broad
range of shareholder services.
Prior to August 2, 2004, the Former Pitcairn Funds had a separate Shareholder
Services Plan, whereby the Funds paid a shareholder service fee of 0.25% on an
annual basis of the average daily net assets to Pitcairn Trust Company, the
parent company of Pitcairn Investment Management.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent
for the Funds under a transfer agency agreement with the Trust. The Former
Turner Funds reimburse CIMCO for amounts paid to third parties that provide
sub-transfer agency and other administrative services to the Funds. Prior to
August 2, 2004, Boston Financial Data Services, Inc. served as the transfer
agent and dividend disbursing agent for the Former Pitcairn Funds.
5. INVESTMENT ADVISORY AGREEMENT:
The Trust and CIMCO are parties to an Investment Advisory Agreement dated
March 4, 2004 under which CIMCO receives a fee, that is calculated daily and
paid monthly. CIMCO has agreed to waive all or a portion of their fees and to
reimburse expenses in order to limit other expenses to a specified percentage
of the average daily net assets of certain Funds on an annualized basis. For
its services, CIMCO is entitled to receive base investment advisory fees at an
annualized rate, based on the average daily net assets of each Fund as
follows:
"OTHER TOTAL
ADVISORY EXPENSE" EXPENSE
FEES CAP CAP
-------- -------- -------
Constellation Clover Large Cap Value Fund 0.74% 0.50%(1) 1.24%(2)
Constellation Clover Core Value Fund 0.74 0.50(1) 1.24(2)
Constellation Clover Small Cap Value Fund 0.85 0.50(1) 1.35(3)
Constellation Clover Core Fixed Income Fund 0.45 0.35(1) 0.80
Constellation Chartwell Ultra Short Duration Fixed Income Fund -- Class I Shares 0.25 0.24(4) 0.49(5)
Constellation Chartwell Ultra Short Duration Fixed Income Fund -- Class II Shares 0.25 0.49(4) 0.74(6)
Constellation Chartwell Short Duration Fixed Income Fund -- Class I Shares 0.25 0.24(4) 0.49(5)
Constellation Chartwell Short Duration Fixed Income Fund -- Class II Shares 0.25 0.49(4) 0.74(6)
Constellation Chartwell High Yield Fund 0.55 0.35(4) 0.90(7)
Constellation HLAM Large Cap Value Fund 0.70 0.50(4) 1.20
Constellation Pitcairn Diversified Value Fund 0.70 0.40(8) 1.10(9)
Constellation Pitcairn Select Value Fund 0.70 0.45(8) 1.15(10)
Constellation Pitcairn Diversified Growth Fund 0.70 0.40(8) 1.10(9)
Constellation Pitcairn Small Cap Fund 0.70 0.40(8)(11) 1.10(9)
Constellation Pitcairn Family Heritage(R) Fund 0.90 0.40(8) 1.30(12)
Constellation Pitcairn Taxable Bond Fund 0.40 0.50(8) 0.90(13)
Constellation Pitcairn Tax-Exempt Bond Fund 0.30 0.40(8) 0.70(14)
Constellation Sands Capital Select Growth Fund -- Class I Shares 0.85 0.25(8) 1.10
Constellation Sands Capital Select Growth Fund -- Class II Shares 0.85 0.50(8) 1.35(15)
Constellation TIP Small Cap Value Opportunities Fund 0.95 0.50(4) 1.45
Constellation TIP Tax Managed U.S. Equity Fund 0.75 0.50(4) 1.25
Constellation International Equity Fund 0.95 0.50(8)(11) 1.45(16)
Constellation Strategic Value and High Income Fund 0.10 0.15(4) 0.25
(1) Represents a voluntary cap.
(2) Effective May 10, 2004, the Board agreed to decrease the total expense cap
from 1.25% to 1.24%.
(3) Effective May 10, 2004, the Board agreed to decrease the total expense cap
from 1.40% to 1.35%.
(4) Represents a contractual cap effective through January 31, 2006.
(5) Effective February 1, 2004, the Board agreed to increase the total expense
cap from 0.41% to 0.49%.
(6) Effective February 1, 2004, the Board agreed to increase the total expense
cap from 0.66% to 0.74%.
(7) Effective May 10, 2004, the Board agreed to increase the total expense cap
from 0.80% to 0.90%.
(8) Represents a contractual cap effective through July 31, 2007.
(9) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 1.00% to 1.10%.
(10) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 1.00% to 1.15%.
(11) This fee waiver obligation will be reduced by up to 0.01% to the extent
that the Fund earns revenues from securities lending activities. See the
Funds' Prospectus for additional information.
(12) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 1.20% to 1.30%.
(13) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 0.70% to 0.90%.
(14) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 0.60% to 0.70%.
(15) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 1.15% to 1.35%.
(16) Effective August 2, 2004, the Board agreed to increase the total expense
cap from 1.25% to 1.45%.
132 | Constellation Funds 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
Prior to August 2, 2004, the Former Pitcairn Funds were parties to an expense
limitation agreement with Pitcairn Investment Management. Pursuant to the
agreement, Pitcairn Investment Management agreed to waive or limit its fees
and assume other expenses so that the total annual operating expenses of the
Funds were limited to a specified percentage of the average daily net assets
of each Fund, throughout its fiscal year ended October 31. The limitation was
net of securities lending revenue, if any, and exclusive of interest, taxes,
brokerage fees and commissions, and extraordinary expenses.
For the Constellation TIP Financial Services and Constellation TIP Healthcare
& Biotechnology Funds, the advisory fees are comprised of a base fee and a
performance adjustment that increases or decreases the total fee depending
upon the performance of the Fund relative to the Fund's performance benchmark.
Effective May 10, 2004, the Fund's base fee is accrued daily and paid monthly,
based on the Fund's average net assets during the current month. Prior to May
10, 2004, the Fund's base fee was accrued daily and paid monthly based on
average net assets during the performance period, which was then multiplied by
a fraction, the numerator of which was the number of days in the month and
denominator of which was 365 (366 in leap years). The performance period
consists of the current month plus the previous 11 months.
The performance adjustment is calculated and paid monthly by comparing the
Fund's performance to that of the Fund's performance benchmark over the
12-month performance period. The annual performance adjustment is multiplied
by the average net assets of the Fund over the entire performance period,
which is then multiplied by a fraction, the numerator of which is the number
of days in the month and the denominator of which is 365 (366 in leap years).
The resulting amount is then added to (in the case of overperformance) or
subtracted from (in the case of underperformance) the base fee.
In cases where the advisory fee is comprised of a base fee and a performance
adjustment, CIMCO has voluntarily agreed to waive all or a portion of its fee
and to reimburse expenses in order to keep such Fund's "other expenses" from
exceeding a specified percentage of the average daily net assets of the Fund
on an annualized basis. Accordingly, the base advisory fee, annual adjustment
rate, benchmark, over/under performance relative to the benchmark threshold,
and other expense cap are as follows:
BASE ANNUAL OTHER
ADVISORY ADJUSTMENT BENCHMARK EXPENSES
FEE RATE BENCHMARK THRESHOLD(1) CAP
-------- ---------- ---------- --------- --------
Constellation TIP
Financial S&P
Services Financials
Fund 1.00% +/-0.25% Index +/-3.01% 0.40%
Constellation TIP
Healthcare & S&P
Biotechnology Healthcare
Fund 1.00 +/-0.25 Index +/-3.01 0.75
(1) See the Funds' Prospectus and Statement of Additional Information for more
information regarding the Funds' benchmark performance.
During the year ended September 30, 2004, the Funds' advisory fees were
adjusted in accordance with the policy described above:
BASE NET ADVISER
ADVISER PERFORMANCE FEE BEFORE
FEE ADJUSTMENT WAIVERS
-------- ----------- -----------
Constellation TIP
Financial Services
Fund $172,587 $11,565 $184,152
Constellation TIP
Healthcare &
Biotechnology Fund 212,703 37,948 250,651
Beginning May 1, 2005 for the remaining Former Turner Funds and the
Constellation HLAM Large Cap Value Fund and August 1, 2005 for the Former
Pitcairn Funds, the Funds' advisory fees will be subject to adjustment, up or
down, based on the Funds' performance relative to the performance of the
Funds' benchmark. See the Funds' Prospectus and Statement of Additional
Information for more information regarding the Funds' benchmark performance.
Prior to May 10, 2004, Turner Investment Partners, Inc. served as investment
adviser to the Former Turner Funds under the same adviser fee structure listed
above, except for the Constellation TIP Small Cap Value Opportunities Fund.
Prior to May 10, 2004, Turner Investment Management, LLC served as investment
adviser to the Constellation TIP Small Cap Value Opportunities Fund under the
same adviser fee structure listed above.
Prior to August 2, 2004, Pitcairn Investment Management served as investment
adviser to the Former Pitcairn Funds under the same adviser fee structure
listed above.
CIMCO has entered into investment sub-advisory agreements with the following
parties:
Clover Capital Management, Inc.
- -------------------------------
Constellation Clover Large Cap Value Fund
Constellation Clover Core Value Fund
Constellation Clover Small Cap Value Fund
Constellation Clover Core Fixed Income Fund
Chartwell Investment Partners
- -----------------------------
Constellation Chartwell Ultra Short Duration Fixed
Income Fund
Constellation Chartwell Short Duration Fixed Income Fund
Constellation Chartwell High Yield Fund
Hilliard Lyons Asset Management
- -------------------------------
Constellation HLAM Large Cap Value Fund
Pitcairn Investment Management
- ------------------------------
Constellation Pitcairn Diversified Value Fund
Constellation Pitcairn Select Value Fund
Constellation Pitcairn Diversified Growth Fund
Constellation Pitcairn Small Cap Fund
Constellation Pitcairn Family Heritage(R) Fund
Constellation Pitcairn Taxable Bond Fund
Constellation Pitcairn Tax-Exempt Bond Fund
Constellation Funds 2004 Annual Report | 133
NOTES TO FINANCIAL STATEMENTS
Sands Capital Management, Inc.
- ------------------------------
Constellation Sands Capital Select Growth Fund
Turner Investment Partners, Inc.
- --------------------------------
Constellation TIP Small Cap Value Opportunities Fund
Constellation TIP Financial Services Fund
Constellation TIP Healthcare & Biotechnology Fund
Constellation TIP Tax Managed U.S. Equity Fund
Constellation Strategic Value and High Income Fund
Oechsle International Advisors, LLC
- -----------------------------------
Constellation International Equity Fund
The Boston Company Asset Management, LLC
- ----------------------------------------
Constellation International Equity Fund
Brandywine Asset Management, LLC
- --------------------------------
Constellation International Equity Fund
CIMCO pays sub-advisory fees to each Sub-Adviser from its advisory fee, if
any. Similar to the advisory fee paid to CIMCO, the sub-advisory fee paid to
Clover Capital Management, Inc., Chartwell Investment Partners, Pitcairn
Investment Management, Sands Capital Management, Inc., Brandywine Asset
Management, LLC and Turner Investment Partners, Inc. can increase or decrease
depending on a Fund's performance relative to its benchmark. The sub-advisory
fees paid to Oechsle International Advisors, LLC and The Boston Company Asset
Management, LLC are not subject to a performance adjustment.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales and
maturities, other than short-term investments, for the period ended
September 30, 2004, were as follows:
SALES
AND
PURCHASES MATURITIES
(000) (000)
--------- ----------
Constellation Clover Large Cap Value Fund $ 5,144 $ 4,526
Constellation Clover Core Value Fund 32,269 30,039
Constellation Clover Small Cap Value Fund 335,851 293,214
Constellation Chartwell High Yield Fund 20,522 19,904
Constellation HLAM Large Cap
Value Fund 1,495 60
Constellation Pitcairn Diversified
Value Fund 111,444 115,782
Constellation Pitcairn Select Value Fund 66,945 66,761
Constellation Pitcairn Diversified
Growth Fund 60,509 53,474
Constellation Pitcairn Small Cap Fund 66,033 72,243
Constellation Pitcairn Family
Heritage(R) Fund 14,374 17,036
Constellation Pitcairn Tax-Exempt
Bond Fund 29,584 26,685
Constellation Sands Capital Select
Growth Fund 55,853 7,783
Constellation TIP Small Cap Value Opportunities Fund 47,927 42,822
Constellation TIP Financial Services Fund 16,570 20,584
Constellation TIP Healthcare &
Biotechnology Fund 56,298 36,717
Constellation TIP Tax Managed U.S.
Equity Fund 5,776 6,658
Constellation International Equity Fund 63,016 63,891
Constellation Strategic Value and High
Income Fund 14,017 14,341
SALES AND
MATURITIES
PURCHASES (000) (000)
GOV'T OTHER GOV'T OTHER
-------- ------ -------- -------
Constellation Clover Core Fixed Income Fund $ 9,672 $5,919 $ 17,525 $ 7,788
Constellation Chartwell
Ultra Short Duration
Fixed Income Fund 107,280 3,770 236,075 13,378
Constellation Chartwell
Short Duration
Fixed Income Fund 145,189 8,709 204,311 30,036
Constellation Pitcairn Taxable Bond Fund 1,494 9,501 1,876 9,325
7. FEDERAL TAX POLICIES AND INFORMATION:
Each of the Funds is classified as a separate taxable entity for Federal
income tax purposes. Each of the Funds intends to continue to qualify as a
separate "regulated investment company" under the Internal Revenue Code and
make the requisite distributions to shareholders that will be sufficient to
relieve it from Federal income tax and Federal excise tax. Therefore, no
Federal tax provision is required. To the extent that distributions from net
investment income and net realized capital gains exceed amounts reported in
the financial statements, such amounts are reported separately.
The amounts of distributions from net investment income and net realized
capital gains are determined in accordance with Federal income tax
regulations, which may differ from those amounts determined under accounting
principles generally accepted in the United States of America. These book/tax
differences are either temporary or permanent in nature. These differences are
primarily due to wash sales, net operating losses, adjustments due to
investments in Passive Foreign Investment Companies, REITs, paydowns,
equalization and return of capital. The character of distributions made during
the year from net investment income or net realized gains, and the timing of
distributions where the fiscal year in which the amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded
by the Fund. To the extent these differences are permanent, adjustments are
made to the appropriate equity accounts in the period that the differences
arise.
134 | Constellation Funds 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
Accordingly, the following permanent differences have been reclassified to/
from the following accounts (000):
UNDISTRIBUTED ACCUMULATED
FUND NET INVESTMENT INCOME NET REALIZED GAIN PAID-IN-CAPITAL
- ---- --------------------- ----------------- ---------------
Constellation Clover Core Value Fund $ (1) $ 1 $ -
Constellation Clover Small Cap Value Fund 1,121 33 (1,154)
Constellation Clover Core Fixed Income Fund 91 (91) -
Constellation Chartwell Ultra Short Duration Fixed Income Fund 307 (307) -
Constellation Chartwell Short Duration Fixed Income Fund 643 (643) -
Constellation Pitcairn Diversified Value Fund (31) 31 -
Constellation Pitcairn Diversified Growth Fund 2 - (2)
Constellation Pitcairn Small Cap Fund 219 14 (233)
Constellation Pitcairn Family Heritage(R) Fund (3) 8 (5)
Constellation Pitcairn Taxable Bond Fund (14) 14 -
Constellation Sands Capital Select Growth Fund 638 - (638)
Constellation TIP Small Cap Value Opportunities Fund 41 (41) -
Constellation TIP Financial Services Fund 40 (40) -
Constellation TIP Healthcare & Biotechnology Fund 256 (256) -
Constellation TIP Tax Managed U.S. Equity Fund 15 - (15)
Constellation International Equity Fund 371 (371) -
Constellation Strategic Value and High Income Fund - (294) 294
Constellation Funds 2004 Annual Report | 135
NOTES TO FINANCIAL STATEMENTS
The tax character of dividends and distributions declared during the periods
ended September 30, 2004 and September 30, 2003 (unless otherwise noted) were
as follows (000):
ORDINARY LONG-TERM TAX EXEMPT RETURN OF
INCOME CAPITAL GAIN INCOME CAPITAL TOTAL
-------- ------------ ---------- --------- -------
Constellation Clover Large Cap Value Fund
2004 $ 42 $ - $ - $ - $ 42
2003 39 - - - 39
Constellation Clover Core Value Fund
2004 468 1,442 - - 1,910
2003 189 - - - 189
Constellation Clover Small Cap Value Fund
2004 652 - - - 652
2003 315 - - 109 424
Constellation Clover Core Fixed Income Fund
2004 1,530 - - - 1,530
2003 1,934 108 - - 2,042
Constellation Chartwell Ultra Short Duration Fixed Income Fund
2004 8,779 - - - 8,779
2003 10,584 483 - - 11,067
Constellation Chartwell Short Duration Fixed Income Fund
2004 5,810 - - - 5,810
2003 8,475 563 - - 9,038
Constellation Chartwell High Yield Fund
2004 753 - - - 753
2003 709 - - - 709
Constellation HLAM Large Cap Value Fund
2004(1) 2 - - - 2
Constellation Pitcairn Diversified Value Fund
2004(2) 1,559 - - - 1,559
2003 1,782 - - - 1,782
2002 1,613 - - - 1,613
Constellation Pitcairn Select Value Fund
2004(2) 492 902 - - 1,394
2003 509 - - - 509
2002 516 - - - 516
Constellation Pitcairn Diversified Growth Fund
2004(2) 46 - - - 46
2003 - - - - -
2002 - - - - -
Constellation Pitcairn Small Cap Fund
2004(2) - 3 - - 3
2003 17 - - - 17
2002 494 - - - 494
Constellation Pitcairn Family Heritage(R) Fund
2004(2) 38 - - 2 40
2003 - - - - -
2002 - - - - -
Constellation Pitcairn Taxable Bond Fund
2004(2) 1,725 - - - 1,725
2003 1,858 - - - 1,858
2002 2,275 - - - 2,275
Constellation Pitcairn Tax-Exempt Bond Fund
2004(2) 41 432 4,034 - 4,507
2003 12 294 4,611 - 4,917
2002 50 11 4,690 - 4,751
Constellation TIP Small Cap Value Opportunities Fund
2004 223 - - - 223
2003 1 - - - 1
Constellation TIP Financial Services Fund
2004 1,642 111 - - 1,753
2003 - 136 - - 136
Constellation TIP Healthcare & Biotechnology Fund
2004 5 9 - - 14
2003 - - - - -
Constellation International Equity Fund
2004(2) 2,621 - - - 2,621
2003 459 - - - 459
2002 1,095 - - - 1,095
Constellation Strategic Value and High Income Fund
2004 125 - - - 125
2003(3) 4 - - - 4
(1) Commenced operations April 30, 2004.
(2) From the period November 1, 2003 through September 30, 2004. The Fund
changed its fiscal year end from October 31 to September 30.
(3) Commenced operations October 31, 2002.
136 | Constellation Funds 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
As of September 30, 2004, the components of distributable earnings
(accumulated losses) on a tax basis were as follows (000):
TOTAL
DISTRIBUTABLE
CAPITAL POST- UNREALIZED OTHER EARNINGS
ORDINARY LONG-TERM TAX-EXEMPT LOSS OCTOBER APPRECIATION TEMPORARY (ACCUMULATED
INCOME CAPITAL GAIN INCOME CARRYFORWARD LOSSES (DEPRECIATION) DIFFERENCES LOSSES)
-------- ------------ ---------- ------------ ------- -------------- ----------- -------------
Constellation
Clover Large
Cap Value Fund $ 13 $ - $ - $ (484) $ - $ 272 $ (13) $ (212)
Constellation
Clover Core
Value Fund 51 4,076 - - - 10,671 (45) 14,753
Constellation
Clover Small
Cap Value Fund - - - (11,559) - 64,985 - 53,426
Constellation
Clover Core
Fixed Income
Fund 110 394 - - - 1,024 (108) 1,420
Constellation
Chartwell
Ultra Short
Duration Fixed
Income Fund 754 - - (6,719) (229) 2,107 (757) (4,844)
Constellation
Chartwell
Short Duration
Fixed Income
Fund 453 - - (1,994) (112) 505 (454) (1,602)
Constellation
Chartwell High
Yield Fund 54 - - (15,154) - 85 (53) (15,068)
Constellation
HLAM Large Cap
Value Fund 1 - - - - (3) (1) (3)
Constellation
Pitcairn
Diversified
Value Fund 330 - - (172) - 17,457 (330) 17,285
Constellation
Pitcairn
Select Value
Fund 103 306 - - - 8,058 (103) 8,364
Constellation
Pitcairn
Diversified
Growth Fund - - - (70,034) (2,107) (8,858) - (80,999)
Constellation
Pitcairn Small
Cap Fund - 731 - - - 15,451 - 16,182
Constellation
Pitcairn
Family
Heritage(R)
Fund - - - (13,032) (6,010) 13,908 - (5,134)
Constellation
Pitcairn
Taxable Bond
Fund 145 - - (491) - 2,409 (145) 1,918
Constellation
Pitcairn
Tax-Exempt
Bond Fund - 716 367 - - 8,333 (350) 9,066
Constellation
Sands Capital
Select Growth
Fund - - - (26,265) - 8,637 - (17,628)
Constellation
TIP Small Cap
Value
Opportunities
Fund 1,597 279 - - - 1,834 - 3,710
Constellation
TIP Financial
Services Fund 726 330 - - - 1,881 - 2,937
Constellation
TIP Healthcare
&
Biotechnology
Fund 163 932 - - - 1,128 - 2,223
Constellation
TIP Tax
Managed U.S.
Equity Fund - - - (1,996) - 699 - (1,297)
Constellation
International
Equity Fund 211 - - (37,045) (61) 11,424 (1) (25,472)
Constellation
Strategic
Value and High
Income Fund 223 2 - - - 86 (5) 306
Post-October losses represent losses realized on investment transactions from
November 1, 2003 through September 30, 2004 that, in accordance with Federal
income tax regulations, a Fund may elect to defer and treat as having arisen
in the following year. For Federal income tax purposes, capital loss
carryforwards may be carried forward and applied against future capital gains.
Constellation Funds 2004 Annual Report | 137
NOTES TO FINANCIAL STATEMENTS
At September 30, 2004, the Funds had capital loss carryforwards available to
offset future realized capital gains through the indicated expiration dates
(000):
EXPIRING SEPTEMBER 30,
-----------------------------------------------------------------
2007 2008 2009 2010 2011 2012 TOTAL
---- ------ ------- ------- ------- ------ -------
Constellation Clover Large Cap Value Fund $ - $ - $ - $ 196 $ 288 $ - $ 484
Constellation Clover Small Cap Value Fund - - - - 11,559 - 11,559
Constellation Chartwell Ultra Short Duration Fixed Income Fund - - - - - 6,719 6,719
Constellation Chartwell Short Duration Fixed Income Fund - - - - - 1,994 1,994
Constellation Chartwell High Yield Fund 565 2,916 2,590 4,590 4,493 - 15,154
Constellation Pitcairn Diversified Value Fund - - - - 172 - 172
Constellation Pitcairn Diversified Growth Fund - - 23,304 35,399 11,331 - 70,034
Constellation Pitcairn Family Heritage(R) Fund - 1,614 3,678 2,799 4,941 - 13,032
Constellation Pitcairn Taxable Bond Fund - - - 491 - - 491
Constellation Sands Capital Select Growth Fund - - 8,179 12,366 5,720 - 26,265
Constellation TIP Tax Managed U.S. Equity Fund - - - 179 1,817 - 1,996
Constellation International Equity Fund - - 4,428 24,091 8,526 - 37,045
During the year ended September 30, 2004, the following Funds utilized capital
loss carryforwards to offset capital gains:
FUND AMOUNT
- ---- -----------
Constellation Clover Large Cap Value Fund $ 188,939
Constellation Clover Small Cap Value Fund 42,082,156
Constellation Clover Core Fixed Income Fund 5,536
Constellation Chartwell High Yield Fund 576,132
Constellation Pitcairn Diversified Value Fund 7,072,106
Constellation Pitcairn Select Value Fund 4,731,191
Constellation Pitcairn Diversified Growth Fund 2,785,056
Constellation Pitcairn Small Cap Fund 12,891,786
Constellation Pitcairn Taxable Bond Fund 672,266
Constellation Sands Capital Select Growth Fund 1,024,064
Constellation TIP Healthcare & Biotechnology Fund 94,064
Constellation TIP Tax Managed U.S. Equity Fund 691,319
Constellation International Equity Fund 11,912,492
At September 30, 2004, the total cost of securities for Federal income tax
purposes and the aggregate gross unrealized appreciation and depreciation for
the securities held by the Funds were as follows (000):
NET
FEDERAL UNREALIZED
TAX UNREALIZED UNREALIZED APPRECIATION
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- -------- ------------ ------------ --------------
Constellation Clover Large Cap Value Fund $ 6,184 $ 606 $ (334) $ 272
Constellation Clover Core Value Fund 57,673 11,611 (940) 10,671
Constellation Clover Small Cap Value Fund 663,808 90,425 (25,440) 64,985
Constellation Clover Core Fixed Income Fund 30,920 1,083 (59) 1,024
Constellation Chartwell Ultra Short Duration Fixed Income Fund 398,293 2,347 (240) 2,107
Constellation Chartwell Short Duration Fixed Income Fund 174,197 1,022 (517) 505
Constellation Chartwell High Yield Fund 9,973 193 (108) 85
Constellation HLAM Large Cap Value Fund 1,444 47 (50) (3)
Constellation Pitcairn Diversified Value Fund 134,725 20,440 (2,983) 17,457
Constellation Pitcairn Select Value Fund 53,869 8,616 (558) 8,058
Constellation Pitcairn Diversified Growth Fund 113,485 9,155 (18,013) (8,858)
Constellation Pitcairn Small Cap Fund 76,273 19,576 (4,125) 15,451
Constellation Pitcairn Family Heritage(R) Fund 64,254 21,086 (7,178) 13,908
Constellation Pitcairn Taxable Bond Fund 40,340 2,473 (64) 2,409
Constellation Pitcairn Tax-Exempt Bond Fund 104,191 8,387 (54) 8,333
Constellation Sands Capital Select Growth Fund 91,313 16,568 (7,931) 8,637
Constellation TIP Small Cap Value Opportunities Fund 15,684 1,941 (107) 1,834
Constellation TIP Financial Services Fund 15,938 2,047 (166) 1,881
Constellation TIP Healthcare & Biotechnology Fund 40,191 2,754 (1,626) 1,128
Constellation TIP Tax Managed U.S. Equity Fund 4,456 768 (69) 699
Constellation International Equity Fund 91,845 14,089 (2,692) 11,397
Constellation Strategic Value and High Income Fund 622 86 -- 86
138 | Constellation Funds 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
8. CONCENTRATIONS/RISKS:
Certain Funds invest a high percentage of their assets in specific sectors of
the market in order to achieve a potentially greater investment return. As a
result, the Funds may be more susceptible to economic, political, and
regulatory developments in a particular sector of the market, positive or
negative, and may experience increased volatility on the Fund's net asset
value and magnified effect on the total return.
The Constellation International Equity Fund invests in securities of foreign
issuers in various countries. These investments may involve certain
considerations and risks not typically associated with investments in the
United States of America, as a result of, among other factors, the possibility
of future political and economic developments and the level of governmental
supervision and regulation of securities markets in the respective countries.
The Funds enter into contracts that contain a variety of indemnifications. The
Funds' maximum exposure under these arrangements is unknown. However, the
Funds have not had prior claims or losses pursuant to these contracts and
expect the risk of loss to be remote.
9. LOANS OF PORTFOLIO SECURITIES:
The Funds may lend securities in their portfolio pursuant to a securities
lending agreement ("Lending Agreement") with Goldman Sachs & Co. Unless
otherwise agreed, security loans made pursuant to the Lending Agreement are
required at all times to be secured by collateral equal to at least 100% of
the market value of the securities loaned. Cash collateral received is
invested pursuant to the terms approved by the Board. All such investments are
made at the risk of the Funds and, as such, the Funds are liable for
investment losses. The Funds are receiving an annual fee for their
participation in the Lending Agreement which is allocated among participating
Funds based on estimated lending activity.
In the event of bankruptcy of the borrower, realization/retention of the
collateral may be subject to legal proceedings.
Cash collateral received in connection with securities lending is invested in
Boston Global Investment Trust--Quality Portfolio. The Quality Portfolio is
exempt from registration under Section 3(c)(7) of the Investment Company Act
of 1940 and is managed by Goldman Sachs Asset Management ("GSAM"), for which
GSAM receives an investment advisory fee. The Quality Portfolio invests in
high quality money market instruments. The Funds bear the risk of incurring a
loss from the investment of cash collateral due to either credit or market
factors.
Prior to August 2, 2004, the Former Pitcairn Funds were parties to a separate
securities lending agreement. The borrower paid the lending Fund income
accrued thereon, and the Fund invested cash collateral in permissible
securities, thereby earning additional income.
10. FUND REORGANIZATION:
The Trustees of the Pitcairn Small Cap Fund unanimously approved a Plan of
Reorganization which resulted in the transfer of all the assets and
liabilities of the Pitcairn Small Cap Fund to the Pitcairn Small Cap Core Fund
in exchange for shares of the Pitcairn Small Cap Core Fund after the close of
business of October 31, 2002. The shareholders of the Pitcairn Small Cap Fund
exchanged 5,536,781 shares and received 2,602,903 shares of the Pitcairn Small
Cap Core Fund with an aggregate value of $25,687,425.
The value of the Pitcairn Small Cap Fund on October 31, 2002 was $25,687,425
which included $4,381,612 in unrealized depreciation and $23,046,960 in
accumulated net realized losses. Upon the business combination of the Funds
after the close of business on October 31, 2002, the value of the Pitcairn
Small Cap Core Fund was $75,783,828. The Pitcairn Small Cap Core Fund changed
its name to the Pitcairn Small Cap Fund.
11. LINE OF CREDIT:
Prior to August 2, 2004, the Former Pitcairn Funds were parties to a revolving
line of credit facility to be used by the Funds for temporary and emergency
purposes. Borrowings under the line of credit bore interest at the Federal
Funds Rate plus 0.50% per annum. During the period ended September 30, 2004,
the following fund borrowed under the agreement:
WEIGHTED WEIGHTED
MAXIMUM AVERAGE LOAN INTEREST AVERAGE
BORROWING BALANCE DATE PAID RATE
----------- ------------ --------- -------- --------
12/18/03-
International Equity Fund $10,000,000 $8,543,902 01/27/04 $14,256 1.70%
12. SUBSEQUENT EVENT:
On November 8, 2004, the shareholders of the Constellation Funds approved the
reorganization of the Hilliard Lyons Growth Fund with and into the
Constellation HLAM Large Cap Quality Growth Fund, a newly formed series of the
Constellation Funds. The Constellation HLAM Large Cap Quality Growth Fund will
be substantially similar to the Hilliard Lyons Growth Fund. Each shareholder
will receive a number of shares of the Constellation HLAM Large Cap Quality
Growth Fund equal in dollar value to the shares of the Hilliard Lyons Growth
Fund owned at the time of reorganization.
13. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (UNAUDITED):
On June 14, 2004, Ernst & Young LLP (E&Y) was dismissed as independent
registered public accounting firm for the Funds. KPMG LLP (KPMG) was selected
as the Funds' independent registered public accounting firm. The Funds'
selection of KPMG as its independent registered public accounting firm was
recommended by the Funds' audit committee and was approved by the Funds' Board
of Trustees.
The reports of the financial statements audited by E&Y for the Funds and their
predecessor entities for each of the years in the five-year period ended
September 30, 2003 did not contain an adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles. There were no disagreements between the Funds and E&Y
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to the satisfaction of E&Y would have caused it to make reference to
the subject matter of the disagreements in connection with its reports on the
financial statements of such years.
Constellation Funds 2004 Annual Report | 139
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES
AND SHAREHOLDERS OF CONSTELLATION FUNDS:
We have audited the accompanying statements of net assets of the Constellation
Clover Large Cap Value Fund, Constellation Clover Core Value Fund,
Constellation Clover Small Cap Value Fund, Constellation Clover Core Fixed
Income Fund, Constellation Chartwell Ultra Short Duration Fixed Income Fund,
Constellation Chartwell Short Duration Fixed Income Fund, Constellation
Chartwell High Yield Fund, Constellation TIP Financial Services Fund,
Constellation TIP Healthcare & Biotechnology Fund, Constellation TIP Tax
Managed U.S. Equity Fund and Constellation Strategic Value and High Income
Fund (collectively the "Former Turner Funds"), the Constellation Pitcairn
Diversified Value Fund, Constellation Pitcairn Select Value Fund,
Constellation Pitcairn Diversified Growth Fund, Constellation Pitcairn Small
Cap Fund, Constellation Pitcairn Family Heritage Fund, Constellation Pitcairn
Taxable Bond Fund, Constellation Pitcairn Tax-Exempt Bond Fund, Constellation
Sands Capital Select Growth Fund and Constellation International Equity Fund
(collectively the "Former Pitcairn Funds") and Constellation HLAM Large Cap
Value Fund and the statement of assets and liabilities, including the
schedule of investments, of Constellation TIP Small Cap Value Opportunities
Fund, (a Former Turner Fund), twenty-two of the funds constituting
Constellation Funds (collectively, the "Constellation Funds"), as of September
30, 2004 and the related statements of operations, statements of changes in
net assets and financial highlights for the year or period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial statements and financial highlights of the Former Turner Funds for
periods prior to September 30, 2004 were audited by other auditors. Those
auditors expressed an unqualified opinion on those financial statements and
financial highlights in their reports dated November 13, 2003. The financial
statements and financial highlights of the Former Pitcairn Funds for periods
prior to September 30, 2004 were audited by other auditors. Those auditors
expressed an unqualified opinion on those financial statements and financial
highlights in their report dated December 12, 2003.
We conducted our audits in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 2004,
by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Constellation Funds as of September 30, 2004 and the results of their
operations, the changes in their net assets and their financial highlights for
the year or period ended September 30, 2004 in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Philadelphia, Pennsylvania
November 19, 2004
140 | Constellation Funds 2004 Annual Report
NOTICE TO SHAREHOLDERS (UNAUDITED)
For shareholders that do not have a September 30, 2004 tax year end, this
notice is for informational purposes only. For shareholders with a September
30, 2004 year end, please consult you tax advisor as to the pertinance of this
notice. For the fiscal year ended September 30, 2004, each Fund is designating
the following items with regard to distributions paid during the year.
LONG- LONG-
TERM TERM
(20% RATE) (15% RATE) QUALIFIED
CAPITAL CAPITAL 5 YEAR ORDINARY TAX-
GAIN GAIN GAIN INCOME EXEMPT
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS INTEREST
------------- ------------- ------------- ------------- --------
Constellation Clover Large Cap Value Fund ........... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Clover Core Value Fund ................ 18.29% 58.41% 0.00% 23.30% 0.00%
Constellation Clover Small Cap Value Fund ........... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Clover Core Fixed Income Fund ......... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Chartwell Ultra Short Duration
Fixed Income Fund ................................. 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Chartwell Short Duration Fixed
Income Fund ....................................... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Chartwell High Yield Fund ............. 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation HLAM Large Cap Value Fund ............. 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Pitcairn Diversified Value Fund ....... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Pitcairn Select Value Fund ............ 0.00% 69.86% 0.00% 30.14% 0.00%
Constellation Pitcairn Diversified Growth Fund ...... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Pitcairn Small Cap Fund ............... 0.00% 100.00% 0.00% 0.00% 0.00%
Constellation Pitcairn Family Heritage(R) Fund ...... 0.00% 0.00% 0.00% 94.40% 0.00%
Constellation Pitcairn Taxable Bond Fund ............ 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Pitcairn Tax-Exempt Bond Fund ......... 4.39% 5.12% 0.00% 0.89% 89.60%
Constellation Sands Capital Select Growth Fund ...... 0.00% 0.00% 0.00% 0.00% 0.00%
Constellation TIP Small Cap Value Opportunities
Fund .............................................. 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation TIP Financial Services Fund ........... 0.00% 6.34% 0.00% 93.66% 0.00%
Constellation TIP Healthcare & Biotechnology Fund ... 0.00% 61.26% 0.00% 38.74% 0.00%
Constellation TIP Tax Managed U.S. Equity Fund ...... 0.00% 0.00% 0.00% 0.00% 0.00%
Constellation International Equity Fund(3) .......... 0.00% 0.00% 0.00% 100.00% 0.00%
Constellation Strategic Value and High Income Fund .. 0.00% 0.58% 0.00% 99.42% 0.00%
DIVIDENDS
QUALIFYING
FOR
CORPORATE
RETURN DIVIDENDS QUALIFYING
OF CAPITAL TOTAL RECEIVABLE DIVIDENDS
DISTRIBUTION DISTRIBUTIONS DEDUCTION(1) INCOME(2)
------------ ------------- ------------ ---------
Constellation Clover Large Cap Value Fund ........... 0.00% 100.00% 100.00% 100.00%
Constellation Clover Core Value Fund ................ 0.00% 100.00% 100.00% 99.99%
Constellation Clover Small Cap Value Fund ........... 0.00% 100.00% 0.00% 0.00%
Constellation Clover Core Fixed Income Fund ......... 0.00% 100.00% 0.00% 0.00%
Constellation Chartwell Ultra Short Duration
Fixed Income Fund ................................. 0.00% 100.00% 0.00% 0.00%
Constellation Chartwell Short Duration Fixed
Income Fund ....................................... 0.00% 100.00% 0.00% 0.00%
Constellation Chartwell High Yield Fund ............. 0.00% 100.00% 0.00% 0.00%
Constellation HLAM Large Cap Value Fund ............. 0.00% 100.00% 100.00% 100.00%
Constellation Pitcairn Diversified Value Fund ....... 0.00% 100.00% 100.00% 100.00%
Constellation Pitcairn Select Value Fund ............ 0.00% 100.00% 100.00% 100.00%
Constellation Pitcairn Diversified Growth Fund ...... 0.00% 100.00% 100.00% 100.00%
Constellation Pitcairn Small Cap Fund ............... 0.00% 100.00% 0.00% 0.00%
Constellation Pitcairn Family Heritage(R) Fund ...... 5.60% 100.00% 100.00% 100.00%
Constellation Pitcairn Taxable Bond Fund ............ 0.00% 100.00% 0.00% 0.00%
Constellation Pitcairn Tax-Exempt Bond Fund ......... 0.00% 100.00% 0.00% 0.00%
Constellation Sands Capital Select Growth Fund ...... 0.00% 0.00% 0.00% 0.00%
Constellation TIP Small Cap Value Opportunities
Fund .............................................. 0.00% 100.00% 12.97% 7.02%
Constellation TIP Financial Services Fund ........... 0.00% 100.00% 15.29% 11.05%
Constellation TIP Healthcare & Biotechnology Fund ... 0.00% 100.00% 62.87% 62.72%
Constellation TIP Tax Managed U.S. Equity Fund ...... 0.00% 0.00% 0.00% 0.00%
Constellation International Equity Fund(3) .......... 0.00% 100.00% 0.00% 100.00%
Constellation Strategic Value and High Income Fund .. 0.00% 100.00% 12.56% 12.49%
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected a percentage of "Ordinary
Income Distributions".
(2) The percentage in this column represents the amount of "Qualifying Dividend
Income" as created by the Jobs and Growth Tax Relief Reconciliation Act of
2003 and is reflected as a percentage of "Ordinary Income Distributions".
It is the intention of each of the aforementioned Funds to designate the
maximum amount permitted by law.
(3) The Fund intends to pass through a foreign tax credit to shareholders. For
the fiscal year ended September 30, 2004, the total amount of foreign
source income is $1,884,026. The total amount of foreign taxes paid is
$239,075. Your allocable share of the foreign tax credit will be reported
on Form 1099 DIV.
The information reported herein may differ from the information and
distributions taxable to the shareholders for the calendar year ending December
31, 2004. Complete information will be computed and reported in conjunction with
your 2004 Form 1099-DIV.
Constellation Funds 2004 Annual Report | 141
TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
INTERESTED TRUSTEE*
John H. Grady, Jr.
ADDRESS Constellation Investment Management Company, LP,
Berywn, PA 19312
DATE OF BIRTH 6/1/61
POSITION HELD
WITH FUND Trustee and President; Chairman of the Board
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
President and CEO of CIMCO since 2003. Executive Vice President & Secretary
from 2001 to 2003 - General Counsel, Chief Legal Officer of Turner from 2001
to 2003. CID President, Chief Operating Officer since September 2001. Partner,
Morgan, Lewis & Bockius LLP (law firm) (October 1995 - January 2001).
NUMBER OF PORTFOLIOS
IN COMPLEX OVERSEEN
BY TRUSTEE 23
* Mr. Grady is deemed to be an "Interested Trustee" by virtue of his
relationship with Constellation Investment Management Company, LP.
NON-INTERESTED TRUSTEES
Ronald Filante
ADDRESS 51 Verdum Avenue, New Rochelle, NY 10804
DATE OF BIRTH 11/19/45
POSITION HELD
WITH FUND Trustee
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Associate Professor of Finance, Pace University, since 1987.
NUMBER OF PORTFOLIOS
IN COMPLEX OVERSEEN
BY TRUSTEE 23
Alfred C. Salvato
ADDRESS 13 Fountain Court, Cherry Hill, NJ 08034
DATE OF BIRTH 1/9/58
POSITION HELD
WITH FUND Trustee
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Treasurer, Thomas Jefferson University, since 1995, and Assistant Treasurer,
1988-1995.
NUMBER OF PORTFOLIOS
IN COMPLEX OVERSEEN
BY TRUSTEE 23
Janet F. Sansone
ADDRESS 1023 North Pitt Street, Alexandria, VA 22314-1525
DATE OF BIRTH 8/11/45
POSITION HELD
WITH FUND Trustee since 2004
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Executive Director, JFS Consulting. Consultant since 1999. Senior Vice
President of Human Resources of Frontier Corporation (telecommunications
company), (1993-1999).
NUMBER OF PORTFOLIOS
IN COMPLEX OVERSEEN
BY TRUSTEE 23
142 | Constellation Funds 2004 Annual Report
TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
EXECUTIVE OFFICERS
Peter Golden
ADDRESS SEI Investments, Oaks PA, 19456
DATE OF BIRTH 6/27/64
POSITIONS HELD
WITH FUND Controller and Chief Financial Officer since 2001
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Director of Funds Accounting of SEI Investments (investment management
company) since June 2001; Previously, Vice President of Fund Administration,
J.P. Morgan Chase & Co. (investment bank), March 2000 to April 2001; Vice
President, Fund and Pension Accounting, Chase Manhattan Bank (investment
bank), June 1997 to March 2000.
Lydia A. Gavalis
ADDRESS SEI Investments, Oaks PA, 19456
DATE OF BIRTH 6/5/64
POSITIONS HELD
WITH FUND Vice President and Assistant Secretary since 1999
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Vice President and Assistant Secretary of SEI Investments (investment
management company) since 1998.
Timothy D. Barto
ADDRESS SEI Investments, Oaks PA, 19456
DATE OF BIRTH 3/28/68
POSITIONS HELD
WITH FUND Vice President and Assistant Secretary since 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Employed by SEI Investments since October 1999. Vice President and Assistant
Secretary of SEI Investments (investment management company) since December
1999. Associate at Dechert Price & Rhoads (law firm) (1997-1999).
Christine M. McCullough
ADDRESS SEI Investments, Oaks PA, 19456
DATE OF BIRTH 12/2/60
POSITIONS HELD
WITH FUND Vice President and Assistant Secretary since 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Employed by SEI Investments (investment management company) since November 1,
1999. Vice President and Assistant Secretary of SEI Investments since December
1999. Associate at White and Williams LLP (law firm) (1991-1999).
Antoinette C. Robbins
ADDRESS Constellation Investment Management Company, LP,
Berywn, PA 19312
DATE OF BIRTH 3/23/63
POSITION HELD
WITH FUND Vice President since 2004
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Employed by CIMCO as Vice President and Director of Compliance since 2004.
Previously, Vice President and Director of Compliance of Turner Investment
Partners, Inc. (investment management company) (2002-2004). Senior Gift
Planning Officer, American Civil Liberties Union (2001-2002). Assistant Vice
President and Counsel, Equitable Life Assurance Society of the United States
(insurance company) (1996-2002).
Constellation Funds 2004 Annual Report | 143
TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
John J. Canning
ADDRESS Constellation Investment Management Company, LP,
Berywn, PA 19312
DATE OF BIRTH 11/15/70
POSITIONS HELD
WITH FUND Vice President and Chief Compliance Officer since
2004
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Employed by CIMCO as Vice President and Director of Mutual Fund Administration
and Operations since 2004. Previously, Assistant Director of Mutual Fund
Administration and Operations, Sub-Advisory Institutional Service Product
Manager for Turner Investment Partners, Inc. (investment management company)
(2000-2004). Portfolio Implementation Analyst, SEI Investments (investment
management company) (1998-2000).
Rami Livelsberger
ADDRESS Constellation Investment Management Company, LP,
Berywn, PA 19312
DATE OF BIRTH 11/14/74
POSITIONS HELD
WITH FUND Vice President and Assistant Secretary since 2004
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Employed by CIMCO as Vice President, Fund Governance since 2004. Previously,
Compliance Officer, Legal Assistant for Turner Investment Partners, Inc.
(investment management company) (2001-2004). Legal Assistant, Morgan Lewis &
Bockius LLP (law firm) (1999-2001).
Saeed A. Franklin
ADDRESS Constellation Investment Management Company, LP,
Berywn, PA 19312
DATE OF BIRTH 8/1/75
POSITIONS HELD
WITH FUND Vice President since 2004
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Employed by CIMCO as Vice President, Fund Administration; previously,
Performance Analyst, Turner Investment Partners, Inc. (investment management
company) (2003-2004). Performance Analyst, ING Variable Annuities (an
insurance company) (2001-2003). Senior Fund Accountant, Bank of New York
(investment bank) (1999-2001). Fund Accountant, PFPC Inc. (investment
management company) (1997-1999).
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Trustees and Officers. The SAI may be obtained without
charge by calling 1-866-242-5742.
144 | Constellation Funds 2004 Annual Report
SHAREHOLDER VOTING RESULTS (UNAUDITED)
There was a special meeting of shareholders held on April 23, 2004, at which
the shareholders of each Former Turner Fund were asked to approve the
reorganization of the Funds with and into the corresponding series of the
Constellation Funds.
Turner Large Cap Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 391,458 99.1% 64.5%
Against 3,407 0.9% 0.6%
Abstain - 0.0% 0.0%
------------ ----------- -----------
394,865 100.0% 65.1%
Turner Small Cap Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 11,941,437 96.6% 55.5%
Against 298,489 2.4% 1.4%
Abstain 128,501 1.0% 0.6%
------------ ----------- -----------
12,368,427 100.0% 57.5%
Turner Ultra Short Duration Fixed Income Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 21,495,639 94.4% 53.3%
Against 703,570 3.1% 1.7%
Abstain 565,043 2.5% 1.4%
------------ ----------- -----------
22,764,252 100.0% 56.4%
Turner High Yield Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 1,579,741 99.8% 51.3%
Against - 0.0% 0.0%
Abstain 3,568 0.2% 0.1%
------------ ----------- -----------
1,583,309 100.0% 51.4%
Turner Financial Services Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 658,385 96.6% 56.6%
Against 19,805 2.9% 1.7%
Abstain 3,432 0.5% 0.3%
------------ ----------- -----------
681,622 100.0% 58.6%
Turner Tax Managed U.S. Equity Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 625,087 99.9% 97.5%
Against 476 0.1% 0.1%
Abstain - 0.0% 0.0%
------------ ----------- -----------
625,563 100.0% 97.6%
Turner Core Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 1,965,291 95.6% 57.8%
Against 59,154 2.9% 1.7%
Abstain 30,303 1.5% 0.9%
------------ ----------- -----------
2,054,748 100.0% 60.4%
Turner Core Fixed Income Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 1,986,707 96.0% 52.9%
Against 27,405 1.3% 0.7%
Abstain 55,656 2.7% 1.5%
------------ ----------- -----------
2,069,768 100.0% 55.1%
Turner Short Duration Fixed Income Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 10,924,917 94.1% 52.3%
Against 435,982 3.8% 2.1%
Abstain 237,914 2.1% 1.1%
------------ ----------- -----------
11,598,813 100.0% 55.5%
Turner Small Cap Value Opportunities Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 1,060,796 97.9% 61.9%
Against 17,231 1.6% 1.0%
Abstain 6,056 0.5% 0.4%
------------ ----------- -----------
1,084,083 100.0% 63.3%
Turner Healthcare & Biotechnology Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 652,491 96.8% 51.1%
Against 14,131 2.1% 1.1%
Abstain 7,517 1.1% 0.6%
------------ ----------- -----------
674,139 100.0% 52.8%
Turner Strategic Value and High Income Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 347,200 97.7% 76.3%
Against 8,155 2.3% 1.8%
Abstain - 0.0% 0.0%
------------ ----------- -----------
355,355 100.0% 78.1%
Constellation Funds 2004 Annual Report | 145
SHAREHOLDER VOTING RESULTS (UNAUDITED)
There was a special meeting of shareholders held on May 20, 2004, at which the
shareholders of each Former Pitcairn Fund were asked to consider several
proposals:
1. To approve a proposal to reorganize the Funds with and into the
corresponding series of the Constellation Funds.
Pitcairn Diversified Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,757,302 100.0% 94.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,757,302 100.0% 94.0%
Pitcairn Diversified Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 17,896,803 100.0% 94.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
17,896,803 100.0% 94.2%
Pitcairn Family Heritage(R) Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,758,520 100.0% 93.7%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,758,520 100.0% 93.7%
Pitcairn Tax-Exempt Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,995,625 100.0% 77.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,995,625 100.0% 77.0%
Pitcairn International Equity Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,357,649 100.0% 82.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,357,649 100.0% 82.2%
Pitcairn Select Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,359,505 100.0% 96.6%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,359,505 100.0% 96.6%
Pitcairn Small Cap Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,775,433 100.0% 94.4%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,775,433 100.0% 94.4%
Pitcairn Taxable Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 2,564,253 100.0% 64.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
2,564,253 100.0% 64.0%
Pitcairn Select Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,917,107 99.1% 64.5%
Against 9,461 0.1% 0.1%
Abstain 61,954 0.8% 0.5%
------------ ----------- -----------
7,988,522 100.0% 65.1%
2. To approve a new investment advisory agreement with Constellation
Investment Management Company, LP ("CIMCO").
Pitcairn Diversified Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,757,302 100.0% 94.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,757,302 100.0% 94.0%
Pitcairn Select Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,359,505 100.0% 96.6%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,359,505 100.0% 96.6%
146 | Constellation Funds 2004 Annual Report
SHAREHOLDER VOTING RESULTS (UNAUDITED)
Pitcairn Diversified Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 17,896,803 100.0% 94.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
17,896,803 100.0% 94.2%
Pitcairn Family Heritage(R) Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,758,520 100.0% 93.7%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,758,520 100.0% 93.7%
Pitcairn Tax-Exempt Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,995,625 100.0% 77.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,995,625 100.0% 77.0%
Pitcairn International Equity Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,357,649 100.0% 82.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,357,649 100.0% 82.2%
Pitcairn Small Cap Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,775,433 100.0% 94.4%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,775,433 100.0% 94.4%
Pitairn Taxable Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 2,564,253 100.0% 64.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
2,564,253 100.0% 64.0%
Pitcairn Select Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,906,007 99.0% 64.4%
Against 9,461 0.1% 0.1%
Abstain 72,984 0.9% 0.6%
------------ ----------- -----------
7,988,452 100.0% 65.1%
3. To approve a new investment sub-advisory agreement between CIMCO and
Pitcairn Investment Management.
Pitcairn Diversified Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,757,302 100.0% 94.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,757,302 100.0% 94.0%
Pitcairn Diversified Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 17,896,803 100.0% 94.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
17,896,803 100.0% 94.2%
Pitcairn Family Heritage(R) Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,758,520 100.0% 93.7%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,758,520 100.0% 93.7%
Pitcairn Select Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,359,505 100.0% 96.6%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,359,505 100.0% 96.6%
Pitcairn Small Cap Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,775,433 100.0% 94.4%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,775,433 100.0% 94.4%
Pitairn Taxable Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 2,564,253 100.0% 64.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
2,564,253 100.0% 64.0%
Constellation Funds 2004 Annual Report | 147
SHAREHOLDER VOTING RESULTS (UNAUDITED)
Pitcairn Tax-Exempt Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,995,625 100.0% 77.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,995,625 100.0% 77.0%
Pitcairn International Equity Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,357,649 100.0% 82.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,357,649 100.0% 82.2%
Pitcairn Select Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,906,077 99.0% 64.4%
Against 9,461 0.1% 0.1%
Abstain 72,984 0.9% 0.6%
------------ ----------- -----------
7,988,522 100.0% 65.1%
4. To approve a distribution and shareholder services plan with Constellation
Investment Distribution Company, Inc.
Pitcairn Diversified Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,757,302 100.0% 94.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,757,302 100.0% 94.0%
Pitcairn Diversified Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 17,896,803 100.0% 94.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
17,896,803 100.0% 94.2%
Pitcairn Family Heritage(R) Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,758,520 100.0% 93.7%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,758,520 100.0% 93.7%
Pitcairn Tax-Exempt Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,995,625 100.0% 77.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
7,995,625 100.0% 77.0%
Pitcairn International Equity Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 12,357,649 100.0% 82.2%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
12,357,649 100.0% 82.2%
Pitcairn Select Value Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,359,505 100.0% 96.6%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,359,505 100.0% 96.6%
Pitcairn Small Cap Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 5,775,433 100.0% 94.4%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
5,775,433 100.0% 94.4%
Pitairn Taxable Bond Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 2,564,253 100.0% 64.0%
Against - 0.0% 0.0%
Abstain - 0.0% 0.0%
------------ ----------- -----------
2,564,253 100.0% 64.0%
Pitcairn Select Growth Fund
% of Shares % of Shares
Shares Voted Voted Outstanding
------------ ----------- -----------
For 7,917,107 99.1% 64.5%
Against 9,461 0.1% 0.1%
Abstain 61,954 0.8% 0.5%
------------ ----------- -----------
7,988,522 100.0% 65.1%
148 | Constellation Funds 2004 Annual Report
INVESTMENT ADVISER
Constellation Investment Management Company, LP
Berwyn, Pennsylvania
DISTRIBUTOR
Constellation Investment Distribution Company Inc.
Berwyn, Pennsylvania
ADMINISTRATOR
Constellation Investment Management Company, LP
Berwyn, Pennsylvania
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, Pennsylvania
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Philadelphia, Pennsylvania
This report was prepared for sharholders of the Constellation Funds. It may be
distributed to others only if preceded or accompanied by a Constellation Funds'
prospectus, which contains detailed information. All Constellation Funds are
offered by prospectus only.
Beginning on the fiscal quarter ended December 31, 2004, the Trust will file
each Funds' complete schedule of portfolio holdings with the Securities and
Exchange Commission for the first and third quarters of each fiscal year on Form
N-Q within sixty days after the end of the period. The Fund's Forms N-Q will be
available on the Commission's website at http://www.sec.gov, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities, as well as information
relating to how a Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30, is available (i) without charge, upon
request, (i) via the Fund's website, www.constellationfundsgroup.com; and (ii)
on the Commission's website at http://www.sec.gov.
CONSTELLATION FUNDS
P.O. Box 219520
Kansas City, Missouri 64105-9520
1 (866) 242 5742
www.constellationfundsgroup.com
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer and principal
accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the Constellation Funds has determined that the Board's
Audit Committee does not have an "audit committee financial expert," as the
Securities and Exchange Commission has defined that term. After carefully
considering all of the factors involved in the definition of "audit committee
financial expert," the Board determined that none of the members of the audit
committee met all five qualifications in the definition, although some members
of the Audit Committees met many of the qualifications. The Board also
determined that, given the size and type of the Constellation Funds and of the
nature of the accounting and valuation issues they have presented, it did not
appear that the Audit Committee members lacked any necessary skills, and
concluded that it was not necessary to appoint an audit committee financial
expert to the Audit Committee. Finally, the Board of Trustees indicated that
whether a candidate for a new or replacement Trustee position qualified as an
audit committee financial expert would be given due consideration by the Board
in determining whether to nominate and/or select such candidate.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Effective April 9, 2004, the Board of Trustees of the Alpha Select Funds
approved a change in the name of the Trust to the Constellation Funds. On June
14, 2004 the Funds' Board of Trustees dismissed Ernst & Young LLP as independent
auditor for the Funds and selected KPMG LLP as independent auditors to the
Funds. For the fiscal year ended September 30, 2004, the aggregate Audit Fees
billed by KPMG LLP for professional services rendered for the audits of the
financial statements, or services that are normally provided in connection with
statutory and regulatory filings or engagements for the fiscal year for the
Constellation Funds are shown in the table below.
- ------------------ -----------------------------------------------------
2004(1)
- ------------------ -----------------------------------------------------
All fees and All fees and All other fees
services to the services to and services to
Trust that were service service
pre-approved affiliates that affiliates that
were pre- did not require
approved pre-approval
- ------- ---------- ----------------- ----------------- -----------------
(a) Audit $347,000 $0 $0
Fees(2)
- ------- ---------- ----------------- ----------------- -----------------
(b) Audit-Related $0 $0 $0
Fees
- ------- ---------- ----------------- ----------------- -----------------
(c) Tax Fees $40,000 $0 $0
- ------- ---------- ----------------- ----------------- -----------------
(d) All $0 $0 $0
Other
Fees
- ------- ---------- ----------------- ----------------- -----------------
Notes:
(1) Prior to April 9, 2004, the Constellation Funds (the "Trust") operated
as the Alpha Select Funds and consisted of only one mutual fund, the
Target Select Equity Fund. The name change was approved by the Trust's
Board of Trustees on January 26, 2004. As of September 30, 2004, the
Trust consisted of 24 mutual funds and generated higher audit costs in
2004 than were generated in 2003.
(2) Audit fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings.
Ernst & Young LLP did not serve as the Constellation Funds auditor for the
fiscal year 2004. For the fiscal year ended September 30, 2003, the audit fees
billed by Ernst & Young LLP for professional services rendered for the audits of
the financial statements, or services that are normally provided in connection
with statutory and regulatory filings or engagements for the Alpha Select Funds
are as follows:
Audit Fees (4a)
Audit fees for the Alpha Select Funds totaled $16,000 in 2003, including fees
associated with the annual audit and filing of the Trust's N-1A.
Audit Related Fees (4b)
None
Tax Fees (4c)
None
Other Fees (4d)
None
(e)(1) The trust's Audit Committee has adopted policies and procedures to, among
other purposes, provide a framework for the Audit Committee's consideration of
non-audit services by the Registrant's audit firms. The policies and procedures
require pre-approving all audit and permitted non-audit services the independent
auditor provides to the Fund, and all services that the independent auditor
provides to the Fund's investment adviser(s) and advisory affiliates (whether or
not directly related to the Fund's operations and financial reporting); except
that (a) services provided to a sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser, and
(b) de minimis non-audit services, shall not require pre-approval. A non-audit
service is de minimis if: (a) the total amount of the non-audit service is not
more than 5% percent of the total amount of revenues paid to the auditor by the
Fund, its investment adviser, and advisory affiliates that provide ongoing
services to the Trust for services otherwise requiring audit committee
pre-approval during the fiscal year in which the non-audit service was provided;
(b) the Trust did not recognize these services as non-audit services at the time
they were provided; and (c) these services are promptly brought to the attention
of the Committee and the Committee approves them before the audit is complete.
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
---------------------------- ----------------- ----------------
2004 2003
---------------------------- ----------------- ----------------
Audit-Related Fees 0% 0%
---------------------------- ----------------- ----------------
Tax Fees 0% 0%
---------------------------- ----------------- ----------------
(f) Not applicable
(g) The aggregate non-audit fees and services billed by KPMG LLP for fiscal year
ended September 30, 2004 were $0. The aggregate non-audit fees and services
billed by Ernst & Young LLP for the fiscal year ended September 30, 2003 were
$229,512. These fees were primarily for tax compliance and other services to the
Registrant's former investment adviser, Turner Investment Partners, Inc. and its
subsidiaries.
(h) The audit committee is required to pre-approve services to certain entities
to the extent that the services are determined to have a direct impact on the
operations or financial reporting of the Funds. This includes services rendered
to the adviser (excluding sub-advisers) and any entity controlling, controlled
by or under common control with the adviser that provides ongoing services to
the registrant (hereafter referred to as "affiliates"). There were no services
provided to affiliates requiring pre-approval by the committee.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end management investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end management investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable. Effective for closed-end management investment companies for
fiscal years ending on or after December 31, 2005
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable to open-end management investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On March 22, 2004, the shareholders of the Trust's then-sole series, the Target
Select Equity Fund, approved a change in the Fund's investment adviser to
Constellation Investment Management Company, LP ("CIMCO"), approved a new
sub-advisory agreement between CIMCO and Turner Investment Partners, Inc.
("TIP"), and approved a new distribution agreement with Constellation Investment
Distribution Company, Inc. On May 7, 2004, the sole shareholder of the
Constellation Clover Large Cap Value Fund, Constellation Clover Core Value Fund,
Constellation Clover Small Cap Value Fund, Constellation Clover Core Fixed
Income Fund, Constellation Chartwell Ultra Short Duration Fixed Income Fund,
Constellation Chartwell Short Duration Fixed Income Fund, Constellation
Chartwell High Yield Fund, Constellation TIP Small Cap Value Opportunities Fund,
Constellation TIP Financial Services Fund, Constellation TIP Healthcare &
Biotechnology Fund, Constellation TIP Tax Managed U.S. Equity Fund and
Constellation Strategic Value and High Income Fund approved new advisory and
sub-advisory agreements with (or relating to) CIMCO and the following firms:
TIP, Clover Capital Management, Inc. and Chartwell Investment Partners. On
August 1, 2004, the sole shareholders of the Constellation Pitcairn Diversified
Value Fund, Constellation Pitcairn Select Value Fund, Constellation Pitcairn
Diversified Growth Fund, Constellation Pitcairn Small Cap Fund, Constellation
Pitcairn Family Heritage(R) Fund, Constellation Pitcairn Taxable Bond Fund,
Constellation Pitcairn Tax-Exempt Bond Fund, Constellation Sands Capital Select
Growth Fund and Constellation International Equity Fund approved advisory and
sub-advisory agreements with (or relating to) CIMCO and the following firms:
Pitcairn Investment Management, Sands Capital Management, Inc., Oechsle
International Advisors, LLC, The Boston Company Asset Management, LLC and
Brandywine Asset Management, LLC.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Constellation Funds
By (Signature and Title)* /s/ John H. Grady, Jr.
-----------------------------------
John H. Grady, Jr., President & CEO
Date 11/26/04
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ John H. Grady, Jr.
-----------------------------------
John H. Grady, Jr., President & CEO
Date 11/26/04
By (Signature and Title)* /s/ Peter J. Golden
-----------------------------------
Peter J. Golden, Controller & CFO
Date 11/26/04
* Print the name and title of each signing officer under his or her signature.
CONSTELLATION FUNDS
CODE OF ETHICS
--------------
Adopted Under Rule 17j-1
While affirming its confidence in the integrity and good faith of
all of its officers and trustees, Alpha Select Funds (the "Trust"), recognizes
that the knowledge of present or future portfolio transactions and, in certain
instances, the power to influence portfolio transactions which may be possessed
by certain of its officers, employees and trustees could place such individuals,
if they engage in personal transactions in securities which are eligible for
investment by the Trust, in a position where their personal interest may
conflict with that of the Trust.
In view of the foregoing and of the provisions of Rule 17j-1(b)(1)
under the Investment Company Act of 1940 (the "1940 Act"), the Trust has
determined to adopt this Code of Ethics to specify and prohibit certain types of
transactions deemed to create conflicts of interest (or at least the potential
for or the appearance of such a conflict), and to establish reporting
requirements and enforcement procedures.
I. STATEMENT OF GENERAL PRINCIPLES.
In recognition of the trust and confidence placed in the Trust by
its shareholders, and to give effect to the Trust's belief that its operations
should be directed to the benefit of its shareholders, the Trust hereby adopts
the following general principles to guide the actions of its trustees, officers
and employees.
(1) The interests of the Trust's shareholders are paramount,
and all of the Trust's personnel must conduct themselves
and their operations to give maximum effect to this tenet
by assiduously placing the interests of the shareholders
before their own.
(2) All personal transactions in securities by the Trust's
personnel must be accomplished so as to avoid even the
appearance of a conflict of interest on the part of such
personnel with the interests of the Trust and its
shareholders.
(3) All of the Trust's personnel must avoid actions or
activities that allow (or appear to allow) a person to
profit or benefit from his or her position with respect to
the Trust, or that otherwise bring into question the
person's independence or judgment.
II. DEFINITIONS.
(1) "Access Person" shall mean (i) each trustee or officer of
the Trust, (ii) each employee of the Trust (or of any
company in a control relationship to the Trust) who, in
connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding
the purchase or sale of a security by the Trust or any
series thereof (each a "Fund"), or whose functions relate
to the making of any recommendations with respect to such
purchases or sales, and (iii) any natural person in a
control relationship to the Trust who obtains information
concerning recommendations made to or by the Trust with
respect to the purchase or sale of a security by any Fund,
or whose functions relate to the making of any
recommendations with respect to such purchases or sales;
(iv) each director, officer or general partner of any
principal underwriter for the Trust, but only where such
person in the ordinary course either makes, participates
in, or obtains information regarding the purchase or sale
of securities by the Fund(s), or whose functions relate to
the making of recommendations regarding securities to the
Fund(s); and (v) any natural person in a control
relationship with a Fund or any of the Funds' advisers or
sub-advisers who obtain information concerning
recommendations made to the Funds with regard to the
purchase or sale of a security.
(2) "Beneficial ownership" of a security is to be determined
in the same manner as it is for purposes of Section 16 of
the Securities Exchange Act of 1934. This means that a
person should generally consider himself the beneficial
owner of any securities in which he has a direct or
indirect pecuniary interest. In addition, a person should
consider himself the beneficial owner of securities held
by his spouse, his minor children, a relative who shares
his home, or other persons by reason of any contract,
arrangement, understanding or relationship that provides
him with sole or shared voting or investment power.
(3) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides
that "control" means the power to exercise a controlling
influence over the management or policies of a company,
unless such power is solely the result of an official
position with such company. Ownership of 25% or more of a
company's outstanding voting security is presumed to give
the holder thereof control over the company. Such
presumption may be countered by the facts and
circumstances of a given situation.
(4) "Independent Trustee" means a Trustee of the Trust who is
not an "interested person" of the Trust within the meaning
of Section 2(a)(19) of the 1940 Act.
(5) "Initial Public Offering" ("IPO") means an offering of
Securities registered under the Securities Act of 1933,
the issuer of which, immediately before registration, was
not subject to the reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934.
(6) "Private Placement" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to
Section 4(2) or Section 4(6) in the Securities Act of
1933.
(7) "Special Purpose Investment Personnel" means each Access
Person who, in connection with his or her regular
functions (including, where appropriate, attendance at
Board meetings and other meetings at which the official
business of the Trust or any Fund thereof is discussed or
carried on), obtains contemporaneous information regarding
the purchase or sale of a security by a Fund. Special
Purpose Investment Personnel shall occupy this status only
with respect to those securities as to which he or she
obtains such contemporaneous information.
(8) "Purchase or sale of a security" includes, among other
things, the writing of an option to purchase or sell a
security.
(9) "Security" shall have the same meaning as that set forth
in Section 2(a)(36) of the 1940 Act, except that it shall
not include securities issued by the Government of the
United States or an agency thereof, bankers' acceptances,
bank certificates of deposit, commercial paper and
registered, open-end mutual funds and high quality
short-term debt instruments, including repurchase
agreements.
(10) A Security "held or to be acquired" by the Trust or any
Fund means (A) any Security which, within the most recent
fifteen days, (i) is or has been held by the Trust or any
Fund thereof, or (ii) is being or has been considered by a
Fund's investment adviser for purchase by the Fund; and
(B) any option to purchase or sell and any Security
convertible into or exchangeable for any Security
described in (A) above.
(11) A Security is "being purchased or sold" by the Trust from
the time when a purchase or sale program has been
communicated to the person who places the buy and sell
orders for the Trust until the time when such program has
been fully completed or terminated.
III. PROHIBITED PURCHASES AND SALES OF SECURITIES.
(1) No Access Person shall, in connection with the purchase or
sale, directly or indirectly, by such person of a Security
held or to be acquired by any Fund of the Trust:
(A) employ any device, scheme or artifice to defraud
such Fund;
(B) make to such Fund any untrue statement of a
material fact or omit to state to such Fund a
material fact necessary in order to make the
statements made, in light of the circumstances
under which they are made, not misleading;
(C) engage in any act, practice or course of business
which would operate as a fraud or deceit upon such
Fund; or
(D) engage in any manipulative practice with respect
to Fund.
(2) No Special Purpose Investment Personnel may purchase or
sell, directly or indirectly, any Security as to which
such person is a Special Purpose Investment Personnel in
which he had (or by reason of such transaction acquires)
any Beneficial Ownership at any time within 7 calendar
days before or after the time that the same (or a related)
Security is being purchased or sold by any Fund.
(3) No Special Purpose Investment Personnel may sell a
Security as which he or she is a Special Purpose
Investment Personnel within 60 days of acquiring
beneficial ownership of that Security.
IV. ADDITIONAL RESTRICTIONS AND REQUIREMENTS
(1) Pre-approval of IPOs and Private Placements - Each Access
Person must obtain approval from the Review Officer before
acquiring beneficial ownership of any securities offered
in connection with an IPO or a Private Placement.
(2) No Access Person shall accept or receive any gift of more
than de minimis value from any person or entity that does
business with or on behalf of the Trust.
(3) Each Access Person (other than the Trust's Independent
Trustees and its Trustees and officers who are not
currently affiliated with or employed by the Trust's
investment adviser or principal underwriter) who is not
required to provide such information under the terms of a
code of ethics described in Section VII hereof must
provide to the Review Officer a complete listing of all
securities owned by such person as of the end of a
calendar quarter. The initial listing must be submitted no
later than January 31, 2001 (or within 10 days of the date
upon which such person first becomes an Access Person of
the Trust), and each update thereafter must be provided no
later than 30 days after the start of the subsequent year.
V. REPORTING OBLIGATIONS.
(1) Each Access Person (other than the Trust's Independent
Trustees) shall report all transactions in Securities in
which the person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership.
Reports shall be filed with the Review Officer quarterly.
The Review Officer shall submit confidential quarterly
reports with respect to his or her own personal securities
transactions to an officer designated to receive his or
her reports ("Alternate Review Officer"), who shall act in
all respects in the manner prescribed herein for the
Review Officer.
(2) Every report shall be made not later than 10 days after
the end of the calendar quarter in which the transaction
to which the report relates was effected, and shall
contain the following information:
(A) The date of the transaction, the title and the
number of shares or the principal amount of each
security involved;
(B) The nature of the transaction (i.e., purchase,
sale or any other type of acquisition or
disposition);
(C) The price at which the transaction was effected;
(D) The name of the broker, dealer or bank with or
through whom the transaction was effected; and
(E) The date the report was submitted by the Access
Person.
(3) In the event no reportable transactions occurred during
the quarter, the report should be so noted and returned
signed and dated
(4) An Access Person who would otherwise be required to report
his or her transactions under this Code shall not be
required to file reports pursuant to this Section VI where
such person is required to file reports pursuant to a code
of ethics described in Section VII, hereof.
(5) An Independent Trustee shall report transactions in
Securities only if the Trustee knew at the time of the
transaction or, in the ordinary course of fulfilling his
or her official duties as a trustee, should have known,
that during the 15 day period immediately preceding or
following the date of the transaction, such security was
purchased or sold, or was being considered for purchase or
sale, by the Trust. (The "should have known" standard
implies no duty of inquiry, does not presume there should
have been any deduction or extrapolation from discussions
or memoranda dealing with tactics to be employed meeting a
Fund's investment objectives, or that any knowledge is to
be imputed because of prior knowledge of a Fund's
portfolio holdings, market considerations, or a Fund's
investment policies, objectives and restrictions.)
(6) Any such report may contain a statement that the report
shall not be construed as an admission by the person
making such report that he has any direct or indirect
beneficial ownership in the security to which the report
relates.
(7) Each Independent Trustee shall report the name of any
publicly-owned company (or any company anticipating a
public offering of its equity securities) and the total
number of its shares beneficially owned by him or her if
such total ownership is more than 1/2 of 1% of the
company's outstanding shares. Such report shall be made
promptly after the date on which the Trustee's ownership
interest equaled or exceeded 1/2 of 1%.
VI. REVIEW AND ENFORCEMENT.
(1) The Review Officer shall compare all reported personal
securities transactions with completed portfolio
transactions of the Trust and a list of securities being
considered for purchase or sale by the Trust's adviser(s)
and sub-adviser(s) to determine whether a violation of
this Code may have occurred. Before making any
determination that a violation has been committed by any
person, the Review Officer shall give such person an
opportunity to supply additional explanatory material.
(2) If the Review Officer determines that a violation of this
Code may have occurred, he shall submit his written
determination, together with the confidential monthly
report and any additional explanatory material provided by
the individual, to the President of the Trust and outside
counsel, who shall make an independent determination as to
whether a violation has occurred.
(3) If the President and outside counsel find that a violation
has occurred, the President shall impose upon the
individual such sanctions as he or she deems appropriate
and shall report the violation and the sanction imposed to
the Board of Trustees of the Trust.
(4) No person shall participate in a determination of whether
he has committed a violation of the Code or of the
imposition of any sanction against himself. If a
securities transaction of the President is under
consideration, any Vice President shall act in all
respects in the manner prescribed herein for the
President.
VII. INVESTMENT ADVISER'S, ADMINISTRATOR'S OR PRINCIPAL UNDERWRITER'S
CODE OF ETHICS.
Each investment adviser (including, where applicable, any
sub-adviser), administrator or manager (where applicable), and principal
underwriter of the Trust shall:
(1) Submit to the Board of Trustees of the Trust a copy of its
code of ethics adopted pursuant to Rule 17j-1, which code
shall comply with the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing
or be accompanied by a written statement explaining any
differences and supplying the rationale therefor;
(2) Promptly report to the appropriate Trust in writing any
material amendments to such code of ethics;
(3) Promptly furnish to the Trust upon request copies of any
reports made pursuant to such Code by any person who is an
Access Person as to the Trust; and
(4) Shall immediately furnish to the Trust, without request,
all material information regarding any violation of such
Code by any person who is an Access Person as to the
Trust.
VIII. ANNUAL WRITTEN REPORT TO THE BOARD.
At least once a year, the Review Officer will provide the Board of
Trustees a written report that includes:
(1) ISSUES ARISING UNDER THE CODE - The Report will describe
any issue(s) that arose during the previous year under the
Code, including any material Code violations, and any
resulting sanction(s).
(2) CERTIFICATION - The Report will certify to the Board of
Trustees that the each Trust has adopted measures
reasonably necessary to prevent its personnel from
violating the Code currently and in the future.
IX. RECORDS.
The Trust shall maintain records in the manner and to the extent
set forth below, which records may be maintained under the conditions described
in Rule 31a-2 under the Investment Company Act and shall be available for
examination by representatives of the Securities and Exchange Commission.
(1) A copy of this Code and any other code which is, or at any
time within the past five years has been, in effect shall
be preserved in an easily accessible place;
(2) A record of any violation of this Code and of any action
taken as a result of such violation shall be preserved in
an easily accessible place for a period of not less than
five years following the end of the fiscal year in which
the violation occurs;
(3) A copy of each report made by an officer or trustee
pursuant to this Code shall be preserved for a period of
not less than five years from the end of the fiscal year
in which it is made, the first two years in an easily
accessible place; and
(4) A list of all persons who are, or within the past five
years have been, required to make reports pursuant to this
Code shall be maintained in an easily accessible place.
(5) A copy of each annual report to the Board of Trustees will
be maintained for at least five years from the end of the
fiscal year in which it is made, the first two years in an
easily accessible place; and
(6) A record of any decision, and the reasons supporting the
decision, to approve the acquisition of Securities in an
IPO or a Private Placement, shall be preserved for at
least five years after the end of the fiscal year in which
the approval is granted.
X. MISCELLANEOUS
(1) Confidentiality. All reports of securities transactions
and any other information filed with the Trust pursuant to
this Code shall be treated as confidential.
(2) Interpretation of Provisions. The Board of Trustees may
from time to time adopt such interpretations of this Code
as it deems appropriate.
(3) Periodic Review and Reporting. The President of the Trust
shall report to the Board of Trustees at least annually as
to the operation of this Code and shall address in any
such report the need (if any) for further changes or
modifications to this Code.
Revised November 5, 2004