UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-08104
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, 2005
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[Constellation Funds Group LOGO]
ANNUAL REPORT
September 30, 2005
Constellation Clover Core Value Fund
Constellation Clover Small Cap Value Fund
Constellation Clover Core Fixed Income Fund
Constellation Clover Income Plus 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 Quality Stock 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 Mid Cap Fund
Constellation TIP Financial Services Fund
Constellation TIP Healthcare & Biotechnology Fund
Constellation International Equity Fund
Constellation Strategic Value and High Income Fund
Contents
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1 Letter to Shareholders
2 Performance
4 Disclosure of Fund Expenses
6 Investment Review: Constellation Clover Core Value Fund
8 Investment Review: Constellation Clover Small Cap Value Fund
10 Investment Review: Constellation Clover Core Fixed Income Fund
12 Investment Review: Constellation Clover Income Plus 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 Quality Stock 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 Mid Cap Fund
42 Investment Review: Constellation TIP Financial Services Fund
44 Investment Review: Constellation TIP Healthcare & Biotechnology 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
144 Report of Independent Registered Public Accounting Firm
145 Notice to Shareholders
146 Trustees and Officers of the Trust
148 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 Group, P.O. Box
219520, Kansas City, Missouri 64105-9520
Letter to Shareholders
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To our shareholders
November 18, 2005
Dear Shareholder:
Behind this letter is the Annual Report of the Constellation Funds. It contains
financial and other information regarding your investment through September 30,
2005. We hope that you find the commentary for each Fund helpful.
Thank you for your investment.
Sincerely,
/s/ John H. Grady
- ---------------------------------
John H. Grady,
President, Constellation Funds
Constellation Funds 2005 Annual Report 1
Performance
- --------------------------------------------------------------------------------
Total Returns of Constellation Funds
Through September 30, 2005
The performance data quoted represents past performance. Past performance is no
guarantee of future results. 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. Current performance may be lower or higher than
the performance data quoted. Please call (866) 242-5742 for the most recent
month-end performance information.
Net
Three Year to One Three Five Ten Since Assets
Months Date Year Years Years Years Inception ($mil)
- -----------------------------------------------------------------------------------------------------------------------
Constellation Clover Core Value Fund(1) 5.38 11.17 24.83 22.38 12.39 11.06 12.54 $171.25
Russell 3000 Value Index 3.81 5.57 16.78 20.81 6.42 11.59 13.17
Inception Date: 12/6/91
- -----------------------------------------------------------------------------------------------------------------------
Constellation Clover Small Cap Value Fund(1) 3.99 2.49 16.29 22.14 13.29 n/a 14.78 $450.01
Russell 2000 Value Index 3.09 4.02 17.75 24.89 15.18 n/a 13.33
Inception Date: 2/28/96
- -----------------------------------------------------------------------------------------------------------------------
Constellation Clover Core Fixed Income Fund (0.87) 1.78 2.27 2.87 5.82 6.02 6.61 $ 26.17
Lehman Aggregate Bond Index (0.68) 1.83 2.80 3.96 6.63 6.55 6.88
Inception Date: 12/6/91
- -----------------------------------------------------------------------------------------------------------------------
Constellation Clover Income Plus Fund 0.55 n/a n/a n/a n/a n/a 2.04 $ 4.94
S&P 500 Index 3.60 n/a n/a n/a n/a n/a 3.16
Lehman Aggregate Bond Index (0.68) n/a n/a n/a n/a n/a 1.79
Inception Date: 2/28/05
- -----------------------------------------------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration
Fixed Income Fund 0.76 2.22 2.67 1.90 3.13 4.66 4.82 $305.22
Merrill Lynch 3-Month U.S. Treasury Bill Index 0.83 2.13 2.62 1.68 2.48 3.90 4.08
Inception Date: 3/1/94
- -----------------------------------------------------------------------------------------------------------------------
Constellation Chartwell Short Duration
Fixed Income Fund 0.09 1.57 2.12 2.04 3.99 4.99 5.14 $112.83
Lehman 1-3 Year U.S. Government Bond Index 0.10 1.03 1.09 1.68 4.25 5.07 5.17
Inception Date: 3/1/94
- -----------------------------------------------------------------------------------------------------------------------
Constellation Chartwell High Yield Fund 1.64 0.15 3.60 11.27 (0.67) n/a (0.26) $ 6.36
Merrill Lynch High Yield, Cash Pay Index 0.91 2.14 6.69 15.36 7.74 n/a 5.56
Inception Date: 2/27/98
- -----------------------------------------------------------------------------------------------------------------------
Constellation HLAM Large Cap Quality
Stock Fund 2.92 (2.09) 5.70 8.22 (3.04) 6.30 7.26 $ 16.14
Russell 1000 Growth Index 4.01 2.22 11.60 14.74 (8.64) 6.89 8.42
Inception Date: 4/30/92
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Value Fund 3.55 4.01 13.47 18.61 5.31 n/a 5.72 $168.54
Russell 1000 Value Index 3.88 5.72 16.69 20.48 5.76 n/a 6.14
Inception Date: 8/4/00
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Select Value Fund 3.16 0.76 8.82 16.63 3.20 n/a 4.36 $ 65.40
Russell 1000 Value Index 3.88 5.72 16.69 20.48 5.76 n/a 5.95
Inception Date: 8/11/00
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Growth Fund 2.66 (0.85) 8.71 13.19 (9.53) n/a (9.94) $116.56
Russell 1000 Growth Index 4.01 2.22 11.60 14.74 (8.64) n/a (8.81)
Inception Date: 8/4/00
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Small Cap Fund(1) 2.17 (1.61) 8.69 18.17 10.65 n/a 10.86 $ 95.94
Russell 2000 Index 4.69 3.38 17.95 24.12 6.44 n/a 6.20
Inception Date: 8/25/00
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R) Fund 2.79 (0.70) 6.72 14.34 0.21 9.88 9.87 $ 84.45
Wilshire 5000 Index 3.89 3.91 14.65 18.43 (0.53) 9.43 10.72
Inception Date: 8/4/00(2)
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund (0.97) 0.94 1.50 4.01 6.06 5.90 6.99 $ 47.97
Lehman U.S. Government Credit Index (0.97) 1.74 2.56 4.13 6.89 6.59 7.89
Inception Date: 8/4/00(2)
- -----------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Bond Fund (0.55) 1.83 2.78 3.33 5.71 5.21 5.83 $111.58
Lehman Municipal Bond Index (0.12) 2.79 4.07 4.18 6.34 6.07 7.15
Inception Date: 8/11/00(2)
- -----------------------------------------------------------------------------------------------------------------------
2 Constellation Funds 2005 Annual Report
Performance
- --------------------------------------------------------------------------------
Net
Three Year to One Three Five Ten Since Assets
Months Date Year Years Years Years Inception ($mil)
- ----------------------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select
Growth Fund - Class I Shares 5.26 2.90 14.85 21.73 (3.11) n/a (4.69) $ 81.98
Russell 1000 Growth Index 4.01 2.22 11.60 14.74 (8.64) n/a (8.91)
Inception Date: 8/27/04(3)
- ----------------------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select
Growth Fund - Class II Shares 5.26 2.90 14.71 21.68 (3.13) n/a (4.71) $163.00
Russell 1000 Growth Index 4.01 2.22 11.60 14.74 (8.64) n/a (8.91)
Inception Date: 8/11/00
- ----------------------------------------------------------------------------------------------------------------------
Constellation TIP Small Cap Value
Opportunities Fund(1) 8.39 9.68 24.32 30.21 n/a n/a 22.20 $ 74.24
Russell 2000 Value Index 3.09 4.02 17.75 24.89 n/a n/a 13.31
Inception Date: 3/4/02
- ----------------------------------------------------------------------------------------------------------------------
Constellation TIP Mid Cap Fund(1) 9.70 18.53 35.24 n/a n/a n/a 29.29 $ 0.84
Russell Midcap Index 5.92 10.07 25.10 n/a n/a n/a 23.68
Inception Date: 1/2/03
- ----------------------------------------------------------------------------------------------------------------------
Constellation TIP Financial Services Fund(4) 3.65 2.61 18.27 21.78 4.92 n/a 12.89 $ 16.39
S&P 500 Financials Index 0.72 (1.60) 6.20 15.37 2.56 n/a 12.45
Inception Date: 5/22/96
- ----------------------------------------------------------------------------------------------------------------------
Constellation TIP Healthcare &
Biotechnology Fund(1)(4) 5.15 11.01 21.10 19.36 n/a n/a 11.91 $ 59.74
S&P 500 Healthcare Index 1.40 4.96 10.42 8.85 n/a n/a (1.03)
Inception Date: 2/28/01
- ----------------------------------------------------------------------------------------------------------------------
Constellation International Equity Fund 9.65 8.97 24.19 22.34 (0.89) 3.20 4.98 $127.93
MSCI All Country World ex-U.S. Index 11.83 12.19 29.48 27.19 4.81 6.61 7.11
Inception Date: 8/4/00(2)
- ----------------------------------------------------------------------------------------------------------------------
Constellation Strategic Value
and High Income Fund 5.57 5.34 14.22 n/a n/a n/a 20.05 $ 0.82
50/50 Blend of the Russell 2000 Value Index
and Merrill Lynch High Yield, Cash Pay Index 2.02 3.17 12.28 n/a n/a n/a 20.79
S&P 500 Index 3.60 2.76 12.25 n/a n/a n/a 13.89
Inception Date: 10/31/02
- ----------------------------------------------------------------------------------------------------------------------
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 carefully 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.
Returns less than one year are cumulative. The performance in the above table
does not reflect the deduction of taxes the shareholder will pay on fund
distributions or the redemption of fund shares. 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 indexes mentioned
are unmanaged statistical composites of stock market or bond market performance.
Investing in an index is not possible.
(1) Investing in small and medium capitalization companies and science and
technology companies may subject the funds to specific inherent risks,
including above-average price fluctuations.
(2) For periods prior to August 2000, when the Fund began operating, the
performance data quoted represents past performance of 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.
(3) Class I Shares for the periods prior to the inception date shown reflect
the performance of the Fund's Class II Shares.
(4) Funds that take a focus or sector specific approach are subject to greater
risk from downturns affecting a specific issuer or industry.
Constellation Funds 2005 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 below 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 "Expenses 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.
- -------------------------------------------------------------------------------------------------------
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
4/1/05 9/30/05 Ratios Period*
- -------------------------------------------------------------------------------------------------------
Constellation Clover Core Value Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return $1,000.00 $1,094.90 1.14% $5.99
Hypothetical Fund Return 1,000.00 1,019.35 1.14 5.77
- -------------------------------------------------------------------------------------------------------
Constellation Clover Small Cap Value Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,066.80 1.23 6.37
Hypothetical Fund Return 1,000.00 1,018.90 1.23 6.23
- -------------------------------------------------------------------------------------------------------
Constellation Clover Core Fixed Income Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,020.40 0.80 4.05
Hypothetical Fund Return 1,000.00 1,021.06 0.80 4.05
- -------------------------------------------------------------------------------------------------------
Constellation Clover Income Plus Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,039.60 1.30 6.65
Hypothetical Fund Return 1,000.00 1,018.55 1.30 6.58
- -------------------------------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration
Fixed Income Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,014.60 0.67 3.38
Hypothetical Fund Return 1,000.00 1,021.71 0.67 3.40
- -------------------------------------------------------------------------------------------------------
Constellation Chartwell Short Duration Fixed
Income Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,014.10 0.71 3.58
Hypothetical Fund Return 1,000.00 1,021.51 0.71 3.60
- -------------------------------------------------------------------------------------------------------
Constellation Chartwell High Yield Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,022.60 0.52 2.64
Hypothetical Fund Return 1,000.00 1,022.46 0.52 2.64
- -------------------------------------------------------------------------------------------------------
Constellation HLAM Large Cap Quality Stock
Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,032.70 1.25 6.37
Hypothetical Fund Return 1,000.00 1,018.80 1.25 6.33
- -------------------------------------------------------------------------------------------------------
4 Constellation Funds 2005 Annual Report
Disclosure of Fund Expenses (Unaudited)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
4/1/05 9/30/05 Ratios Period*
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Value
Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return $1,000.00 $1,046.60 1.08% $ 5.54
Hypothetical Fund Return 1,000.00 1,019.65 1.08 5.47
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Select Value Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,034.00 1.13 5.76
Hypothetical Fund Return 1,000.00 1,019.40 1.13 5.72
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Growth
Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,034.00 1.10 5.61
Hypothetical Fund Return 1,000.00 1,019.55 1.10 5.57
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Small Cap Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,039.00 1.09 5.57
Hypothetical Fund Return 1,000.00 1,019.60 1.09 5.52
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R)
Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,032.10 1.28 6.52
Hypothetical Fund Return 1,000.00 1,018.65 1.28 6.48
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,020.20 0.89 4.51
Hypothetical Fund Return 1,000.00 1,020.61 0.89 4.51
- -------------------------------------------------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Bond Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,022.00 0.69 3.50
Hypothetical Fund Return 1,000.00 1,021.61 0.69 3.50
- -------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth
Fund - Class I
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,133.50 1.12 5.99
Hypothetical Fund Return 1,000.00 1,019.45 1.12 5.67
- -------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth
Fund - Class II
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,132.10 1.37 7.32
Hypothetical Fund Return 1,000.00 1,018.20 1.37 6.93
- -------------------------------------------------------------------------------------------------------
Constellation TIP Small Cap Value
Opportunities Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,130.60 1.47 7.85
Hypothetical Fund Return 1,000.00 1,017.70 1.47 7.44
- -------------------------------------------------------------------------------------------------------
Constellation TIP Mid Cap Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,139.80 0.99 5.31
Hypothetical Fund Return 1,000.00 1,020.10 0.99 5.01
- -------------------------------------------------------------------------------------------------------
Constellation TIP Financial Services Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,078.80 1.67 8.70
Hypothetical Fund Return 1,000.00 1,016.70 1.67 8.44
- -------------------------------------------------------------------------------------------------------
Constellation TIP Healthcare & Biotechnology
Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,118.60 1.91 10.14
Hypothetical Fund Return 1,000.00 1,015.49 1.91 9.65
- -------------------------------------------------------------------------------------------------------
Constellation International Equity Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,085.60 1.43 7.48
Hypothetical Fund Return 1,000.00 1,017.90 1.43 7.23
- -------------------------------------------------------------------------------------------------------
Constellation Strategic Value and High
Income Fund
- -------------------------------------------------------------------------------------------------------
Actual Fund Return 1,000.00 1,082.90 0.24 1.25
Hypothetical Fund Return 1,000.00 1,023.87 0.24 1.22
- -------------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 183/365 (to reflect
the one-half year period).
Constellation Funds 2005 Annual Report 5
Investment Review
- --------------------------------------------------------------------------------
Constellation Clover Core Value Fund
Investment Philosophy & Process
The Constellation Clover Core Value Fund is sub-advised by Clover Capital
Management ("Clover"). 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 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, 2005, the Constellation Clover Core
Value Fund posted a total return of 24.83% compared with a total return for the
Russell 3000 Value Index of 16.78%. According to Lipper, the Fund ranked 43 out
of 247 mid cap value funds for the one year period ending September 30, 2005,
placing it in the 17th percentile.
Good stock selection in the healthcare and energy sectors led to the Fund's
strong performance for the year. WellPoint and Aetna, both managed health care
companies, and Triad Hospitals contributed significantly to performance in the
healthcare sector. An overweight position in healthcare stocks also added to the
Fund's returns. Valero Energy, an oil refiner and retailer, was the Fund's best
performing stock and contributed the most to relative performance. National
Oilwell Varco, an oilfield services company and Chesapeake Energy, an oil and
gas producer, were also strong performers in the energy sector. Countrywide
Financial detracted from performance for the year. After ranking among the
Fund's top performers in calendar year 2004, Countrywide Financial declined in
2005, as investor fears of a decrease in mortgage origination levels hurt the
stock. Other detractors included Jones Apparel Group, an apparel and footware
retailer, and BISYS Group, a financial data processor.
There were no significant changes to Fund strategy during the period. Clover
remained focused on identifying inexpensive stocks with improving fundamentals
and improving investor sentiment. The current positioning of the Fund remains
consistent. As the economic cycle continues to mature and age, the Fund has an
emphasis on companies management believes are not dependent on rising economic
growth to achieve good returns. The largest sector investments are in
healthcare, utilities, and insurance companies. At the individual stock level,
Fund 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.
6 Constellation Funds 2005 Annual Report
Investment Review
- ------------------------------------------
Constellation Clover Core Value Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED
BY A BAR CHART IN THE PRINTED MATERIAL.]
Ticker CCEVX
- ------------------------------------------ Financials 25.0%
CUSIP 21038A604 Cash Equivalents+ 16.7%
- ------------------------------------------ Energy 11.0%
% in 10 largest holdings*++ 18.8% Health Care 10.9%
- ------------------------------------------ Utilities 9.9%
# of holdings 73 Consumer Staples 8.0%
- ------------------------------------------ Industrials 6.6%
Price/Earnings Ratio Information Technology 5.8%
(wtd. harmonic avg.) 15.58x Consumer Discretionary 3.9%
- ------------------------------------------ Materials 2.2%
Weighted Average Market
Capitalization $32.2 billion * Percentages based on total investments.
- ------------------------------------------
Net assets $171 million + Cash equivalents include a short-term
- ------------------------------------------ investment held as collateral for
loaned securities (see Note 9 in the
Top 10 Holdings++ Notes to Financial Statements).
1 Valero Energy Lipper Inc. Performance Ranking
2 Loews
3 ConocoPhillips As of September 30, 2005
4 WellPoint
5 Aetna Lipper Mid-Cap Value Category
6 Exxon Mobil
7 National Oilwell Varco Period Rank Percentile
8 Sovereign Bancorp ---------------------------------------
9 Merrill Lynch 10 year (30 of 46 funds) 65%
10 Radian Group ---------------------------------------
++ Excludes cash equivalent 5 year (39 of 102 funds) 38%
and short-term investment ---------------------------------------
held as collateral for 3 year (126 of 195 funds) 65%
loaned securities. ---------------------------------------
1 year (43 of 247 funds) 17%
Market Capitalization Investment Style
small [_] value [X]
medium [X] blend [_]
large [_] growth [_]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation Russell
Clover Core Midcap Value Russell 3000 Russell 3000
Value Fund Index Index Value Index
----------- ------------ ------------ ------------
Sep 30 95 $10,000 $10,000 $10,000 $10,000
Sep 96 11,105 11,574 11,902 11,748
Sep 97 14,040 16,233 16,505 16,722
Sep 98 13,198 15,630 17,269 17,052
Sep 99 14,007 17,087 21,814 20,059
Sep 00 15,921 19,308 25,782 21,935
Sep 01 16,638 19,301 18,586 20,185
Sep 02 15,578 18,247 15,088 16,977
Sep 03 18,944 23,411 18,999 21,203
Sep 04 22,875 29,409 21,708 25,632
Sep 05 28,555 37,090 24,871 29,933
**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, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
24.83% 22.38% 12.39% 11.06% 12.54%
Constellation Funds 2005 Annual Report 7
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 ("Clover"). 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 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, 2005, the Constellation Clover Small Cap
Value Fund gained 16.29%, net of expenses, compared with a return of 17.75% for
the Russell 2000 Value Index and a return of 17.95% for the Russell 2000 Index.
According to Lipper, for the one year period ending September 30, 2005, the Fund
ranked 181 out of 242 small cap value funds, placing it in the 75th percentile
among peers.
Security selection in the technology, energy and consumer sectors contributed
positively to performance for the period. This strength was offset by
sub-optimal selection in the materials and processing and producer durables
sectors, resulting in underperformance versus the Russell 2000 Value Index for
the year. Specific companies within the portfolio which detracted from
performance included MagneTek, a supplier of digital power equipment, which
suffered after it lost a patent infringement lawsuit, and Navigant
International, a provider of corporate travel management services, whose stock
price fell after the company cut earnings estimates. In addition, the stock of
Georgia Gulf, a specialty chemicals company, retreated after experiencing
significant gains during the calendar year 2004.
The Fund's holdings in CMS Energy, an energy holding company, NICE Systems, a
provider of telecommunication equipment and solutions and Electronic Boutique
Holding Company, a retailer of video game hardware and software and related
products contributed positively to results. FelCor Lodging Trust was another
strong performer in the portfolio. This company, a real estate investment trust
with extensive hotel holdings, benefited from the favorable supply/demand
situation in the lodging industry which allowed it to enjoy higher occupancy
rates and pricing.
Clover remains focused on identifying inexpensive stocks with improving
fundamentals and improving investor sentiment. The small cap asset class has
enjoyed several years of outperformance which has left small caps more fully
valued, on a relative basis, than they have been in some time. As a result, the
Fund is prudently diversified in an array of stocks which management believes
have fundamentally attractive business models and inexpensive valuations and are
positioned to benefit from improving industry trends.
8 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Clover Small Cap Value Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TCSVX
- ------------------------------------------------------ Financials 28.4%
CUSIP 21038A828 Industrials 15.3%
- ------------------------------------------------------ Information Technology 9.8%
% in 10 largest holdings*++ 13.0% Consumer Discretionary 9.2%
- ------------------------------------------------------ Cash Equivalents+ 8.4%
# of holdings 170 Utilities 7.8%
- ------------------------------------------------------ Energy 7.3%
Price/Earnings Ratio (wtd. harmonic avg.) 15.99x Health Care 5.0%
- ------------------------------------------------------ Consumer Staples 4.6%
Weighted Average Market Capitalization $1.6 billion Materials 2.7%
- ------------------------------------------------------ Telecommunication Services 1.5%
Net assets $450 million
- ------------------------------------------------------ * Percentages based on total investments.
+ Cash equivalents include a short-term
Top 10 Holdings++ investment held as collateral for
loaned securities (see Note 9 in the
1 FelCor Lodging Trust Notes to Financial Statements).
2 CMS Energy
3 Colonial BancGroup Lipper Inc. Performance Ranking
4 AmeriCredit
5 PFF Bancorp As of September 30, 2005
6 American Financial Realty Trust
7 Reliant Energy Lipper Small Cap Value Category
8 Nice Systems ADR
9 United Therapeutics Period Rank Percentile
10 Allmerica Financial -----------------------------------------
++ Excludes cash equivalent 5 year (97 of 138 funds) 70%
and short-term investment -----------------------------------------
held as collateral for 3 year (129 of 186 funds) 69%
loaned securities. -----------------------------------------
1 year (181 of 242 funds) 75%
Market Capitalization Investment Style
small [X] value [X]
medium [_] blend [_]
large [_] growth [_]
Growth of $10,000 Investment in the Fund
February 29, 1996 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Clover Small Cap Russell 2000 Russell 2000
Value Fund Index Value Index
---------------- ------------ ------------
Feb 29 96 $10,000 $10,000 $10,000
Sep 96 10,838 10,752 10,785
Sep 97 16,169 14,320 15,385
Sep 98 12,733 11,596 13,417
Sep 99 15,511 13,808 14,199
Sep 00 20,101 17,037 16,381
Sep 01 22,543 13,424 17,299
Sep 02 20,584 12,175 17,047
Sep 03 26,072 16,619 22,444
Sep 04 32,256 19,739 28,203
Sep 05 37,511 23,282 33,209
**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, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
16.29% 22.14% 13.29% 14.78%
Constellation Funds 2005 Annual Report 9
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 ("Clover"). 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
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, 2005, the Constellation Clover Core
Fixed Income Fund posted a net total return of 2.27% versus 2.80% for the Lehman
Aggregate Bond Index. According to Lipper, the Fund ranked 266 out of 458
intermediate investment grade bond funds for the one year period ending
September 30, 2005, placing it in the 58th percentile.
Factors contributing positively to Fund performance for the period included the
absence of automotive debt from holdings, an emphasis on AAA-rated mortgages and
agencies rather than lower quality corporate issues and maintaining a portfolio
consistent with the Fund's benchmark. The Fund's best performing holdings
benefited from a flatter yield curve over the course of the year. The position
in Freddie Mac PAC Interest Only Strips, which are structured to hold up
strongly when interest rates rise, provided a significant total return as yields
moved higher on the short end of the market. Additionally, the Fund's holdings
in long Treasury bonds experienced material price appreciation as yields on long
duration securities fell. Negatively impacting performance were two corporate
bond holdings which underperformed similar duration Treasury bonds. These
holdings were Marsh & McLennan 7.125% due 6/15/09 and Sysco 7.16% due 9/15/27.
Marsh & McLennan suffered due to company specific issues including
investigations into their business practices. The Sysco holding trailed due to a
general spread widening in long duration corporate bonds.
Fund management raised the portfolio yield from 97% of the performance benchmark
on September 30, 2004 to 102% of the Index by September 30, 2005. Eliminating
the Fund's negative carry relative to the Lehman Aggregate Bond Index was
designed to position the Fund to fully capture the benefits of above-index
quality structure. Fund management also reduced the allocation to the credit
sector from over 44% (market-value weight) of the portfolio to less than 33% as
of September 30, 2005. Sales of longest duration and lowest quality corporate
bonds reduced the contribution-to-portfolio-duration for the credit sector from
140% of the index to only 85% over the period. Fund management also reduced cash
exposure from 3% on September 30, 2004 to less than 1% by September 30, 2005. In
place of corporate securities and cash, management boosted the Fund's
allocations to mortgage-backed securities, Treasuries, agencies and added
positions in commercial mortgage-backed securities and taxable municipal
securities.
10 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Clover Core Fixed Income Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TCFIX
- ------------------------------------------------ U.S. Government
CUSIP 21038A703 Mortgage-Backed Obligations 40.1%
- ------------------------------------------------ Corporate Bonds 28.1%
% in 10 largest holdings* 37.5% U.S. Treasury Obligations 16.7%
- ------------------------------------------------ U.S. Government Agency Obligations 5.8%
# of holdings 61 Convertible Bonds 4.5%
- ------------------------------------------------ Asset Backed Security 2.1%
Weighted Average Effective Duration 4.51 Municipal Bond 1.5%
- ------------------------------------------------ Cash Equivalents+ 1.2%
Weighted Average Quality AA2
- ------------------------------------------------ * Percentages based on total investments.
Weighted Average Yield 4.98 + Cash equivalents include a short-term
- ------------------------------------------------ investment held as collateral for
Net assets $26 million loaned securities (see Note 9 in the
- ------------------------------------------------ Notes to Financial Statements).
Top 10 Holdings Lipper Inc. Performance Ranking
1 U.S. Treasury Note As of September 30, 2005
2 FNMA Pool #254759
3 Scana, MTN, Ser B Lipper Intermediate Investment Grade Bond Category
4 FNMA Pool #689022
5 U.S. Treasury Note Period Rank Percentile
6 FNMA Pool #255111 ----------------------------------------
7 TVA 10 year (50 of 138 funds) 36%
8 Conagra Foods ----------------------------------------
9 U.S. Treasury Bond 5 year (168 of 290 funds) 58%
10 FHLMC Pool #G08062 ----------------------------------------
3 year (338 of 396 funds) 85%
Quality Duration ----------------------------------------
low [_] short [_] 1 year (266 of 458 funds) 58%
high [X] long [_]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Clover Core Fixed Lehman Aggregate
Income Fund Bond Index
----------------- -------------------
Sep 30 95 $10,000 $10,000
Sep 96 10,519 10,488
Sep 97 11,532 11,510
Sep 98 12,837 12,833
Sep 99 12,609 12,786
Sep 00 13,518 13,679
Sep 01 15,139 15,451
Sep 02 16,479 16,780
Sep 03 17,034 17,686
Sep 04 17,540 18,337
Sep 05 17,938 18,850
**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, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
2.27% 2.87% 5.82% 6.02% 6.61%
Constellation Funds 2005 Annual Report 11
Investment Review
- --------------------------------------------------------------------------------
Constellation Clover Income Plus Fund
Investment Philosophy & Process
The Constellation Clover Income Plus Fund is subadvised by Clover Capital
Management ("Clover"). The Fund seeks to generate income and, to a lesser
extent, capital appreciation, by allocating Fund assets to income and non-income
producing equity securities, including common stocks, real estate investment
trusts, preferred stocks and convertible securities. To generate income and
enhance exposure to the equity markets, the Fund purchases investment grade and
high yield fixed income securities (or unrated securities of equivalent quality)
along with options on securities indices. In selecting securities, Clover
considers factors such as dividend yield, potential appreciation and valuation,
and for fixed income securities, credit quality. Clover also may consider other
factors, such as competitive position, earnings outlook and price momentum.
Clover generally considers selling a security when it reaches a target price,
when it fails to perform as expected, or when other opportunities appear more
attractive.
Fund Performance & Positioning
From the Fund's inception on February 28, 2005 through September 30, 2005, it
posted a cumulative total return of 2.04% compared with a total return for the
S&P 500 Index of 3.16% and 1.79% for the Lehman Aggregate Bond Index.
Fund performance was positively impacted by stock selection in the technology,
utilities and consumer sectors. This benefit was offset by sub-optimal selection
in the industrials and materials sectors. Sector weighting decisions had a
positive impact on total performance, led by the financials, energy, materials,
and consumer discretionary sectors. This was partially offset by the negative
impact of weighting in the technology sector.
CMS Energy, an electric utility company, Callaway Golf, a producer of golf
clubs, balls and accessories and Lufkin Industries, an oilfield services and
equipment company, were among the most significant contributors to Fund
performance. Coeur d'Alene Mining, a silver and gold mining company, Freidman
Billings Ramsey Group, an investment banking company, and Alliance One
International, a tobacco company, detracted from results for the period. There
were no changes to Fund strategy during the period. Clover is focused on
identifying attractively valued dividend-paying securities.
12 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Clover Income Plus Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker CCIPX
- ---------------------------------------- Utilities 26.9%
CUSIP 21038A687 Financials 20.9%
- ---------------------------------------- Cash Equivalent 14.0%
% in 10 largest holdings*++ 21.9% Industrials 9.2%
- ---------------------------------------- Energy 7.7%
# of holdings 88 Consumer Discretionary 7.1%
- ---------------------------------------- Consumer Staples 4.1%
Net assets $5 million Exchange Traded Fund 4.1%
- ---------------------------------------- Materials 3.7%
Health Care 1.6%
Top 10 Holdings++ Telecommunication Services 0.7%
1 iShares Dow Jones Select * Percentages based on total investments.
Dividend Index Fund
2 Chevron
3 Equity Residential
4 BP ADR
5 FPL Group
6 Wisconsin Energy
7 LTC Properties
8 Public Service Enterprise Group
9 CMS Energy
10 Constellation Energy Group
++ Excludes cash equivalent and securities sold short.
Growth of $10,000 Investment in the Fund
February 28, 2005 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Clover Income S&P 500 Lehman Aggregate
Plus Fund Index Bond Index
------------- ------- ----------------
Feb 28 05 $10,000 $10,000 $10,000
Sep 05 10,204 10,316 10,179
**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
Income Plus Fund is February 28, 2005.
Cumulative Total Returns**
Period ending September 30, 2005
Since
inception
- ---------
2.04%
Constellation Funds 2005 Annual Report 13
Investment Review
- --------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration Fixed Income Fund
Investment Philosophy & Process
The Constellation Chartwell Ultra 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 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 has 100% of its portfolio in government
quality issues.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Fund returned 2.67%,
outperforming the Merrill Lynch 3-Month U.S. Treasury Bill Index return of
2.62%. According to Lipper, the Fund ranked 14 out of 76 ultra short obligation
funds for the one year period ending September 30, 2005, placing it in the 18th
percentile.
The Fund delivered good performance relative to its peers, during a period when
many short duration assets were negatively impacted by sharply higher short term
interest rates and a year-over-year increase in the Federal Funds rate from
1.75% to 3.75%. During the last year, the Fund benefited from its yield
advantage over other short term fixed income alternatives. This advantage was
achieved and maintained during the year primarily because of the Fund's
emphasis in floating rate Agency CMO's and floating rate Agency debentures. The
Fund also carried a position in overnight government-backed repurchase
agreements throughout the year. The emphasis in floating rate and overnight
investments allowed the Fund's yield to rise as market rates increased and
provided a cushion against the price declines of longer maturity bonds. All
holdings in the Fund are agency-backed, providing a 100% government quality
portfolio. The Fund's focus on the high-quality source of excess yield provided
by the government mortgage-backed securities (MBS) sector also benefited Fund
performance during the year as the MBS sector outperformed the broad bond
market. MBS performance was driven by declining prepayment risk and the
resulting cushion to MBS bond prices as interest rates rose.
14 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration Fixed Income Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TSDOX
- ------------------------------------------------- U.S. Government Mortgage-Backed Obligations 75.2%
CUSIP 21038A802 U.S. Government Agency Obligations 17.6%
- ------------------------------------------------- Repurchase Agreement 7.2%
% in 10 largest holdings*++ 32.0%
- ------------------------------------------------- * Percentages based on total investments.
# of holdings 96
- ------------------------------------------------- Lipper Inc. Performance Ranking
Weighted Average Effective Duration 0.8
- ------------------------------------------------- As of September 30, 2005
Weighted Average Quality Government
- ------------------------------------------------- Lipper Ultra Short Obligation Category
Weighted Average Life 3.7
- ------------------------------------------------- Period Rank Percentile
SEC 30-day Yield 3.70% ----------------------------------------
- ------------------------------------------------- 10 year (4 of 19 funds) 21%
Net assets $305 million ----------------------------------------
- ------------------------------------------------- 5 year (15 of 37 funds) 41%
----------------------------------------
Top 10 Holdings++ 3 year (16 of 50 funds) 32%
----------------------------------------
1 FNMA CMO/REMIC Ser 2002-81, Cl F 1 year (14 of 76 funds) 18%
2 FNMA CMO/REMIC Ser 2003-61, Cl FK
3 FHLB
4 FHLB
5 FHLB
6 FHLMC CMO/REMIC
Ser 2571, Cl FN
7 FHLB
8 FHLMC CMO/REMIC
Ser 2650, Cl FX
9 FHLMC CMO/REMIC
Ser 2892, Cl KF
10 FHLMC CMO/REMIC
Ser 2827, Cl FW
++ Excludes repurchase agreement.
Quality Duration
low [_] short [X]
high [X] long [_]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation Merrill Lynch
Chartwell Ultra Short 3-Month U.S.
Duration Fixed Income Fund Treasury Bill Index
--------------------------- -------------------
Sep 30 95 $10,000 $10,000
Sep 96 10,703 10,548
Sep 97 11,366 11,117
Sep 98 12,072 11,712
Sep 99 12,717 12,263
Sep 00 13,523 12,972
Sep 01 14,482 13,679
Sep 02 14,909 13,952
Sep 03 15,118 14,136
Sep 04 15,365 14,292
Sep 05 15,775 14,666
**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 is March 1, 1994.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
2.67% 1.90% 3.13% 4.66% 4.82%
Constellation Funds 2005 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 fiscal year ended September 30, 2005, the Fund returned 2.12%,
outperforming the Lehman 1-3 Year U.S. Government Bond Index return of 1.09%.
According to Lipper, the Fund ranked 2 out of 78 short-intermediate U.S.
Government funds for the one year period ending September 30, 2005, placing it
in the 3rd percentile.
The Fund's outperformance relative to the benchmark was primarily the result of
a disciplined approach to security selection and portfolio structure as well as
an emphasis on liquidity. During the last year, the Fund benefited from its
yield advantage over most other short term fixed income alternatives; its
slightly defensive average maturity, and the defensive nature of its security
holdings. However, when compared to a broad range of short duration styles, the
Fund's high quality emphasis did cause it to trail the returns available from
the high yield bond sector. The Fund's position in floating rate and overnight
investments contributed to performance and allowed the Fund's yield to rise as
market rates increased and provided a cushion against the price declines of
longer maturity bonds. All but 2% (AA rated bonds) of the holdings in the Fund
are agency-backed, providing for a very high quality portfolio. The Fund's
emphasis on the high-quality source of excess yield provided by the government
mortgage-backed securities (MBS) sector also benefited Fund performance during
the year as the MBS sector outperformed the broad bond market. MBS performance
was driven by declining prepayment risk and the resulting cushion to MBS bond
prices as interest rates rose. Finally, the Fund's barbell portfolio structure
added to its performance advantage over the year, as the use of very short-term
or floating rate maturities combined with slightly longer than benchmark
maturities outperformed most bulleted types of portfolios.
16 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Chartwell Short Duration Fixed Income Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TSDGX
- -------------------------------------------------- U.S. Government Mortgage-Backed Obligations 67.4%
CUSIP 21038A877 Cash Equivalents+ 10.1%
- -------------------------------------------------- U.S. Treasury Obligations 9.6%
% in 10 largest holdings*++ 38.6% U.S. Government Agency Obligations 7.2%
- -------------------------------------------------- Repurchase Agreement 4.2%
# of holdings 86 Certificate of Deposit 1.5%
- --------------------------------------------------
Weighted Average Effective Duration 3.0 * Percentages based on total investments.
- -------------------------------------------------- + Cash equivalents include a short-term
Weighted Average Quality Government investment held as collateral for
- -------------------------------------------------- loaned securities (see Note 9 in the
Weighted Average Life 3.7 Notes to Financial Statements).
- --------------------------------------------------
SEC 30-day Yield 3.70% Lipper Inc. Performance Ranking
- --------------------------------------------------
Net assets $113 million As of September 30, 2005
- --------------------------------------------------
Lipper Short-Intermediate U.S. Government Category
Top 10 Holdings++
Period Rank Percentile
1 U.S. Treasury Note -----------------------------------------
2 FNMA Pool #535560 SER 10 year (24 of 45 funds) 53%
3 FNMA CMO/REMIC -----------------------------------------
Ser 2005-93, Cl XT 5 year (50 of 66 funds) 76%
4 FHLB -----------------------------------------
5 FNMA CMO/REMIC 3 year (13 of 67 funds) 19%
Ser 2003-34, Cl GJ -----------------------------------------
6 FHLMC CMO/REMIC 1 year (2 of 78 funds) 3%
Ser 2649, Cl PJ
7 FNMA Pool #794717
8 FHLB
9 FNMA Pool #545304
10 FHLMC CMO/REMIC
Ser 2744, Cl TA
++ Excludes repurchase agreement and short-term
investment held as collateral for loaned securities.
Quality Duration
low [_] short [X]
high [X] long [_]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation Lehman 1-3 Year
Chartwell Short U.S. Government
Duration Fixed Income Fund Bond Index
--------------------------- ---------------
Sep 30 95 $10,000 $10,000
Sep 96 10,602 10,567
Sep 97 11,355 11,295
Sep 98 12,271 12,191
Sep 99 12,626 12,580
Sep 00 13,383 13,314
Sep 01 14,635 14,735
Sep 02 15,321 15,597
Sep 03 15,650 16,034
Sep 04 15,938 16,220
Sep 05 16,276 16,396
**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 is March 1, 1994.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
2.12% 2.04% 3.99% 4.99% 5.14%
Constellation Funds 2005 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 seven member 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. The portfolio typically consists
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 fiscal year ended September 30, 2005, the Fund returned 3.60%, net of
expenses, compared to 6.69% for the Merrill Lynch High Yield, Cash Pay Index.
One factor causing the Fund's underperformance was an overweighting in the upper
credit tiers and the more cyclically sensitive sectors of the market. Given the
relatively tight credit spreads prevailing at the beginning of the year, as well
as Chartwell's conviction that economic growth was firming, the Fund was
positioned with an overweighting in higher quality tiers as well as cyclically
sensitive industrial sectors. Returns for the year proved to be inversely
correlated with credit quality, with the lowest quality tier, CCC's, sharply
outperforming B's, which in turn outperformed BB's. The Fund's focus on BB's and
B's detracted from performance relative to the market as a whole. In addition,
the dramatic and unforeseen increase in energy prices combined with the limited
pricing flexibility experienced by industrial concerns led to fears that profit
margins would shrink throughout the cyclically sensitive sectors.
Notwithstanding the resiliency of the U.S. economy and the emerging signs of
global recovery, which would imply increased demand for industrial products,
high yield cyclical bonds underperformed.
Another major factor in the Fund's underperformance was significant turnover
that occurred in December 2004, when approximately 80% of Fund assets were
withdrawn by the majority shareholder, necessitating the liquidation of a
majority of the Fund's securities. Subsequently, in February of 2005, the
majority of the withdrawn funds were reinvested in the Fund. Transaction costs
associated with this turnover were significant, a result of the normal bid-ask
spread in the high yield market compounded by the extremely small position sizes
involved, as well as seasonal effects.
Structurally, during the year, the portfolio managers of the Fund increased the
weighting in top quality BB's by approximately 15 percentage points, while
decreasing B and CCC exposure. In addition, given the emerging signs of higher
inflation and the Federal Reserve's clear bias toward tightening the monetary
reins, management shortened the Fund's duration as a hedge against rising
interest rates.
18 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Chartwell High Yield Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PCSHX
- --------------------------------------------------- Consumer Discretionary 26.9%
CUSIP 21038A851 Industrials 26.0%
- --------------------------------------------------- Materials 7.8%
% in 10 largest holdings*++ 16.2% Energy 6.6%
- --------------------------------------------------- Cash Equivalents+ 6.2%
# of holdings 82 Utilities 5.5%
- --------------------------------------------------- Consumer Staples 5.3%
Weighted Average Market Capitalization $6.2 Financials 5.2%
- --------------------------------------------------- Telecommunication Services 5.1%
Weighted Average Quality B1 Health Care 4.8%
- --------------------------------------------------- Repurchase Agreement 0.6%
Net assets $6 million
- --------------------------------------------------- * Percentages based on total investments.
+ Cash equivalents include a short-term
Top 10 Holdings++ investment held as collateral for
loaned securities (see Note 9 in the
1 Geo Group Notes to Financial Statements).
2 Coinmach
3 American Seafood Group Lipper Inc. Performance Ranking
4 Koppers
5 La Quinta Properties As of September 30, 2005
6 Chesapeake Energy
7 AES Lipper High Current Yield Category
8 CE Generation
9 Tenaska Alabama Period Rank Percentile
10 Aztar -----------------------------------------
++ Excludes short-term investment held as 5 year (290 of 297 funds) 98%
collateral for loaned securities. -----------------------------------------
3 year (304 of 362 funds) 84%
Quality Duration -----------------------------------------
low [X] short [_] 1 year (394 of 424 funds) 93%
high [_] long [_]
Growth of $10,000 Investment in the Fund
February 28, 1998 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Chartwell Merrill Lynch
High Yield High Yield,
Bond Fund Cash Pay Index
------------- --------------
Feb 28 98 $10,000 $10,000
Sep 98 9,278 9,895
Sep 99 10,080 10,265
Sep 00 10,137 10,391
Sep 01 7,739 10,045
Sep 02 7,116 9,825
Sep 03 8,653 12,598
Sep 04 9,461 14,139
Sep 05 9,802 15,084
**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 served as investment adviser to the Fund.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
3.60% 11.27% (0.67)% (0.26)%
Constellation Funds 2005 Annual Report 19
Investment Review
- --------------------------------------------------------------------------------
Constellation HLAM Large Cap Quality Stock Fund
Investment Philosophy & Process
Hilliard Lyons Asset Management ("HLAM") serves as sub-adviser to the
Constellation HLAM Large Cap Quality Stock Fund. The investment philosophy of
the Fund focuses on the long-term ownership of high quality growth companies.
The Fund invests in equity securities of U.S. companies with large market
capitalizations that HLAM believes to be high quality companies selling at
compelling valuations relative to their anticipated growth rates. HLAM further
emphasizes investments in common stocks of "quality" growth companies. HLAM
performs analysis designed to identify companies that have produced consistent
results and have a strong balance sheet. HLAM selects for investment only those
companies that they believe are capable of delivering above-market earnings and
revenue growth, significant and expanding free cash flow, industry leadership
and which have specific characteristics typically displayed by "great"
companies, including long-term competitive advantages, compelling future growth
drivers and a superior management team. HLAM uses this process to create a
focused portfolio, emphasizing companies that it believes have an enduring
competitive advantage over their competition.
Fund Performance & Positioning
For the nine-month period ended September 30, 2005, the Fund posted a return of
(2.09)%. Over the same period, the Fund's benchmark, the Russell 1000 Growth
Index returned 2.22%.
A major contributor to the underperformance of the Fund during the period was
the decision not to own stocks in the energy or utility sectors. These sectors
were the best performing sectors during the past period. Fund management
believes that the outsized returns produced by these two sectors will not be
sustainable into the future as supply and demand come into balance due to high
energy prices and strong profits. Since it may be impossible to determine how
long it will take to reach that equilibrium, Fund management remains focused on
owning industry leading companies with consistent earnings and revenue growth,
strong balance sheets, capable management teams and attractive valuations.
Among the top performing stocks in the Fund during the period were Cardinal
Health, Amgen, Texas Instruments, Allergan and Walgreens. The bottom performing
stocks in the Fund during the period were Harley-Davidson, Pfizer and Freddie
Mac. The Fund's position in American International Group also detracted from
performance. AIG's stock suffered as the company dealt with accounting
investigations and the departure of longtime CEO Hank Greenberg.
The holdings of the Fund were repositioned in August 2005 to increase exposure
to value oriented stocks. The investment objective was broadened from its
previous emphasis on growth stocks only. Fund management has increased the
number of stocks held in the portfolio to more than 40, though the Fund
continues to take a concentrated approach to investing, generally holding fewer
than 50 stocks. The strategy of the Fund's managers is to create a portfolio
comprised of high quality, solid businesses and to maintain a healthy balance
between very exciting growth prospects and market valuations that are quite
inexpensive.
20 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation HLAM Large Cap Quality Stock Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker HLGRX
- ------------------------------------------------------- Cash Equivalents+ 20.8%
CUSIP 21038A695 Consumer Discretionary 19.3%
- ------------------------------------------------------- Financials 18.9%
% in 10 largest holdings*++ 32.5% Health Care 16.2%
- ------------------------------------------------------- Information Technology 12.2%
# of holdings 46 Consumer Staples 8.0%
- ------------------------------------------------------- Industrials 3.4%
Price/Earnings Ratio (wtd. harmonic avg.) 19.40x Telecommunication Services 1.2%
- -------------------------------------------------------
Weighted Average Market Capitalization $62.6 billion * Percentages based on total investments.
- ------------------------------------------------------- + Cash equivalents include a short-term
Net assets $16 million investment held as collateral for
- ------------------------------------------------------- loaned securities (see Note 9 in the
Notes to Financial Statements).
Top 10 Holdings++
Lipper Inc. Performance Ranking
1 American International Group
2 Home Depot As of September 30, 2005
3 Automatic Data Processing
4 PepsiCo Lipper Large Cap Core Category
5 Omnicom Group
6 Waters Period Rank Percentile
7 Synovus Financial -----------------------------------------
8 Harley-Davidson 10 year (191 of 221 funds) 86%
9 Berkshire Hathaway, Cl A -----------------------------------------
10 Comcast, Cl A 5 year (382 of 603 funds) 63%
++ Excludes short-term investment held -----------------------------------------
as collateral for loaned securities. 3 year (759 of 765 funds) 99%
-----------------------------------------
Market Capitalization Investment Style 1 year (818 of 881 funds) 93%
small [_] value [_]
medium [_] blend [_]
large [X] growth [X]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
HLAM Large Cap Russell 1000
Quality Stock Fund Growth Index
------------------ ------------------
Sep 30 95 $10,000 $10,000
Sep 96 11,927 12,140
Sep 97 15,859 16,547
Sep 98 17,128 18,384
Sep 99 20,254 24,790
Sep 00 21,493 30,599
Sep 01 17,251 16,633
Sep 02 14,529 12,889
Sep 03 16,350 16,230
Sep 04 17,421 17,449
Sep 05 18,414 19,473
**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 Quality Stock Fund is April 30, 1992.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
5.70% 8.22% (3.04)% 6.30% 7.26%
Constellation Funds 2005 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. Fund management seeks to identify
stocks with strong fundamental characteristics which are attractively priced
relative to their peer groups.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Fund returned 13.47%. This
compares to a 16.69% return for the Russell 1000 Value Index. The Constellation
Pitcairn Diversified Value Fund ranked at the 68th percentile (320 out of 470
funds) when compared to the Lipper Multi-Cap Value category over the
twelve-month period.
Poor security selection had a negative impact on the performance of the Fund
over the past year. While the Fund had a number of stocks that posted
exceptional returns, it also owned stocks that delivered disappointing results.
The Fund benefited from a modest tilt towards stocks with lower dividend yields.
This was offset to some extent by the manager's preference for stocks with
stronger than average growth characteristics and stronger balance sheets. Over
the past year, the market has favored the stocks of slower growing and more
highly leveraged companies. The following companies were among the most
significant positive contributors to Fund performance for the year: Devon
Energy, an independent energy company engaged primarily in oil and gas
exploration and production; National Oilwell Varco, a manufacturer of components
used in oil and gas drilling and production and Altria Group, a producer of
tobacco products and branded food and beverages. Significant detractors from
performance included Fifth Third Bancorp, a bank holding company;
Avery-Dennison, a producer of office supplies and equipment and pharmaceutical
giant Pfizer.
22 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Diversified Value Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTDVX
- ------------------------------------------------------- Financials 27.4%
CUSIP 21038A794 Cash Equivalents+ 19.8%
- ------------------------------------------------------- Energy 12.9%
% in 10 largest holdings*++ 32.6% Consumer Discretionary 7.3%
- ------------------------------------------------------- Utilities 5.6%
# of holdings 47 Consumer Staples 5.6%
- ------------------------------------------------------- Health Care 5.6%
Price/Earnings Ratio (wtd. harmonic avg.) 15.21x Industrials 5.4%
- ------------------------------------------------------- Telecommunication Services 4.3%
Weighted Average Market Capitalization $83.5 billion Information Technology 3.3%
- ------------------------------------------------------- Materials 2.0%
Net assets $169 million Exchange Traded Fund 0.8%
- -------------------------------------------------------
* Percentages based on total investments.
Top 10 Holdings++ + Cash equivalents include a short-term
investment held as collateral for
1 Exxon Mobil loaned securities (see Note 9 in the
2 Citigroup Notes to Financial Statements).
3 Devon Energy
4 Wells Fargo Lipper Inc. Performance Ranking
5 Bear Stearns
6 Walt Disney As of September 30, 2005
7 North Fork Bancorporation
8 Capital One Financial Lipper Multi-Cap Value Category
9 Pfizer
10 Altria Group Period Rank Percentile
++ Excludes short-term investment held -----------------------------------------
as collateral for loaned securities. 5 year (127 of 225 funds) 56%
-----------------------------------------
Market Capitalization Investment Style 3 year (187 of 362 funds) 52%
small [_] value [X] -----------------------------------------
medium [_] blend [_] 1 year (320 of 470 funds) 68%
large [X] growth [_]
Growth of $10,000 Investment in the Fund
August 31, 2000 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Diversified Russell 1000
Value Fund Value Index
-------------------- ------------
Aug 31 00 $10,000 $10,000
Sep 00 10,122 10,092
Sep 01 9,079 9,193
Sep 02 7,858 7,635
Sep 03 9,774 9,495
Sep 04 11,556 11,444
Sep 05 13,112 13,354
**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, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
13.47% 18.61% 5.31% 5.72%
Constellation Funds 2005 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 their analysts believe have exceptional appreciation
potential. The portfolio is structured to keep risk exposures controlled
relative to the Russell 1000 Value Index. Individual security selection is
expected to generate excess returns.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Constellation Pitcairn Select
Value Fund returned 8.82%. This compares to a 16.69% return posted by the
Russell 1000 Value Index. The Constellation Pitcairn Select Value Fund ranked at
the 91st percentile (428 out of 470 funds) when compared to the Lipper Multi-Cap
Value category over the twelve-month period.
During the 12 month period ending September 30, 2005, the Fund benefited from
its exposure to stocks with lower dividend yields because the market did not
reward high yielding stocks during the year. During the period, the lowest
yielding stocks in the Russell 1000 Value Index enjoyed a significant
performance premium relative to those stocks with higher yields. Unfortunately,
however, this was not enough to offset the generally negative impact of stock
selection. The Fund's emphasis on stocks with stronger than average growth
characteristics also detracted from performance as these stocks were out of
favor over the last twelve months.
The Fund's holdings in the energy sector, including Devon Energy and National
Oilwell Varco, were contributors to performance for the year. Both companies
benefited from the strength in energy stocks due to record high energy prices.
Detractors from Fund performance over the past year included Fifth Third
Bancorp, a bank holding company; Avery-Dennison, a producer of office supplies
and equipment and pharmaceutical giant Pfizer. There were no significant changes
made to the Fund's strategy or positioning during the past year.
24 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Select Value Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTSVX
- ------------------------------------------------------- Financials 25.2%
CUSIP 21038A752 Cash Equivalents+ 18.4%
- ------------------------------------------------------- Energy 14.3%
% in 10 largest holdings*++ 43.2% Consumer Staples 7.2%
- ------------------------------------------------------- Consumer Discretionary 6.7%
# of holdings 31 Health Care 6.2%
- ------------------------------------------------------- Utilities 5.8%
Price/Earnings Ratio (wtd. harmonic avg.) 15.75x Telecommunication Services 4.3%
- ------------------------------------------------------- Industrials 4.0%
Weighted Average Market Capitalization $69.8 billion Information Technology 4.0%
- ------------------------------------------------------- Materials 3.4%
Net assets $65 million Exchange Traded Fund 0.5%
- -------------------------------------------------------
* Percentages based on total investments.
Top 10 Holdings++ + Cash equivalents include a short-term
investment held as collateral for
1 Devon Energy loaned securities (see Note 9 in the
2 Exxon Mobil Notes to Financial Statements).
3 Walt Disney
4 Capital One Financial Lipper Inc. Performance Ranking
5 Wells Fargo
6 Sprint Nextel As of September 30, 2005
7 Altria Group
8 ENSCO International Lipper Multi-Cap Value Category
9 North Fork Bancorporation
10 FPL Group Period Rank Percentile
++ Excludes short-term investment held ----------------------------------------
as collateral for loaned securities. 5 year (167 of 225 funds) 74%
----------------------------------------
Market Capitalization Investment Style 3 year (280 of 362 funds) 77%
small [_] value [X] ----------------------------------------
medium [_] blend [_] 1 year (428 of 470 funds) 91%
large [X] growth [_]
Growth of $10,000 Investment in the Fund
August 31, 2000 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Select Russell 1000
Value Fund Value Index
--------------- ------------
Aug 31 00 $10,000 $10,000
Sep 00 10,514 10,092
Sep 01 10,094 9,193
Sep 02 7,757 7,635
Sep 03 9,628 9,495
Sep 04 11,308 11,444
Sep 05 12,306 13,354
**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, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
8.82% 16.63% 3.20% 4.36%
Constellation Funds 2005 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, 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
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. Fund management seeks to identify
stocks that offer significant growth potential, but are attractively valued
relative to their peer groups.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Pitcairn Diversified Growth
Fund posted a return of 8.71%. Over the same period, the Fund's benchmark, the
Russell 1000 Growth Index returned 11.60%. The Constellation Pitcairn
Diversified Growth Fund ranked in the 82nd percentile (559 out of 678 funds)
when compared to the Lipper Large-Cap Growth category over the twelve-month
period.
The Fund's underperformance during the fiscal year ending September 30, 2005 was
largely attributable to security selection. The Fund was negatively impacted by
Pitcairn's focus on stocks with stronger than average growth characteristics, as
these stocks were out of favor over the last twelve months. In addition, stocks
with low S&P's quality rankings dramatically outperformed stocks with high
quality rankings during the last twelve months. S&P quality rankings convey the
relative growth and stability of earnings and dividends generated by a company
over a trailing 10-year period. For example, for the twelve months ended
September 30, 2005, stocks ranked A+ and A in the Russell 1000 Growth Index
returned -1.17% and 0.88% respectively. Conversely, B, B- and C rated stocks
returned 17.56%, 21.92%, and 19.30%, respectively. The majority of the stocks
held in the Fund have quality rankings of B+ or higher.
The top contributors to the Fund's performance include WellPoint, National
Oilwell Varco and Altria Group. Detractors from Fund performance over the past
year included Lexmark, Dollar Tree Stores and Aeropostale.
26 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Diversified Growth Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTDGX
- ------------------------------------------------------- Information Technology 20.4%
CUSIP 21038A810 Cash Equivalents+ 18.3%
- ------------------------------------------------------- Health Care 16.5%
% in 10 largest holdings*++ 29.8% Consumer Discretionary 12.5%
- ------------------------------------------------------- Consumer Staples 10.4%
# of holdings 58 Industrials 9.1%
- ------------------------------------------------------- Financials 5.3%
Price/Earnings Ratio (wtd. harmonic avg.) 20.38x Energy 2.9%
- ------------------------------------------------------- Exchange Traded Funds 2.1%
Weighted Average Market Capitalization $81.7 billion Materials 1.8%
- ------------------------------------------------------- Telecommunication Services 0.7%
Net assets $117 million
- ------------------------------------------------------- * Percentages based on total investments.
+ Cash equivalents include a short-term
Top 10 Holdings++ investment held as collateral for
loaned securities (see Note 9 in the
1 Johnson & Johnson Notes to Financial Statements).
2 Microsoft
3 Procter & Gamble Lipper Inc. Performance Ranking
4 Amgen
5 Medtronic As of September 30, 2005
6 General Electric
7 Intel Lipper Large-Cap Growth Category
8 Lowe's
9 PepsiCo Period Rank Percentile
10 Cisco Systems ----------------------------------------
++ Excludes short-term investment held 5 year (314 of 453 funds) 69%
as collateral for loaned securities. ----------------------------------------
3 year (296 of 577 funds) 51%
Market Capitalization Investment Style ----------------------------------------
small [_] value [_] 1 year (559 of 678 funds) 82%
medium [_] blend [_]
large [X] growth [X]
Growth of $10,000 Investment in the Fund
August 31, 2000 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Diversified Russell 1000
Growth Fund Growth Index
-------------------- ------------
Aug 31 00 $10,000 $10,000
Sep 00 8,899 9,054
Sep 01 4,986 4,922
Sep 02 3,719 3,814
Sep 03 4,607 4,802
Sep 04 4,960 5,163
Sep 05 5,392 5,762
**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, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
8.71% 13.19% (9.53)% (9.94)%
Constellation Funds 2005 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, 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 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. Fund management seeks to identify
stocks that offer significant growth potential, but are attractively valued
relative to their peer groups.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Constellation Pitcairn Small
Cap Fund delivered a 8.69% return compared to 17.95% for the Russell 2000 Index.
The Constellation Pitcairn Small Cap Fund ranked at the 95th percentile (575 out
of 604 funds) when compared to the Lipper Small Cap Core category over the
twelve-month period.
The Fund's underperformance stems from its emphasis on higher quality companies.
During the twelve-month period the market favored stocks of companies with lower
quality earnings profile. Companies in the benchmark Russell 2000 Index that had
negative forward earnings growth during the period significantly outperformed
those companies with positive forward earnings growth. Pitcairn emphasizes
companies with higher quality earnings characteristics.
The individual companies which detracted most from performance were: Lionbridge
Technologies, a provider of multi-lingual web content services, due to poor
sales and a major strategy change by management; Trex, a manufacturer of
non-wood decking and railing products, due to weak results from a wet spring and
erosion in market share; and Aeropostale, a specialty retailer focused on the
teen and young adult market, due to a weak back-to-school selling season. The
stronger performers among the Fund's holdings were: Matria Healthcare, a medical
services company, due to strong disease management results; Metris, a financial
services company, due to refinancing and an economic recovery in their customer
base; and Advance Auto Parts, an automotive parts retailer, due to strong same
store sales, particularly from hurricane stricken areas in Florida. There were
no changes to the Fund's strategy. Management continues to focus investments in
relatively inexpensive companies with solid long-term growth prospects.
28 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Small Cap Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTMVX
- ------------------------------------------------------- Financials 19.7%
CUSIP 21038A745 Information Technology 15.2%
- ------------------------------------------------------- Consumer Discretionary 12.8%
% in 10 largest holdings*++ 30.1% Health Care 12.6%
- ------------------------------------------------------- Cash Equivalents+ 11.5%
# of holdings 61 Industrials 11.4%
- ------------------------------------------------------- Energy 5.8%
Price/Earnings Ratio (wtd. harmonic avg.) 0.75x Materials 4.6%
- ------------------------------------------------------- Consumer Staples 2.9%
Weighted Average Market Capitalization $1.1 billion Telecommunication Services 1.9%
- ------------------------------------------------------- Utilities 1.4%
Net assets $96 million Exchange Traded Fund 0.2%
- -------------------------------------------------------
* Percentages based on total investments.
Top 10 Holdings++ + Cash equivalents include a short-term
investment held as collateral for
1 Matria Healthcare loaned securities (see Note 9 in the
2 Aeroflex Notes to Financial Statements).
3 Forest Oil
4 Hyperion Solutions Lipper Inc. Performance Ranking
5 W-H Energy Services
6 Martek Biosciences As of September 30, 2005
7 Medicis Pharmaceutical, Cl A
8 First Cash Financial Services Lipper Small Cap Core Category
9 Central Pacific Financial
10 Applied Films Period Rank Percentile
++ Excludes short-term investment held ---------------------------------------
as collateral for loaned securities. 5 year (119 of 341 funds) 35%
---------------------------------------
Market Capitalization Investment Style 3 year (438 of 488 funds) 90%
small [X] value [_] ---------------------------------------
medium [_] blend [_] 1 year (575 of 604 funds) 95%
large [_] growth [X]
Growth of $10,000 Investment in the Fund
August 31, 2000 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Russell 2000 Russell 2000
Small Cap Fund Index Value Index
-------------- ------------ ------------
Aug 31 00 $10,000 $10,000 $10,000
Sep 00 10,059 9,706 9,943
Sep 01 10,412 7,647 10,501
Sep 02 10,111 6,936 10,347
Sep 03 12,822 9,468 13,624
Sep 04 15,350 11,245 17,119
Sep 05 16,684 13,263 20,158
**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, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
8.69% 18.17% 10.65% 10.86%
Constellation Funds 2005 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 diversified 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. Pitcairn seeks to identify stocks that offer significant
growth potential, but are attractively valued relative to their peer groups.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Fund returned 6.72%. This
compares to a 14.65% return from the Wilshire 5000 Index and a 11.60% return for
the Russell 1000 Growth Index. The Constellation Pitcairn Family Heritage(R)
Fund ranked in the 95th percentile (718 out of 752 funds) when compared to the
Lipper Multi-Cap Core category over the twelve-month period.
The Fund's underperformance during the fiscal year ending September 30, 2005 was
largely attributable to security selection. The Fund was negatively impacted by
Pitcairn's focus on stocks with stronger than average growth characteristics, as
these stocks were out of favor over the last twelve months. In addition, stocks
with low S&P's quality rankings dramatically outperformed stocks with high
quality rankings during the last twelve months. S&P quality rankings convey the
relative growth and stability of earnings and dividends generated by a company
over a trailing 10-year period. For example, for the twelve months ended
September 30, 2005, stocks ranked A+ and A in the Russell 1000 Growth Index
returned - 1.17% and 0.88% respectively. Conversely, B, B- and C rated stocks
returned 17.56%, 21.92%, and 19.30%, respectively. The majority of the stocks
held in the Fund have quality rankings of B+ or higher, which resulted in some
of the Fund's underperformance over the past year.
The list of positive contributors to performance over the past year included
Chesapeake Energy, Devon Energy and Apache; all are oil and gas production
companies which benefited from the strength in energy stocks due to record high
energy prices. Detractors from Fund performance over the past year included
Wireless Facilities, a commercial services company offering design and
engineering for wireless networks, Commercial Capital Bancorp, Flagstar Bancorp
and Wal-Mart Stores. There were no significant changes made to the Fund's
strategy or positioning during the past year.
30 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R) Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTFMX
- -------------------------------------------------------- Cash Equivalents+ 20.1%
CUSIP 21038A786 Financials 17.4%
- -------------------------------------------------------- Information Technology 14.8%
% in 10 largest holdings*++ 25.4% Health Care 9.5%
- -------------------------------------------------------- Consumer Discretionary 8.7%
# of holdings 52 Energy 7.7%
- -------------------------------------------------------- Industrials 7.3%
Price/Earnings Ratio (wtd. harmonic avg.) 19.61x Consumer Staples 7.2%
- -------------------------------------------------------- Materials 3.4%
Weighted Average Market Capitalization $37.4 billion Utilities 2.2%
- -------------------------------------------------------- Telecommunication Services 1.7%
Net assets $84 million
- -------------------------------------------------------- * Percentages based on total investments.
+ Cash equivalents include a short-term
Top 10 Holdings++ investment held as collateral for
loaned securities (see Note 9 in the
1 Microsoft Notes to Financial Statements).
2 Stryker
3 TCF Financial Lipper Inc. Performance Ranking
4 Eli Lilly
5 Wm. Wrigley Jr. As of September 30, 2005
6 Devon Energy
7 AES Lipper Multi-Cap Core Category
8 Capital One Financial
9 Chesapeake Energy Period Rank Percentile
10 Wal-Mart Stores ---------------------------------------
++ Excludes short-term investment held 5 year (184 of 396 funds) 46%
as collateral for loaned securities. ---------------------------------------
3 year (437 of 567 funds) 77%
Market Capitalization Investment Style ---------------------------------------
small [_] value [_] 1 year (718 of 752 funds) 95%
medium [_] blend [_]
large [X] growth [X]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Family Wilshire 5000
Heritage Fund Index
--------------- -------------
Sep 30 95 $10,000 $10,000
Sep 96 10,995 11,892
Sep 97 15,692 16,415
Sep 98 16,660 16,953
Sep 99 21,069 21,522
Sep 00 25,377 25,282
Sep 01 19,642 17,968
Sep 02 17,157 14,820
Sep 03 20,692 18,710
Sep 04 24,033 21,471
Sep 05 25,648 24,617
**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, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ -------- ---------
6.72% 14.34% 0.21% 9.88%*** 9.87%***
Constellation Funds 2005 Annual Report 31
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund
Investment Philosophy & Process
The Constellation Pitcairn Taxable Bond Fund is sub-advised by Pitcairn
Investment Management ("Pitcairn"). Pitcairn's investment strategy is designed
to deliver 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 to achieve a total return advantage over the
Lehman U.S. Government Credit Index. Additional value may be gained by
anticipating changing credit conditions and identifying unique anomalies offered
by the marketplace.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Fund returned 1.50%. By
comparison, the Fund's benchmark, the Lehman U.S. Government Credit Index
returned 2.56%. The Fund ranked at the 87th percentile (135 out of 155 funds)
when compared to the Lipper Corporate Debt BBB Rating category over the
twelve-month period.
During the fiscal year, the yield curve flattened. The 30-year US Treasury was
down 33 basis points while the 2-year US Treasury was up 157 basis points. The
majority of Fund underperformance resulted from a decline in the value of bonds
in the automobile sector. Ford and GM were downgraded to below investment grade
credit ratings by Moody's and Standard and Poors. The downgrade caused many
investors to sell, and in turn the automobile sector declined in value. The
Fund's holdings of long US Treasury securities contributed positively to
performance. The Fund concentrates on investment-grade quality securities.
Overall, the average quality of the Fund's holdings was double-A credit rated.
32 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTGCX
- ----------------------------------------- U.S. Government Agency Obligations 24.5%
CUSIP 21038A729 Financials 22.5%
- ----------------------------------------- U.S. Treasury Obligations 15.1%
% in 10 largest holdings*++ 31.9% Industrials 9.2%
- ----------------------------------------- Cash Equivalents+ 7.4%
# of holdings 47 Telecommunication Services 4.6%
- ----------------------------------------- Consumer Discretionary 4.1%
Average Effective Duration 4.93 Municipal Bonds 3.3%
- ----------------------------------------- Asset-Backed Securities 2.3%
Average Quality AA3 Consumer Staples 2.1%
- ----------------------------------------- Energy 2.0%
Average Maturity 8.42 Health Care 1.9%
- ----------------------------------------- Sovereign Bond 1.0%
Average Current Yield 5.73
- ----------------------------------------- * Percentages based on total investments.
Net assets $48 million + Cash equivalents include a short-term
- ----------------------------------------- investment held as collateral for
loaned securities (see Note 9 in the
Top 10 Holdings++ Notes to Financial Statements).
1 Tyco International Group Lipper Inc. Performance Ranking
2 U.S. Treasury Bond
3 U.S. Treasury Bond As of September 30, 2005
4 FHLB, Ser EX10
5 FHLMC Lipper Corporate Debt Funds BBB Rating Category
6 CIT Group
7 FHLB, Ser RA18 Period Rank Percentile
8 First Data --------------------------------------
9 Lehman Brothers Holdings 5 year (61 of 93 funds) 66%
10 FNMA --------------------------------------
++ Excludes short-term investment held 3 year (97 of 125 funds) 78%
as collateral for loaned securities. --------------------------------------
1 year (135 of 155 funds) 87%
Quality Duration
low [_] short [_]
high [X] long [X]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Taxable Lehman U.S. Government
Bond Fund Credit Index
---------------- ----------------------
Sep 30 95 $10,000 $10,000
Sep 96 10,357 10,451
Sep 97 11,303 11,453
Sep 98 12,697 12,924
Sep 99 12,393 12,714
Sep 00 13,222 13,569
Sep 01 15,008 15,356
Sep 02 15,767 16,769
Sep 03 16,895 17,860
Sep 04 17,479 18,459
Sep 05 17,741 18,931
**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 have been 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.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
1.50% 4.01% 6.06% 5.90%*** 6.99%***
Constellation Funds 2005 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 to achieve 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 ended September 30, 2005, the Constellation Pitcairn
Tax-Exempt Bond Fund returned 2.78%. The Fund's benchmark, the Lehman Municipal
Bond Index, returned 4.07%. The Constellation Pitcairn Tax-Exempt Fund ranked at
the 72nd percentile (192 out of 268 funds) when compared to the Lipper General
Municipal Bond category over the twelve-month period.
The yield curve flattened during the fiscal year ended September 30, 2005. The
result of this flattening was the long end of the yield curve outperforming the
short end of the yield curve. Despite the rise in short rates, interest rates
remained low compared to historical standards. Investors sought additional yield
opportunities in lower quality sectors. The lack of exposure in tobacco and
airline bonds contributed to the Fund's underperformance. Bonds backed by the
Master Settlement Agreement between the states and the tobacco companies more
than doubled the performance of the municipal bond index. Airline backed
municipal bonds also performed well during the fiscal year, despite poor
fundamentals. There were no significant changes to the strategy of the Fund
during the period.
34 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Bond Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTTEX
- ----------------------------------------- Utilities 14.9%
CUSIP 21038A737 General Obligations 13.4%
- ----------------------------------------- Higher Education 12.8%
% in 10 largest holdings* 23.8% Medical 12.1%
- ----------------------------------------- Facilities 8.2%
# of holdings 77 Development 8.1%
- ----------------------------------------- School District 7.6%
Average Effective Duration 6.85 Transportation 6.2%
- ----------------------------------------- Power 4.3%
Average Quality AA1 Education 3.2%
- ----------------------------------------- General Revenue 3.1%
Average Maturity 14.24 Water 2.4%
- ----------------------------------------- Single-Family Housing 1.5%
Average Current Yield 4.92% Pollution 1.0%
- ----------------------------------------- Multi-Family Housing 0.9%
Net assets $112 million Cash Equivalent 0.3%
- -----------------------------------------
* Percentages based on total investments.
Top 10 Holdings
Lipper Inc. Performance Ranking
1 California State GO, AMBAC
2 Maryland State, Health & Higher As of September 30, 2005
Education Authority RB, Johns Hopkins
University, Ser A Lipper General Municipal Bond Category
3 Darlington County, Water & Sewer
Authority RB, AMBAC Period Rank Percentile
4 University of Hawaii RB, Ser A, FGIC -------------------------------------------
5 Atlanta Water & Waste Water, RB, FSA 5 year (84 of 221 funds) 38%
6 Puerto Rico Commonwealth, -------------------------------------------
Infrastructure RB, Ser B 3 year (143 of 254 funds) 56%
7 Henry County, Water & Sewer Authority -------------------------------------------
RB, AMBAC 1 year (192 of 268 funds) 72%
8 California Health Facilities Finance
Authority RB, St. Francis Memorial
Hospital, Ser C, ETM
9 Louisiana Public Facilities
Authority RB, Franciscan Missionaries
Project, Ser A, FSA
10 Norwin Penn School District GO, FGIC
Quality Duration
low [_] short [_]
high [X] long [_]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
Pitcairn Tax- Lehman Municipal
Exempt Bond Fund Bond Index
---------------- ----------------
Sep 30 95 $10,000 $10,000
Sep 96 10,430 10,604
Sep 97 11,264 11,562
Sep 98 12,164 12,570
Sep 99 11,958 12,482
Sep 00 12,588 13,253
Sep 01 13,844 14,633
Sep 02 15,062 15,941
Sep 03 15,606 16,561
Sep 04 16,168 17,321
Sep 05 16,617 18,026
**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 have been 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, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
2.78% 3.33% 5.71% 5.21%*** 5.83%***
Constellation Funds 2005 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"). The managers' 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. 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
For the fiscal year ended September 30, 2005, the Constellation Sands Capital
Select Growth Fund, Class II Shares returned 14.71%. The Fund's benchmark, the
Russell 1000 Growth Index ("Index"), returned 11.60%. The Constellation Sands
Capital Select Growth Fund ranked at the 26th percentile (176 out of 678 funds)
when compared to the Lipper Large-Cap Growth category over the twelve-month
period.
The Fund's holdings in Genentech, Google, Genzyme, Moody's and Red Hat were the
most significant contributors to relative performance during the period.
Avoiding index components Johnson & Johnson and United Healthcare detracted from
portfolio performance. The Fund's sizable stake in eBay, an overweight relative
to the index, also detracted from relative performance.
Overall, the Fund's sector allocations contributed positively to relative
performance during the past twelve months. Overweight positions in the
healthcare and consumer discretionary sectors were the most significant positive
drivers of performance. An underweight allocation versus the index in the energy
sector detracted from relative performance during the time period.
During this year, Sands Capital eliminated three companies that were held in the
Fund since inception: Harley-Davidson, Microsoft and Wal-Mart Stores. Sands
Capital believed that these stocks had reached maturity as a growth company. The
primary reason that ownership of these stocks was so rewarding in the past was
that the underlying businesses consistently generated high-quality,
above-average and greater-than-expected earnings growth. Harley-Davidson,
Microsoft and Wal-Mart Stores continue to be great companies. Each remains a
leader in its respective business space and continues to enjoy significant
competitive advantages. Additionally, each remains relatively focused on its
primary lines of business, is financially sound and appears to be reasonably
valued relative to the market and its peers. However, all three companies
matured over the past decade and face significant challenges for continued
robust growth; thus, they no longer met Sands Capital's requirement for
sustainable above-average growth rates.
New securities added to the portfolio during the past twelve months included
Google (GOOG), Zimmer Holdings (ZMH), Iron Mountain (IRM), American
Pharmaceutical Partners (APPX), Chicago Mercantile Exchange Holdings (CME) and
Intuitive Surgical (ISRG).
36 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker (Class I/Class II) CFSIX/PTSGX
- -------------------------------------------------------------- Health Care 28.8%
CUSIP(Class I/Class II) 21038A711/21038A760 Cash Equivalents+ 22.0%
- -------------------------------------------------------------- Consumer Discretionary 18.1%
% in 10 largest holdings*++ 46.0% Information Technology 14.4%
- -------------------------------------------------------------- Financials 9.5%
# of holdings 28 Industrials 5.3%
- -------------------------------------------------------------- Consumer Staples 1.9%
Price/Earnings Ratio (wtd. harmonic avg.) 29.49x
- -------------------------------------------------------------- * Percentages based on total investments.
Weighted Average Market Capitalization $42.9 billion + Cash equivalents include a short-term
- -------------------------------------------------------------- investment held as collateral for
Net assets $245 million loaned securities (see Note 9 in the
- -------------------------------------------------------------- Notes to Financial Statements).
Top 10 Holdings++ Lipper Inc. Performance Ranking
1 Genentech As of September 30, 2005
2 eBay
3 Google, Cl A Lipper Large-Cap Growth Category
4 Starbucks
5 Apollo Group, Cl A Period Rank Percentile
6 Capital One Financial -----------------------------------------
7 Dell 5 year (60 of 453 funds) 13%
8 Genzyme -----------------------------------------
9 Lowe's 3 year (9 of 577 funds) 2%
10 Qualcomm -----------------------------------------
++ Excludes short-term investment held 1 year (176 of 678 funds) 26%
as collateral for loaned securities.
Market Capitalization Investment Style
small [_] value [_]
medium [_] blend [_]
large [X] growth [X]
Growth of $10,000 Investment in the Fund
August 31, 2000 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation Constellation
Sands Capital Select Sands Capital Select
Growth Fund - Class II Growth Fund - Class I Russell 1000
Shares Shares Growth Index
----------------------- --------------------- ------------
Aug 31 00 $10,000 $10,000 $10,000
Sep 00 8,841 8,841 9,054
Sep 01 4,863 4,863 4,922
Sep 02 4,186 4,186 3,814
Sep 03 5,694 5,694 4,802
Sep 04 6,573 6,573 5,163
Sep 05 7,540 7,550 5,762
**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 is August 11, 2000.
***Class I Shares were offered beginning August 27, 2004. Class I Shares
performance for the periods prior to August 27, 2004 reflects performance of the
Class II Shares. The performance of the Class I Shares has not been adjusted for
the differences in fees between classes.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Past 3 Past 5 Since
year years years inception
------ ------ ------ ---------
Class I 14.85% 21.73%*** (3.11)%*** (4.69)%***
Class II 14.71% 21.68% (3.13)% (4.71)%
Constellation Funds 2005 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 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 fiscal year ended September 30, 2005, the Fund posted a gain of 24.32%
versus a gain of 17.75% for its benchmark, the Russell 2000 Value Index. The
Constellation TIP Small Cap Value Opportunities Fund ranked at the 12th
percentile (73 out of 604 funds) when compared to the Lipper Small Cap Core
category over the twelve-month period.
Contributing the most to performance during the year were holdings in the
telecommunications, financial services and materials/processing sectors. Among
the Fund's best performers were companies in wireless communications business.
Alamosa Holdings and Leap Wireless International benefited from improved
fundamentals due to an increase in subscriber base and improved roaming charges.
US Unwired enjoyed very strong performance because it was acquired by Sprint.
The Fund also benefited from an underweight in the financial services sector.
Specifically, the Fund's limited exposure to bank stocks helped performance.
Another contributor to performance within the financial services sector was
Archipelago. Archipelago operates an electronic trading platform and announced
that it would be acquired by the New York Stock Exchange. The Fund's portfolio
managers also found good opportunities in some selected REITs and payment
processor companies in this sector.
The Fund's underweighting in oil and gas production companies was a slight
detractor from overall performance for the fiscal year ended September 30, 2005.
Several specific technology related holdings also detracted from performance for
the period; including Inforte, a provider of systems design consulting and
Imation, a manufacturer of data storage devices.
38 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation TIP Small Cap Value Opportunities Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TSVOX
- ------------------------------------------------------- Financials 26.2%
CUSIP 21038A208 Industrials 21.5%
- ------------------------------------------------------- Cash Equivalents+ 14.0%
% in 10 largest holdings*++ 15.0% Information Technology 7.6%
- ------------------------------------------------------- Consumer Discretionary 7.5%
# of holdings 100 Materials 6.3%
- ------------------------------------------------------- Energy 5.4%
Price/Earnings Ratio (wtd. harmonic avg.) 14.45x Health Care 5.3%
- ------------------------------------------------------- Telecommunication Services 3.2%
Weighted Average Market Capitalization $1.1 billion Consumer Staples 1.9%
- ------------------------------------------------------- Exchange Traded Fund 0.7%
Net assets $74 million Utilities 0.4%
- -------------------------------------------------------
* Percentages based on total investments.
Top 10 Holdings++ + Cash equivalents include a short-term
investment held as collateral for
1 Walter Industries loaned securities (see Note 9 in the
2 Leap Wireless International Notes to Financial Statements).
3 Washington Group International
4 Analogic Lipper Inc. Performance Ranking
5 Cleveland-Cliffs
6 Foundation Coal Holdings As of September 30, 2005
7 Clean Harbors
8 Comstock Resources Lipper Small Cap Core Category
9 RH Donnelley
10 Jarden Period Rank Percentile
++ Excludes cash equivalent and short-term investment --------------------------------------
held as collateral for loaned securities. 3 year (30 of 488 funds) 6%
--------------------------------------
Market Capitalization Investment Style 1 year (73 of 604 funds) 12%
small [X] value [X]
medium [_] blend [_]
large [_] growth [_]
Growth of $10,000 Investment in the Fund
March 31, 2002 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
TIP Small Cap Value Russell 2000
Opportunities Fund Value Index
------------------- ------------
Mar 31 02 $10,000 $10,000
Sep 02 8,737 7,705
Sep 03 11,995 10,144
Sep 04 15,517 12,747
Sep 05 19,291 15,009
**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, 2005
Past 1 Past 3 Since
year years inception
- ------ ------ ---------
24.32% 30.21% 22.20%
Constellation Funds 2005 Annual Report 39
Investment Review
- --------------------------------------------------------------------------------
Constellation TIP Mid Cap Fund
Investment Philosophy & Process
The Constellation TIP Mid Cap 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 looks for companies with quality
management teams, strong fundamentals, well positioned balance sheets and
distinctive product opportunities that may be positioned to generate and sustain
long term growth.
Fund Performance & Positioning
For the nine-month period ended September 30, 2005, the Fund posted a gain of
18.53% versus a gain of 10.07% for its benchmark, the Russell Midcap Index. The
Constellation TIP Mid Cap Fund ranked at the 1st percentile (3 out of 554 funds)
when compared to the Lipper Mid-Cap Growth category over the nine-month period.
Contributing the most to performance in the Fund were holdings in the
telecommunications services and consumer discretionary sectors. In the
telecommunications services sector, wireless companies NII Holdings and Alamosa
Holdings were good performers with the stocks benefiting from strong business
fundamentals, an increase in usage and greater subscriber retention. Within the
consumer discretionary sector, Chico's FAS contributed significantly to
performance. Chico's FAS operates chains of women's specialty stores under the
retail brands Chico's, White House/Black Market and Soma. The company delivered
solid fundamental results which drove the stock price higher.
The Fund's holdings in the healthcare sector detracted slightly from overall
performance for the period. Cytyc, a medical specialties company focused on
women's health, was the most significant detractor in the healthcare sector. The
stock retreated as investors took profits after very strong performance in 2003
and early 2004. In addition, the Fund was underweighted in the strongly
performing healthcare services industry. This underweighting had a negative
impact on performance.
40 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation TIP Mid Cap Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TMCPX
- -------------------------------------------------------- Industrials 20.1%
CUSIP 21038A679 Financials 17.3%
- -------------------------------------------------------- Information Technology 15.6%
% in 10 largest holdings* 20.2% Consumer Discretionary 12.0%
- -------------------------------------------------------- Energy 8.9%
# of holdings 71 Health Care 8.8%
- -------------------------------------------------------- Telecommunication Services 6.2%
Price/Earnings Ratio (wtd. harmonic avg.) 17.61x Consumer Staples 4.4%
- -------------------------------------------------------- Utilities 3.1%
Weighted Average Market Capitalization $4.0 billion Materials 2.3%
- -------------------------------------------------------- Cash Equivalents 1.3%
Net assets $842 thousand
- -------------------------------------------------------- * Percentages based on total investments.
Top 10 Holdings Lipper Inc. Performance Ranking
1 NII Holdings As of September 30, 2005
2 Jarden
3 Precision Castparts Lipper Mid-Cap Growth Category
4 Leap Wireless International
5 RH Donnelley Period Rank Percentile
6 Global Payments ----------------------------------------
7 Warner Music Group 1 year (3 of 541 funds) 1%
8 Fidelity National Financial
9 Brink's
10 Joy Global
Market Capitalization Investment Style
small [_] value [_]
medium [X] blend [X]
large [_] growth [_]
Growth of $10,000 Investment in the Fund
January 31, 2003 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
TIP Mid Cap Russell Midcap
Fund Index
----------- --------------
Jan 31 03 $10,000 $10,000
Sep 03 12,521 12,290
Sep 04 14,969 14,816
Sep 05 20,244 18,535
**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 Mid Cap
Fund is January 2, 2003.
Annualized Total Returns**
Periods ending September 30, 2005
Past 1 Since
year inception
- ------ ---------
35.24% 29.29%
Constellation Funds 2005 Annual Report 41
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 growth companies with superior
earnings prospects, reasonable valuation, and favorable trading-volume and
pricing patterns. Turner 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 fiscal year ended September 30, 2005, the Fund posted a gain of 18.27%
versus a gain of 6.20% for its benchmark, the S&P 500 Financials Index. The
Constellation TIP Financial Services Fund ranked in the 7th percentile (8 out of
120 funds) when compared to the Lipper Financial Services category over the
twelve-month period.
During the fiscal year ended September 30, 2005, the Fund's holdings in the
securities brokerage and diversified financial services industries contributed
the most to Fund performance. The Fund benefited from exposure to financial
services companies that were less sensitive to interest rate increases. Strong
performers included Ameritrade Holding and Legg Mason, which benefited from
restructuring in their businesses. Chicago Mercantile Exchange Holdings was also
a significant contributor to performance. The company benefited from an increase
in trading volume. Potential merger discussions with the Chicago Board of Trade,
a long-standing rival, also helped the stock. Greenhill, an independent
investment banking firm, also delivered solid earnings and business results
resulting from participation in several large merger transactions.
Mark D. Turner replaced Christopher Perry as the lead portfolio manager for the
Fund in 2005. Mark Turner is President and a founder of Turner Investment
Partners. He is a senior portfolio manager and a member of the analyst team that
researches financial services stocks.
Mark Turner has 22 years of investment experience. Prior to forming Turner
Investment Partners, Mr. Turner was vice president/senior portfolio manager at
First Maryland Asset Management, vice president/portfolio manager at Merrill
Lynch Asset Management, and portfolio manager/analyst at Wachovia Investment
Management. Mr. Turner received a BS in economics from Bradley University and an
MBA in finance from the University of Illinois. He is a member of AIMR.
42 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation TIP Financial Services Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TFFIX
- ------------------------------------------------------- Financials 72.0%
CUSIP 21038A307 Cash Equivalents+ 19.3%
- ------------------------------------------------------- Information Technology 7.1%
% in 10 largest holdings*++ 23.5% Industrials 1.6%
- -------------------------------------------------------
# of holdings 50 * Percentages based on total investments.
- ------------------------------------------------------- + Cash equivalents include a short-term
Price/Earnings Ratio (wtd. harmonic avg.) 16.54x investment held as collateral for
- ------------------------------------------------------- loaned securities (see Note 9 in the
Weighted Average Market Capitalization $34.6 billion Notes to Financial Statements).
- -------------------------------------------------------
Net assets $16 million Lipper Inc. Performance Ranking
- -------------------------------------------------------
As of September 30, 2005
Top 10 Holdings++
Lipper Financial Services Category
1 American International Group
2 Citigroup Period Rank Percentile
3 American Express ---------------------------------------
4 Charles Schwab 5 year (43 of 81 funds) 53%
5 Jefferies Group ---------------------------------------
6 Lehman Brothers Holdings 3 year (15 of 104 funds) 14%
7 Northern Trust ---------------------------------------
8 Affiliated Managers Group 1 year (8 of 120 funds) 7%
9 Morgan Stanley
10 Prudential Financial
++ Excludes short-term investment held
as collateral for loaned securities.
Market Capitalization Investment Style
small [_] value [_]
medium [_] blend [X]
large [X] growth [_]
Growth of $10,000 Investment in the Fund
May 31, 1996 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
TIP Financial S&P 500
Services Fund Financials Index
------------- ----------------
May 31 96 $10,000 $10,000
Sep 96 10,752 10,939
Sep 97 16,893 17,212
Sep 98 14,579 16,772
Sep 99 17,684 19,625
Sep 00 24,439 26,264
Sep 01 19,326 22,736
Sep 02 17,204 19,412
Sep 03 23,389 24,434
Sep 04 26,269 28,070
Sep 05 31,068 29,810
**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, 2005
Past 1 Past 3 Past 5 Since
year years years inception
- ------ ------ ------ ---------
18.27% 21.78% 4.92% 12.89%
Constellation Funds 2005 Annual Report 43
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. Fund 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 fiscal year ended September 30, 2005, the Fund posted a gain of 21.10%
verses a gain of 10.42% for its benchmark, the S&P 500 Healthcare Index. The
Constellation TIP Healthcare & Biotechnology Fund ranked in the 13th percentile
(24 out of 179 funds) when compared to the Lipper Health/Biotechnology category
over the twelve-month period.
Pacificare Health Systems, a managed health care provider, contributed
significantly to Fund performance after announcing its acquisition by United
Health. Intuitive Surgical was another strong performer in the portfolio. This
company designs and manufactures an advanced robotic surgical system which
translates the surgeon's natural hand movements on instrument controls at a
console into corresponding micro movements of instruments positioned inside the
patient through small puncture incisions. The company exceeded earnings
expectations and significant stock price appreciation as a result. The Fund also
benefited from an underweight in pharmaceuticals. Management believed that
product pipelines within the pharmaceutical industry were weak and that major
drug companies were coming under increasing pressure from generic pharmaceutical
companies. Fund management's decision not to own Merck and to underweight Pfizer
were significant contributors to performance for the period. Merck's performance
suffered dramatically as it faced lawsuits resulting from the recall of its
Vioxx drug.
The majority of the Fund's relative underperformance came from underweighting
companies that were strong performers in the benchmark. Examples of this include
Johnson & Johnson, Amgen, Aetna and United Health Group. There were no
significant changes to the portfolio strategy during the twelve months ending
September 30, 2005.
44 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation TIP Healthcare & Biotechnology Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker THBCX
- -------------------------------------------------------- Health Care 77.3%
CUSIP 21038A109 Cash Equivalents+ 21.6%
- -------------------------------------------------------- Financials 1.1%
% in 10 largest holdings*++ 33.4%
- -------------------------------------------------------- * Percentages based on total investments.
# of holdings 51 + Cash equivalents include a short-term
- -------------------------------------------------------- investment held as collateral for
Price/Earnings Ratio (wtd. harmonic avg.) 24.98x loaned securities (see Note 9 in the
- -------------------------------------------------------- Notes to Financial Statements).
Weighted Average Market Capitalization $40.1 billion
- -------------------------------------------------------- Lipper Inc. Performance Ranking
Net assets $60 million
- -------------------------------------------------------- As of September 30, 2005
Top 10 Holdings++ Lipper Health/Biotechnology Category
1 Johnson & Johnson Period Rank Percentile
2 Pfizer --------------------------------------
3 Pacificare Health Systems 3 year (39 of 161 funds) 24%
4 Caremark Rx --------------------------------------
5 C.R. Bard 1 year (24 of 179 funds) 13%
6 Omnicare
7 St. Jude Medical
8 Fisher Scientific International
9 United Therapeutics
10 Genentech
++ Excludes cash equivalents and short-term
investment held as collateral for
loaned securities.
Market Capitalization Investment Style
small [_] value [_]
medium [X] blend [_]
large [_] growth [X]
Growth of $10,000 Investment in the Fund
February 28, 2001 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation
TIP Healthcare & S&P 500
Biotechnology Fund Healthcare Index
------------------ ----------------
Feb 28 01 $10,000 $10,000
Sep 01 11,151 9,467
Sep 02 9,851 7,393
Sep 03 12,336 8,239
Sep 04 13,831 8,634
Sep 05 16,749 9,534
**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, 2005
Past 1 Past 3 Since
year years inception
- ------ ------ ---------
21.10% 19.36% 11.91%
Constellation Funds 2005 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 sub-advised by Oechsle International Advisors
("Oechsle"), The Boston Company Asset Management ("The Boston Company") and
Brandywine Asset Management. Oechsle International Advisors 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 value ratios. 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 invests in companies across the market
capitalization spectrum.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Fund returned 24.19%,
underperforming the 29.48% gain posted by its benchmark, the MSCI All Country
World ex-U.S. Index. The Constellation International Equity Fund ranked in the
61st percentile (177 out of 289 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 slightly
underperformed the growth oriented benchmark for the period. Brandywine Asset
Management decreased exposure in Japan by selling strong performers in the
healthcare sector. Japan demonstrated signs of sustainable growth, and as a
result management sought to increase the portfolio's exposure to cyclical stocks
in the country and reduce exposure to more defensive healthcare stocks. The
weight in Hong Kong also fell as management found better opportunities in other
countries in the region, including South Korea and Thailand. The portfolio also
increased exposure in Switzerland during the period when several high quality
franchises became available at very attractive prices in that country. The
portfolio's weighting climbed in financials, industrials, and energy as many of
these stocks posted strong gains over the year. Japan, Brazil, South Korea and
France were strongly positive contributors for the year. Performance was
impacted negatively by stock selection in Hong Kong, an underweight of the
strongly performing Australia and an underweight of energy dependent Norway.
The portion of the Fund managed by The Boston Company underperformed the
benchmark. Twenty-nine out of 31 countries in the Fund advanced, while ten out
of ten sectors advanced. Japan officially moved into a cyclical recession at the
end of 2004 due to a drop in industrial production. However, Japan's domestic
economy appears to be improving with both employment and housing figures on the
rise. China continued to dominate headlines as Chinese companies considered
acquisitions as a way to build national brands, gain management expertise and
secure natural resources. China fulfilled expectations by revaluing the Yuan and
shifting to a basket of currencies. In the long term, a stronger currency is
positive for materials, energy and Asian exporters. Not surprisingly, materials,
particularly metals, and capital goods producers rallied on the news. A
manufacturing company stepped forward to purchase Maytag in the US and CNOOC
made an $18.3B bid for Unocal, a U.S. oil company with a broad portfolio of
Asian assets. UK consumption dropped markedly with higher interest rates denting
disposable income, though the country still posted solid returns during the
period. From a sector perspective, mining companies and oil producers were
strong performers. Energy markets surged as Brent crude breeched $70/bbl in the
aftermath of Hurricane Katrina. The telecom services sector benefited from net
inflows as the market sought out the relative safety of this cash rich, high
dividend-yielding segment. Information technology was the main area of relative
stock weakness during the period.
The portion of the Fund managed by Oechsle also underperformed the benchmark
index. This shortfall was largely a reflection of the dynamics at play in the
market during the period and the earnings-growth investment philosophy employed
by the team at Oechsle. Over the past year, the market has been relatively
narrowly led by the energy and commodity sectors. It has been characterized by a
series of very short term, choppy rotations through other sectors, with little
differentiation beyond a defensive bias. As global forecasts for economic growth
slowed and interest rates threatened to rise, investors sought safety in the
market's more defensive sectors like utilities and consumer staples. The more
generically growth oriented sectors - technology, telecoms and many industries
in the consumer discretionary and healthcare sectors - trailed the market by
significant margins. With these factors at play in the market, the portfolio was
hampered primarily by its mix of holdings in the United Kingdom and Japan. Many
of the continental European stocks outperformed, especially in Germany and
France. The primary contributors to performance were financial holdings where
our preference for Japanese banks over those in the UK proved favorable.
Performance was less favorable in the energy and healthcare sectors. During the
period, the portfolio emphasized quality companies with strong balance sheets
and good cash flow. The fund managers reduced the portfolio's energy holdings
during the period. Many of these stocks experienced significant appreciation
during the year and management felt it prudent to take profits and move from an
overweight position to a slight underweight. The proceeds were used to increase
technology and healthcare holdings.
46 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation International Equity Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker PTIEX
- ----------------------------------------- Financials 25.1%
CUSIP 21038A778 Consumer Discretionary 14.4%
- ----------------------------------------- Industrials 9.4%
% in 10 largest holdings*++ 15.4% Telecommunication Services 8.4%
- ----------------------------------------- Materials 8.1%
# of holdings 261 Energy 7.6%
- ----------------------------------------- Health Care 7.4%
Net assets $128 million Consumer Staples 7.1%
- ----------------------------------------- Cash Equivalents 5.2%
Information Technology 4.5%
Top 10 Holdings++ Utilities 2.8%
1 Total * Percentages based on total investments.
2 Nestle
3 Kookmin Bank Lipper Inc. Performance Ranking
4 Diageo
5 Novartis As of September 30, 2005
6 Repsol YPF
7 Royal Dutch Shell, Cl A Lipper International Multi-Cap Core Category
8 Mitsubishi UFJ Financial Group
9 Millea Holdings Period Rank Percentile
10 GlaxoSmithKline -----------------------------------------
++ Excludes cash equivalents. 5 year (134 of 169 funds) 79%
-----------------------------------------
Market Capitalization Investment Style 3 year (134 of 230 funds) 58%
small [_] value [_] -----------------------------------------
medium [_] blend [X] 1 year (177 of 289 funds) 61%
large [X] growth [_]
Growth of $10,000 Investment in the Fund
September 30, 1995 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
Constellation MSCI All Country
International World ex-U.S.
Equity Fund Index
------------- ----------------
Sep 30 95 $10,000 $10,000
Sep 96 11,051 10,870
Sep 97 12,252 12,335
Sep 98 10,196 10,714
Sep 99 13,338 14,294
Sep 00 14,330 14,996
Sep 01 9,074 10,604
Sep 02 7,481 9,220
Sep 03 9,290 11,897
Sep 04 11,032 14,652
Sep 05 13,701 18,971
**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 a similarly managed
common trust fund advised by Pitcairn Trust Company, 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, 2005
Past 1 Past 3 Past 5 Past 10 Since
year years years years inception
- ------ ------ ------ ------- ---------
24.19% 22.34% (0.89)% 3.20%*** 4.98%***
Constellation Funds 2005 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
("Chartwell") and the Constellation TIP Small Cap Value Opportunities Fund,
sub-advised by Turner Investment Partners ("Turner"). The Fund periodically
adjusts 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.
Fund Performance & Positioning
For the fiscal year ended September 30, 2005, the Fund returned 14.22%, net of
expenses, compared to 12.28% for a 50/50 blend of the Russell 2000 Value/Merrill
Lynch High Yield, Cash Pay Index, and 12.25% for the S&P 500 Index.
As of September 30, 2005, the Fund had an allocation of 20% to the Constellation
Chartwell High Yield Fund, 60% to the Constellation TIP Small Cap Value
Opportunities Fund and 20% to the Constellation Chartwell Ultra Short Duration
Fund. The Fund eliminated its allocation to the Constellation HLAM Large Cap
Value Fund on April 20, 2005, due to concerns about the poor performance of the
Fund.
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
telecommunications, financial services and materials and processing sectors. The
Fund's allocation to the Constellation HLAM Large Cap Value Fund hurt
performance for the year.
48 Constellation Funds 2005 Annual Report
Investment Review
- --------------------------------------------------------------------------------
Constellation Strategic Value and High Income Fund
Fund Profile Sector Weightings*
As of September 30, 2005 [THE FOLLOWING TABLE WAS REPRESENTED BY
A BAR CHART IN THE PRINTED MATERIAL.]
Ticker TSVIX
- ----------------------------------- Affiliated Equity Fund 60.2%
CUSIP 21038A208 Affiliated Fixed Income Funds 39.8%
- -----------------------------------
% in 3 holdings* 100% * Percentages based on total investments.
- -----------------------------------
# of holdings 3 Lipper Inc. Performance Ranking
- -----------------------------------
Net assets $806 thousand As of September 30, 2005
- -----------------------------------
Lipper Balanced Category
3 Holdings
Period Rank Percentile
1 Constellation TIP Small Cap Value ----------------------------------------
Opportunities Fund, Class II Shares 1 year (24 of 629 funds) 4%
2 Constellation Chartwell Ultra Short Duration
Fixed Income Fund, Class I Shares
3 Constellation Chartwell High Yield
Fund, Class I Shares
Market Capitalization Investment Style
small [X] value [X]
medium [_] blend [_]
large [_] growth [_]
Growth of $10,000 Investment in the Fund
October 31, 2002 - September 30, 2005**
[THE FOLLOWING TABLE WAS REPRESENTED BY
A LINE CHART IN THE PRINTED MATERIAL.]
50/50 Blend of the Russell
Constellation Merrill Lynch 2000 Value Index and
Strategic Value and S&P 500 Russell 2000 High Yield, Merrill Lynch High Yield,
High Income Fund Index Value Index Cash Pay Index Cash Pay Index
------------------- ------- ------------ -------------- ---------------------------
Oct 31 02 $10,000 $10,000 $10,000 $10,000 $10,000
Sep 03 12,860 11,434 12,971 12,933 12,989
Sep 04 14,923 13,020 16,300 14,514 15,451
Sep 05 17,045 14,614 19,193 15,485 17,348
**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, 2005
Past 1 Since
year inception
- ------ ---------
14.22% 20.05%
Constellation Funds 2005 Annual Report 49
Financial Statements
- --------------------------------------------------------------------------------
Schedule of Investments
Constellation Clover Core Value Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (90.0%)
- --------------------------------------------------------------------------------
Consumer Discretionary (4.2%)
- --------------------------------------------------------------------------------
Barnes & Noble 45,900 $ 1,731
Clear Channel Communications 21,200 697
Interpublic Group* 77,700 904
JC Penney 38,700 1,835
Reebok International 10,600 600
Walt Disney 59,100 1,426
--------
7,193
--------
Consumer Staples (8.6%)
- --------------------------------------------------------------------------------
Campbell Soup 65,200 1,940
ConAgra Foods 84,200 2,084
Constellation Brands, Cl A (A)* 64,900 1,687
CVS (A) 98,200 2,849
Dean Foods* 69,400 2,697
Estee Lauder, Cl A (A) 35,500 1,237
HJ Heinz (A) 62,300 2,276
--------
14,770
--------
Energy (11.9%)
- --------------------------------------------------------------------------------
Chesapeake Energy 64,700 2,475
ConocoPhillips 54,100 3,782
Exxon Mobil 52,600 3,342
National Oilwell Varco* 50,600 3,330
Noble Energy 39,200 1,839
Reliant Energy (A)* 81,700 1,261
Valero Energy 37,600 4,251
--------
20,280
--------
Financials (27.1%)**
- --------------------------------------------------------------------------------
ACE 58,800 2,768
Allstate 42,100 2,328
Assurant 60,800 2,314
Citigroup 54,700 2,490
Equity Office Properties Trust (A) 54,100 1,770
Federated Investors, Cl B 73,100 2,429
Freddie Mac 24,000 1,355
Goldman Sachs Group (A) 20,400 2,480
Hartford Financial Services Group (A) 37,100 2,863
Hibernia, Cl A 54,500 1,637
Lehman Brothers Holdings (A) 21,400 2,493
Loews 41,100 3,798
Marshall & Ilsley 29,500 1,283
Merrill Lynch 50,000 3,067
Metlife 49,400 2,462
Prudential Financial 43,200 2,919
Radian Group (A) 55,000 2,920
Safeco 33,900 1,810
Sovereign Bancorp (A) 144,800 3,191
--------
46,377
--------
Value
Shares (000)
- --------------------------------------------------------------------------------
Health Care (11.8%)
- --------------------------------------------------------------------------------
Aetna 40,500 $ 3,489
Cigna 21,600 2,546
Community Health Systems* 69,100 2,682
Forest Laboratories* 59,000 2,299
Sanofi-Aventis ADR 36,200 1,504
Triad Hospitals* 41,500 1,879
WellPoint* 46,500 3,525
Wyeth 47,500 2,198
--------
20,122
--------
Industrials (7.1%)
- --------------------------------------------------------------------------------
Alliant Techsystems* 25,100 1,874
Burlington Northern Santa Fe 42,700 2,553
Dun & Bradstreet* 28,600 1,884
Honeywell International 57,900 2,171
Republic Services 55,200 1,948
SPX 38,100 1,751
--------
12,181
--------
Information Technology (6.3%)
- --------------------------------------------------------------------------------
BISYS Group* 151,300 2,032
Digital Insight* 69,625 1,814
eFunds* 85,600 1,612
Fairchild Semiconductor International (A)* 147,500 2,192
Ingram Micro* 73,200 1,357
LSI Logic* 179,700 1,770
--------
10,777
--------
Materials (2.3%)
- --------------------------------------------------------------------------------
Lubrizol 57,200 2,478
Syngenta ADR 72,000 1,512
--------
3,990
--------
Utilities (10.7%)
- --------------------------------------------------------------------------------
AES* 128,200 2,106
Ameren 31,700 1,696
CMS Energy* 133,000 2,188
Constellation Energy Group 37,400 2,304
Dominion Resources 22,500 1,938
Duke Energy (A) 62,700 1,829
Edison International 33,500 1,584
Exelon 28,500 1,523
NiSource 64,200 1,557
Public Service Enterprise Group 23,750 1,528
--------
18,253
- --------------------------------------------------------------------------------
Total Common Stock (Cost $133,723) 153,943
================================================================================
50 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Schedule of Investments
Constellation Clover Core Value Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Short-Term Investment Held as Collateral for Loaned
Securities (15.7%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 26,966,850 $ 26,967
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities (Cost $26,967) 26,967
================================================================================
Cash Equivalent (2.3%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 4,009,315 4,009
- --------------------------------------------------------------------------------
Total Cash Equivalent (Cost $4,009) 4,009
================================================================================
Total Investments (108.0%) (Cost $164,699) $184,919
================================================================================
Percentages are based on net assets of $171,251,300.
* Non-income producing security.
** More narrow industries are utilized for compliance purposes, whereas broad
sectors are utilized for reporting purposes.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $26,233,115.
ADR - American Depositary Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 51
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Clover Small Cap Value Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (97.9%)
- --------------------------------------------------------------------------------
Consumer Discretionary (9.9%)
- --------------------------------------------------------------------------------
Big Lots (A)* 111,000 $ 1,220
Brown Shoe 43,300 1,429
Callaway Golf 228,350 3,446
Commercial Vehicle Group* 72,650 1,521
Cumulus Media, Cl A* 290,700 3,631
Dollar Thrifty Automotive Group* 101,125 3,405
Entravision Communications, Cl A* 407,225 3,205
HOT Topic* 221,200 3,398
Isle of Capri Casinos* 75,650 1,617
Marvel Entertainment* 102,625 1,834
Monro Muffler 85,775 2,253
Playtex Products* 174,100 1,915
RC2* 48,275 1,630
Scholastic* 118,275 4,371
Select Comfort (A)* 89,600 1,790
Steiner Leisure* 106,525 3,619
Sunterra* 113,500 1,490
Timberland, Cl A* 40,600 1,371
WCI Communities (A)* 42,000 1,192
--------
44,337
--------
Consumer Staples (5.0%)
- --------------------------------------------------------------------------------
Andersons 43,575 1,276
Chiquita Brands International (A) 104,425 2,919
Church & Dwight (A) 73,375 2,710
Energizer Holdings (A)* 39,350 2,231
Nash Finch 63,350 2,673
Natures Sunshine Products 166,550 3,871
Pantry* 58,400 2,182
Performance Food Group* 85,500 2,698
Rite Aid* 450,000 1,746
--------
22,306
--------
Energy (7.8%)
- --------------------------------------------------------------------------------
Cabot Oil & Gas 94,200 4,758
Denbury Resources* 44,800 2,260
Encore Acquisition* 118,600 4,608
Giant Industries* 38,850 2,274
Grey Wolf* 428,500 3,612
Helmerich & Payne 70,700 4,269
Reliant Energy (A)* 327,025 5,049
SEACOR Holdings* 40,175 2,916
Tesoro 33,225 2,234
Whiting Petroleum* 70,000 3,069
--------
35,049
--------
Financials (30.3%)**
- --------------------------------------------------------------------------------
Advanta, Cl B 97,525 2,753
AG Edwards 33,175 1,453
Allmerica Financial* 118,920 4,892
American Financial Realty Trust 376,950 5,353
AmeriCredit (A)* 230,750 5,508
Value
Shares (000)
- --------------------------------------------------------------------------------
AmerUs Group 65,950 $ 3,784
BankAtlantic Bancorp, Cl A 99,675 1,693
CB Richard Ellis Group, Cl A* 37,150 1,828
CBL & Associates Properties 51,700 2,119
Colonial BancGroup 316,650 7,093
Commercial Capital Bancorp 115,100 1,957
East West Bancorp 33,800 1,151
FelCor Lodging Trust* 630,400 9,551
Financial Federal 33,500 1,333
FPIC Insurance Group* 72,150 2,597
Greater Bay Bancorp 53,800 1,326
HCC Insurance Holdings 108,075 3,083
Home Properties 109,800 4,310
HRPT Properties Trust 292,600 3,631
Investment Technology Group* 46,200 1,367
Jackson Hewitt Tax Service 56,000 1,339
Jefferies Group 45,000 1,960
Jones Lang LaSalle* 25,550 1,177
LTC Properties 198,225 4,202
MeriStar Hospitality* 292,750 2,673
Mid-America Apartment Communities 35,900 1,670
Mills 45,450 2,503
Northwest Bancorp 115,300 2,450
Ohio Casualty 137,675 3,734
PFF Bancorp 181,850 5,503
ProAssurance* 75,775 3,536
Reckson Associates Realty 116,025 4,009
Scottish Re Group 140,825 3,357
Selective Insurance Group 78,175 3,823
State Auto Financial 42,700 1,351
Sterling Bancshares 247,000 3,633
Sterling Financial* 59,130 1,333
Strategic Hotel Capital 224,950 4,108
Trammell Crow* 67,850 1,675
Triad Guaranty* 78,225 3,068
Trizec Properties 102,625 2,366
Trustreet Properties 200,200 3,133
United America Indemnity, Cl A* 156,550 2,873
United Fire & Casualty 16,800 758
West Coast Bancorp 61,500 1,537
Zenith National Insurance 30,000 1,881
--------
136,434
--------
Health Care (5.3%)
- --------------------------------------------------------------------------------
Community Health Systems* 94,600 3,671
Kindred Healthcare* 36,300 1,082
LCA-Vision 69,000 2,561
Lincare Holdings* 75,775 3,111
Molina Healthcare* 59,100 1,477
Triad Hospitals* 79,725 3,609
United Therapeutics* 70,850 4,945
Viasys Healthcare* 139,925 3,497
--------
23,953
--------
52 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Clover Small Cap Value Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Industrials (16.3%)
- --------------------------------------------------------------------------------
AAR* 97,325 $ 1,672
Alderwoods Group* 258,775 4,239
Aviall* 41,425 1,399
Brightpoint* 204,100 3,906
CIRCOR International 52,725 1,447
CNF (A) 53,675 2,818
CRA International* 25,250 1,053
Eagle Materials 13,850 1,681
EMCOR Group* 52,650 3,122
Equifax 37,800 1,321
Flowserve* 84,400 3,068
FTI Consulting* 61,200 1,546
Gardner Denver* 34,675 1,546
GATX (A) 40,350 1,596
Genesee & Wyoming, Cl A* 51,000 1,617
HUB Group, Cl A* 50,625 1,858
Innovative Solutions & Support* 55,975 869
Laidlaw International* 107,125 2,589
Mesa Air Group (A)* 418,325 3,451
Milacron* 360,969 643
Molecular Devices* 47,750 997
Moog, Cl A* 42,600 1,258
NS Group* 39,000 1,531
Pacer International* 119,375 3,147
Quanta Services* 214,225 2,733
Reliance Steel & Aluminum (A) 47,025 2,489
Shaw Group* 61,000 1,504
Stewart & Stevenson Services 77,900 1,858
Teleflex (A) 44,550 3,141
Terex* 59,425 2,937
Tredegar 99,675 1,297
United Rentals (A)* 183,100 3,609
URS* 42,900 1,733
Washington Group International* 35,625 1,920
Waste Connections* 51,900 1,821
--------
73,416
--------
Information Technology (10.5%)
- --------------------------------------------------------------------------------
Activision* 175,783 3,595
Carreker* 236,475 1,669
Checkpoint Systems* 116,225 2,757
Ciber* 152,550 1,133
Coherent* 54,600 1,599
Cymer* 74,225 2,325
eFunds* 88,300 1,663
ESS Technology* 177,425 630
Exar* 42,063 590
Fairchild Semiconductor International (A)* 233,025 3,463
Infospace* 73,800 1,761
Integrated Silicon Solutions* 426,525 3,583
IXYS* 231,075 2,440
LSI Logic* 364,250 3,588
Neoware Systems* 146,975 2,460
Packeteer* 243,025 3,050
Value
Shares (000)
- --------------------------------------------------------------------------------
Pegasus Solutions* 222,900 $ 2,002
Photronics (A)* 76,800 1,490
THQ* 174,187 3,714
Vignette* 103,600 1,648
Zoran* 2,157
--------
47,317
--------
Materials (2.9%)
- --------------------------------------------------------------------------------
Crown Holdings* 83,500 1,331
HB Fuller 57,000 1,772
Owens-Illinois* 210,700 4,345
Potlatch 29,400 1,532
Quanex 26,500 1,755
RPM International 127,075 2,338
--------
13,073
--------
Telecommunication Services (1.6%)
- --------------------------------------------------------------------------------
NICE Systems ADR* 111,275 5,027
West* 36,325 1,358
Yak Communications* 180,325 792
--------
7,177
--------
Utilities (8.3%)
- --------------------------------------------------------------------------------
Allegheny Energy* 72,075 2,214
Centerpoint Energy 204,975 3,048
CMS Energy* 578,100 9,510
El Paso Electric* 151,075 3,150
Headwaters* 108,500 4,058
NorthWestern 60,225 1,818
NRG Energy* 76,675 3,266
SEMCO Energy* 294,500 1,941
Sierra Pacific Resources* 134,050 1,991
Southern Union* 149,465 3,852
Unisource Energy 72,850 2,421
--------
37,269
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $366,717) 440,331
- --------------------------------------------------------------------------------
Short-Term Investment Held as Collateral for Loaned
Securities (6.4%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 28,999,653 29,000
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for Loaned
Securities
(Cost $29,000) 29,000
- --------------------------------------------------------------------------------
Cash Equivalent (2.5%)
BlackRock TempCash Fund, Institutional Shares 11,108,314 11,108
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $11,108) 11,108
- --------------------------------------------------------------------------------
Total Investments (106.8%)
(Cost $406,825) 480,439
- --------------------------------------------------------------------------------
Constellation Funds 2005 Annual Report 53
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Clover Small Cap Value Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-6.8)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral $(29,000)
Payable for investment securities purchased (8,085)
Payable for capital shares redeemed (404)
Payable due to Investment Adviser (303)
Payable due to Administrator (55)
Payable due to Trustees (7)
Other assets and liabilities, net 7,426
- --------------------------------------------------------------------------------
Total Other assets and liabilities (30,428)
- --------------------------------------------------------------------------------
Net assets (100%) $450,011
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $316,335
Undistributed net investment income 46
Accumulated net realized gain on investments 60,016
Net unrealized appreciation on investments 73,614
- --------------------------------------------------------------------------------
Net assets $450,011
- --------------------------------------------------------------------------------
Net asset value, offering and redemption
price per share--Class I Shares
($450,011,132 / 16,284,557 shares) $ 27.63
- --------------------------------------------------------------------------------
* Non-income producing security.
** More narrow industries are utilized for compliance purposes, whereas broad
sectors are utilized for reporting purposes.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $27,847,346.
ADR - American Depositary Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
54 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Clover Core Fixed Income Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
U.S. Government Mortgage-Backed Obligations (39.8%)
- --------------------------------------------------------------------------------
FHLMC CMO/REMIC
Ser 2882, Cl OI IO
5.000%, 02/15/30 $1,115 $ 174
Ser 2882, Cl YI IO
5.000%, 03/15/24 4,847 477
FHLMC
Pool #C01844
4.500%, 04/01/34 643 613
Pool #G08062
5.000%, 06/01/35 742 727
Pool #G11570
5.000%, 04/01/19 439 438
FNMA CMO/REMIC
Ser 1994-17, Cl H
6.000%, 02/25/09 220 223
FNMA
Pool #254759
4.500%, 06/01/18 1,400 1,373
Pool #255111
5.500%, 03/01/34 869 870
Pool #369214
5.000%, 04/01/09 30 30
Pool #535301
6.500%, 04/01/15 85 88
Pool #689022
5.000%, 05/01/33 953 935
Pool #694431
5.000%, 03/01/18 590 589
Pool #738783
7.000%, 02/01/25 620 652
GNMA CMO/REMIC
Ser 2004-59, Cl DA
5.000%, 06/16/34 208 208
GNMA
Pool #13125
8.000%, 10/15/06 1 1
Pool #187899
8.000%, 05/15/17 6 6
Pool #196477
10.000%, 04/15/10 20 22
Pool #202886
8.000%, 03/15/17 21 22
Pool #221235
8.500%, 07/15/17 16 18
Pool #331786
8.000%, 08/15/22 18 19
Pool #376400
6.500%, 02/15/24 111 116
Pool #439478
7.000%, 01/15/27 97 102
Pool #457921
5.500%, 12/15/28 189 191
Pool #462622
6.500%, 03/15/28 155 162
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Pool #533974
6.500%, 05/15/32 $ 80 $ 83
Pool #553328
4.500%, 07/15/18 620 613
Pool #570400
6.500%, 09/15/31 187 195
Pool #604616
4.500%, 09/15/18 699 691
Pool #781029
6.500%, 05/15/29 53 55
Pool #781096
6.500%, 12/15/28 254 264
Pool #781231
7.000%, 12/15/30 122 128
Pool #781276
6.500%, 04/15/31 199 207
Pool #781328
7.000%, 09/15/31 123 129
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-Backed Obligations
(Cost $10,455) 10,421
================================================================================
Corporate Bonds (27.9%)
- --------------------------------------------------------------------------------
Consumer Staples (4.6%)
- --------------------------------------------------------------------------------
ConAgra Foods
7.875%, 09/15/10 700 783
Sysco
7.250%, 04/15/07 405 420
-------
1,203
-------
Energy (2.1%)
- --------------------------------------------------------------------------------
XTO Energy
7.500%, 04/15/12 475 535
-------
Financials (3.6%)
- --------------------------------------------------------------------------------
Marsh & McClennan
7.125%, 06/15/09 600 636
US Bancorp
6.875%, 09/15/07 300 312
-------
948
-------
Industrials (2.7%)
- --------------------------------------------------------------------------------
Thermo Electron
7.625%, 10/30/08 665 715
-------
Utilities (14.9%)
- --------------------------------------------------------------------------------
Carolina Power & Light
5.125%, 09/15/13 685 690
Consolidated Edison, Ser 97-B
6.450%, 12/01/07 300 311
Consolidated Natural Gas, Ser C
6.250%, 11/01/11 415 441
Emerson Electric
7.125%, 08/15/10 400 443
Kinder Morgan Energy
5.125%, 11/15/14 500 493
Constellation Funds 2005 Annual Report 55
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Clover Core Fixed Income Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
PPL Electric Utilities
4.300%, 06/01/13 $ 525 $ 499
Scana, MTN, Ser B
5.810%, 10/23/08 1,000 1,027
------
3,904
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $7,303) 7,305
================================================================================
U.S. Treasury Obligations (16.6%)
- --------------------------------------------------------------------------------
U.S. Treasury Bonds (7.4%)
- --------------------------------------------------------------------------------
7.500%, 11/15/16 500 633
6.250%, 08/15/23 650 777
6.000%, 02/15/26 450 531
------
1,941
------
U.S. Treasury Notes (9.2%)
- --------------------------------------------------------------------------------
5.000%, 02/15/11 850 881
4.000%, 11/15/12 1,550 1,525
------
2,406
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $4,348) 4,347
================================================================================
U.S. Government Agency Obligations (5.7%)
- --------------------------------------------------------------------------------
FHLB
3.750%, 02/06/08 500 492
FHLMC
3.250%, 07/31/06 150 149
TVA
5.880%, 04/01/36 750 852
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $1,517) 1,493
- --------------------------------------------------------------------------------
Convertible Bonds (4.5%)
- --------------------------------------------------------------------------------
BEA Systems, CV to 28.8600 Shares
4.000%, 12/15/06 410 405
BISYS Group, CV to 29.9458 Shares (A)
4.000%, 03/15/06 650 646
Quebecor World, CV to 30.5880 Shares
6.000%, 10/01/07 128 128
- --------------------------------------------------------------------------------
Total Convertible Bonds
(Cost $1,181) 1,179
- --------------------------------------------------------------------------------
Asset-Backed Security (2.1%)
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Ser 1998-C1, Cl A3
6.720%, 11/15/26 500 548
- --------------------------------------------------------------------------------
Total Asset-Backed Security
(Cost $561) 548
================================================================================
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
Municipal Bond (1.5%)
- --------------------------------------------------------------------------------
Virginia (1.5%)
- --------------------------------------------------------------------------------
State Housing Authority RB, Taxable Rental, Ser C
5.000%, 05/01/13 $ 400 $ 401
- --------------------------------------------------------------------------------
Total Municipal Bond
(Cost $406) 401
================================================================================
Cash Equivalent (0.8%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 198,186 198
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $198) 198
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (0.4%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 102,000 102
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities (Cost $102) 102
================================================================================
Total Investments (99.3%)
(Cost $26,071) 25,994
================================================================================
Other assets and liabilities (0.7)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (102)
Payable for capital shares redeemed (17)
Payable due to Investment Adviser (5)
Income distribution payable (4)
Payable due to Administrator (3)
Other assets and liabilities, net 303
- --------------------------------------------------------------------------------
Total Other assets and liabilities 172
================================================================================
Net assets (100%) $26,166
================================================================================
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $25,637
Accumulated net realized gain on investments 606
Net unrealized depreciation on investments (77)
- --------------------------------------------------------------------------------
Net assets $26,166
================================================================================
Net asset value, offering and redemption price per
share--Class I Shares
($26,166,106 / 2,632,725 shares) $ 9.94
================================================================================
(A) The security or a portion of this security is on loan at September 30, 2005
(See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $99,575.
Cl - Class
CMO - Collateralized Mortgage Obligation
CV - Convertible Security
FHLB - Federal Home Loan Bank
56 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Clover Core Fixed Income Fund
September 30, 2005
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
IO - Interest Only Security
MTN - Medium Term Note
RB - Revenue Bond
REMIC - Real Estate Mortgage Investment Conduit
Ser - Series
TVA - Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 57
Financial Statements
- --------------------------------------------------------------------------------
Schedule of Investments
Constellation Clover Income Plus Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (78.8%)
- --------------------------------------------------------------------------------
Consumer Discretionary (6.8%)
- --------------------------------------------------------------------------------
Callaway Golf (A) 4,025 $ 61
Cherokee 700 24
Claire's Stores 1,375 33
Kimball International, Cl B 1,625 20
Knape & Vogt Manufacturing 1,350 18
Newell Rubbermaid (A) 1,875 42
OfficeMax 1,250 40
Tupperware (A) 2,900 66
World Wrestling Entertainment 2,525 33
-----
337
-----
Consumer Staples (4.0%)
- --------------------------------------------------------------------------------
Alliance One International 6,150 22
ConAgra Foods 1,200 30
HJ Heinz 875 32
Kimberly-Clark 725 43
Reynolds American 475 39
UST 750 31
-----
197
-----
Energy (7.4%)
- --------------------------------------------------------------------------------
BP ADR* 1,500 106
Chevron (A) 1,825 118
ConocoPhillips 750 52
Lufkin Industries 1,250 55
Reliant Energy* 2,275 35
-----
366
-----
Financials (20.2%)
- --------------------------------------------------------------------------------
American Financial Realty Trust 2,575 37
AmSouth Bancorp (A) 2,200 56
Bank of America (A) 1,500 63
Citigroup 775 35
Comerica 375 22
Equity Residential (A) 3,075 116
First Industrial Realty Trust 375 15
FirstMerit 1,500 40
Home Properties 875 34
Hospitality Properties Trust 825 35
Huntington Bancshares 1,500 34
La Quinta Properties 1,000 26
LTC Properties (A) 3,875 82
New York Community Bancorp 1,750 29
Public Storage 525 35
Reckson Associates Realty 1,000 35
Simon Property Group 825 61
Trustreet Properties 1,825 29
Vornado Realty Trust 825 71
W.P. Stewart 1,600 36
Weingarten Realty Investors 825 31
Wilmington Trust 975 36
Winston Hotels (A) 4,025 40
-----
998
-----
Value
Shares (000)
- --------------------------------------------------------------------------------
Health Care (1.5%)
- --------------------------------------------------------------------------------
Bristol-Myers Squibb 1,500 $ 36
Merck 1,450 40
-----
76
-----
Industrials (8.9%)
- --------------------------------------------------------------------------------
Emerson Electric 875 63
General Electric 900 30
Honeywell International (A) 1,450 54
Hubbell, Cl B 575 27
International Aluminum 1,100 41
R.R. Donnelley & Sons 1,200 44
ServiceMaster (A) 4,475 61
Standard Register (A) 3,250 49
Stewart & Stevenson Services (A) 2,850 68
-----
437
-----
Materials (3.6%)
- --------------------------------------------------------------------------------
Dow Chemical 375 15
E.I. du Pont de Nemours 375 15
Lyondell Chemical 1,075 31
NL Industries* (A) 2,600 49
Olin 1,350 25
RPM International 2,275 42
-----
177
-----
Telecommunication Services (0.7%)
- --------------------------------------------------------------------------------
Verizon Communications 1,000 33
-----
Utilities (25.7%)**
- --------------------------------------------------------------------------------
Ameren (A) 1,375 74
Cinergy 900 40
CMS Energy* (A) 4,575 75
Constellation Energy Group 1,225 75
Dominion Resources 550 47
DPL 2,425 67
Duke Energy 1,225 36
Edison International 1,000 47
Energy East (A) 2,025 51
Exelon 500 27
FPL Group (A) 2,100 100
KeySpan 975 36
National Fuel Gas 1,350 46
NiSource (A) 2,950 72
NSTAR (A) 1,575 46
PPL 1,900 61
Public Service Enterprise Group (A) 1,250 80
SCANA 1,100 47
SEMCO Energy* 2,575 17
Southern Union* 1,837 47
Southwest Gas 1,175 32
Vectren 975 28
WGL Holdings 775 25
Wisconsin Energy (A) 2,350 94
-----
1,270
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $3,737) 3,891
================================================================================
58 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Schedule of Investments
Constellation Clover Income Plus Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Exchange Traded Fund (4.0%)
- --------------------------------------------------------------------------------
iShares Dow Jones Select Dividend Index Fund (A) 3,150 $ 196
- --------------------------------------------------------------------------------
Total Exchange Traded Fund
(Cost $193) 196
================================================================================
Preferred Stock (0.2%)
- --------------------------------------------------------------------------------
Utilities (0.2%)
- --------------------------------------------------------------------------------
Southern Union 500 13
- --------------------------------------------------------------------------------
Total Preferred Stock
(Cost $14) 13
================================================================================
Cash Equivalent (13.1%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 648,005 648
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $648) 648
================================================================================
Total Investments (96.1%)
(Cost $4,592) $4,748
================================================================================
Securities Sold Short (-28.5%)
- --------------------------------------------------------------------------------
Consumer Discretionary (-3.3%)
- --------------------------------------------------------------------------------
Carmax* (300) (9)
Centex (525) (34)
Dollar Tree Stores* (500) (11)
Entercom Communications* (225) (7)
KB Home (500) (37)
Lee Enterprises (300) (13)
Mohawk Industries* (150) (12)
Regis (275) (10)
Sotheby's Holdings, Cl A* (1,400) (23)
Thor Industries (150) (5)
------
(161)
------
Consumer Staples (-0.6%)
- --------------------------------------------------------------------------------
Smart & Final* (1,550) (20)
Universal (275) (11)
------
(31)
------
Energy (-1.0%)
- --------------------------------------------------------------------------------
Hanover Compressor* (425) (6)
Harvest Natural Resources* (1,725) (19)
Petroleum Development* (600) (23)
------
(48)
------
Exchange Traded Fund (-3.0%)
- --------------------------------------------------------------------------------
iShares Dow Jones US Real Estate Index Fund (2,300) (148)
------
Financials (-1.8%)
- --------------------------------------------------------------------------------
Commercial Capital Bancorp (1,150) (20)
Fannie Mae (450) (20)
Freddie Mac (550) (31)
Ocwen Financial* (2,750) (19)
------
(90)
------
Value
Shares (000)
- --------------------------------------------------------------------------------
Health Care (-2.7%)
- --------------------------------------------------------------------------------
Cephalon* (275) $ (13)
Cepheid* (2,675) (20)
Cytyc* (1,400) (38)
Martek Biosciences* (125) (4)
MGI Pharma* (875) (20)
Onyx Pharmaceuticals* (800) (20)
Par Pharmaceutical* (275) (7)
Perrigo (725) (10)
------
(132)
------
Industrials (-4.3%)
- --------------------------------------------------------------------------------
AGCO* (200) (4)
Ceradyne* (750) (28)
ChoicePoint* (325) (14)
Crane (475) (14)
Graco (300) (10)
Heidrick & Struggles International* (725) (23)
JB Hunt Transport Services (450) (9)
Kennametal (250) (12)
Korn/Ferry International* (1,350) (22)
Nordson (175) (7)
PDI* (1,600) (25)
Resource America, Cl A (1,150) (20)
TeleTech Holdings* (2,550) (26)
------
(214)
------
Information Technology (-5.7%)
- --------------------------------------------------------------------------------
Acxiom (400) (7)
C-COR* (2,875) (20)
CDW (225) (13)
CommScope* (250) (4)
Cree* (250) (6)
Ditech Communications* (2,900) (20)
F5 Networks* (400) (17)
Harmonic* (4,000) (23)
Infospace* (600) (14)
Jack Henry & Associates (700) (14)
Lattice Semiconductor* (1,025) (4)
Mattson Technology* (2,625) (20)
MPS Group* (400) (5)
Pixelworks* (2,325) (15)
RSA Security* (275) (3)
S1* (4,200) (16)
Scansource* (450) (22)
Silicon Image* (1,775) (16)
Silicon Storage Technology* (4,600) (25)
TTM Technologies* (2,500) (18)
------
(282)
------
Materials (-6.1%)
- --------------------------------------------------------------------------------
Airgas (350) (10)
AK Steel Holding* (2,975) (26)
Brush Engineered Materials* (1,350) (22)
Century Aluminum* (950) (21)
Coeur d'Alene Mines* (5,700) (24)
Georgia Gulf (625) (15)
Constellation Funds 2005 Annual Report 59
Financial Statements
- --------------------------------------------------------------------------------
Schedule of Investments
Constellation Clover Income Plus Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Louisiana-Pacific (800) $ (22)
NewMarket* (1,325) (23)
OM Group* (850) (17)
Schnitzer Steel Industries, Cl A (800) (26)
Sensient Technologies (200) (4)
Sonoco Products (475) (13)
Steel Dynamics (875) (30)
Stillwater Mining* (2,675) (24)
WR Grace* (2,675) (24)
--------
(301)
- --------------------------------------------------------------------------------
Total Securities Sold Short
(Proceeds $(1,349)) $(1,407)
================================================================================
Percentages are based on net assets of $4,941,378.
* Non-income producing security.
** More narrow industries are utilized for compliance purposes, whereas broad
sectors are utilized for reporting purposes.
(A) All or a portion of this security is held as collateral for short sales.
ADR - American Depositary Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
60 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell Ultra Short Duration Fixed Income Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
U.S. Government Mortgage-Backed Obligations (75.3%)
- --------------------------------------------------------------------------------
FHLMC CMO/REMIC
Ser 1106, Cl E
7.500%, 07/15/06 $ 1 $ 1
Ser 1377, Cl F (A)
4.313%, 09/15/07 164 164
Ser 1544, Cl L (A)
4.070%, 07/15/08 116 115
Ser 2440, Cl OG
6.500%, 12/15/30 1,589 1,598
Ser 2463, Cl PE
6.000%, 03/15/28 1,934 1,938
Ser 2520, Cl BD
5.250%, 10/15/31 1,427 1,436
Ser 2527, Cl LT
3.870%, 12/15/28 647 646
Ser 2527, Cl LU
3.790%, 12/15/28 982 980
Ser 2537, Cl LA
4.250%, 05/15/30 1,552 1,546
Ser 2571, Cl FN (A)
4.418%, 08/15/32 9,653 9,794
Ser 2575, Cl LM
4.500%, 05/15/32 2,070 2,056
Ser 2586, Cl WA
4.000%, 12/15/32 3,309 3,253
Ser 2590, Cl UL
3.750%, 03/15/32 2,211 2,172
Ser 2594, Cl YA
4.000%, 04/15/23 2,632 2,580
Ser 2628, Cl F (A)
4.168%, 06/15/32 4,088 4,103
Ser 2649, Cl PJ
3.500%, 06/15/33 2,456 2,397
Ser 2650, Cl FX (A)
4.168%, 12/15/32 8,319 8,362
Ser 2720, Cl FA (A)
4.168%, 01/15/29 2,699 2,698
Ser 2750, Cl FG (A)
4.168%, 02/15/34 4,956 4,979
Ser 2752, Cl FM (A)
4.118%, 12/15/30 3,610 3,619
Ser 2752, Cl FP (A)
5.168%, 02/15/34 438 439
Ser 2764, Cl FB (A)
4.118%, 03/15/31 3,962 3,973
Ser 2770, Cl FH (A)
4.168%, 03/15/34 4,570 4,609
Ser 2778, Cl FV (A)
4.368%, 03/15/34 1,240 1,258
Ser 2799, Cl F (A)
4.368%, 05/15/34 5,734 5,755
Ser 2822, Cl FD (A)
4.368%, 03/15/33 509 509
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Ser 2822, Cl FP (A)
4.368%, 11/15/32 $ 3,215 $ 3,239
Ser 2827, Cl FW (A)
4.568%, 07/15/34 7,171 7,184
Ser 2858, Cl HF (A)
4.318%, 09/15/34 3,243 3,247
Ser 2876, Cl FH (A)
4.318%, 10/15/34 4,443 4,446
Ser 2878, Cl FD (A)
4.368%, 10/15/34 5,171 5,176
Ser 2886, Cl BF (A)
4.268%, 11/15/34 2,504 2,509
Ser 2892, Cl KF (A)
4.418%, 11/15/34 7,185 7,203
Ser 2894, Cl FB (A)
4.368%, 11/15/34 4,868 4,883
Ser 2921, Cl JF (A)
4.268%, 01/15/35 4,939 4,942
Ser 2925, Cl CF (A)
4.268%, 01/15/35 461 462
FHLMC
Pool #184967
7.750%, 08/01/08 20 21
Pool #B15413
8.000%, 03/01/11 643 684
Pool #E00746
7.000%, 09/01/14 1,917 2,002
Pool #E64944
7.000%, 07/01/11 273 285
Pool #G10665
7.000%, 03/01/12 2,126 2,220
Pool #G10822
7.000%, 07/01/13 4,005 4,181
Pool #G11072
7.500%, 12/01/15 712 752
Pool #G11656
7.000%, 06/01/17 3,750 3,917
Pool #G10773
7.000%, 12/01/12 5,544 5,788
Pool #M90686
5.500%, 12/01/06 238 240
FNMA CMO/REMIC
Ser 2002-67, Cl AM
5.000%, 11/25/15 2,735 2,743
Ser 2002-81, Cl F (A)
4.330%, 04/25/32 15,000 15,167
Ser 2002-82, Cl FP (A)
4.330%, 02/25/32 5,000 5,053
Ser 2002-87, Cl FB (A)
4.340%, 10/25/31 2,000 2,022
Ser 2003-119, Cl PU
4.000%, 11/25/33 2,993 2,939
Ser 2003-33, Cl AM
4.250%, 05/25/33 1,330 1,318
Constellation Funds 2005 Annual Report 61
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell Ultra Short Duration Fixed Income Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Ser 2003-33, Cl AU
4.000%, 03/25/33 $ 2,071 $ 1,975
Ser 2003-34, Cl AD
4.000%, 01/25/32 1,675 1,652
Ser 2003-34, Cl FX (A)
4.993%, 05/25/33 844 847
Ser 2003-61, Cl FK (A)
5.330%, 08/25/33 10,868 11,308
Ser 2003-69, Cl NF (A)
5.193%, 07/25/33 3,844 3,885
Ser 2003-76, Cl FB (A)
4.280%, 08/25/33 3,536 3,554
Ser 2003-81, Cl FE (A)
4.330%, 09/25/33 6,168 6,237
Ser 2004-29, Cl HF (A)
5.280%, 07/25/33 590 591
Ser 2004-96, Cl LF (A)
4.830%, 12/25/34 3,757 3,783
Ser 2005-16, Cl FW (A)
4.730%, 01/25/35 5,961 6,018
Ser 2005-93, Cl XT (A)
7.000%, 10/25/35 3,738 3,754
FNMA
Pool #190054
7.000%, 10/01/13 450 469
Pool #190658
7.000%, 02/01/09 1,477 1,525
Pool #253472
7.500%, 09/01/10 287 303
Pool #519992
7.000%, 10/01/14 287 300
Pool #534851
7.500%, 04/01/15 448 474
Pool #535219
7.500%, 03/01/15 336 355
Pool #535635
8.500%, 06/01/12 634 654
Pool #545304
7.500%, 11/01/31 3,428 3,629
Pool #555646
7.500%, 09/01/16 1,894 2,003
Pool #704214
7.500%, 12/01/27 1,655 1,756
GNMA ARM
Pool #8103 (A)
4.625%, 02/20/16 65 66
Pool #8287 (A)
4.125%, 11/20/17 65 66
Pool #8297 (A)
4.125%, 12/20/17 100 102
Pool #8321 (A)
4.625%, 02/20/18 243 243
Pool #8333 (A)
4.625%, 03/20/18 171 174
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
Pool #8345 (A)
4.875%, 04/20/18 $ 94 $ 95
Pool #8366 (A)
4.375%, 06/20/18 103 104
Pool #8404 (A)
3.750%, 09/20/18 6 6
Pool #8405 (A)
4.000%, 09/20/18 53 53
Pool #8462 (A)
4.375%, 02/20/19 10 10
Pool #8489 (A)
4.875%, 04/20/19 89 90
GNMA CMO/REMIC
Ser 2003-34, Cl PM
4.000%, 04/20/33 6,322 6,204
GNMA
Pool #781140
7.000%, 10/15/14 3,889 4,084
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-Backed Obligations
(Cost $228,685) 229,972
================================================================================
U.S. Government Agency Obligations (17.6%)
- --------------------------------------------------------------------------------
FHLB
5.130%, 08/25/08 $10,000 $ 9,950
5.110%, 05/19/10 10,000 9,980
4.761%, 12/07/07 9,000 8,955
4.750%, 09/29/14 3,000 2,923
4.000%, 06/13/07 5,000 4,962
3.695%, 04/27/07 10,000 9,976
3.610%, 02/22/07 5,000 4,987
3.400%, 06/08/06 2,000 1,990
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $53,974) 53,723
================================================================================
Repurchase Agreement (7.3%)
- --------------------------------------------------------------------------------
PNC Capital Markets, 3.56%,
dated 09/30/05, to be repurchased
on 10/03/05, repurchase price
$22,163,573 (collateralized by a
U.S. Government obligation, par
value $22,610,000, 4.00%, 09/22/09,
total market value $22,157,800)(B) 22,157 22,157
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $22,157) 22,157
================================================================================
Cash Equivalent (0.0%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund,
Institutional Shares 414 --
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $ --) --
================================================================================
Total Investments (100.2%)
(Cost $304,816) 305,852
================================================================================
62 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell Ultra Short Duration Fixed Income Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-0.2)%
- --------------------------------------------------------------------------------
Payable for capital shares redeemed $ (1,062)
Payable for investment securities purchased (459)
Payable due to Investment Adviser (64)
Payable due to Administrator (37)
Income distribution payable (25)
Payable due to Trustees (5)
Other assets and liabilities, net 1,022
- --------------------------------------------------------------------------------
Total Other assets and liabilities (630)
================================================================================
Net assets (100%) $305,222
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $311,234
Undistributed net investment income 1
Accumulated net realized loss on investments (7,049)
Net unrealized appreciation on investments 1,036
- --------------------------------------------------------------------------------
Net assets $305,222
================================================================================
- --------------------------------------------------------------------------------
Net asset value, offering and redemption price per
share--Class I Shares ($305,221,604 / 30,279,186 shares) $ 10.08
================================================================================
(A) Variable rate security - the rate reflected on the Statement of Net Assets
is the rate in effect on September 30, 2005.
(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
REMIC - Real Estate Mortgage Investment Conduit
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 2005 Annual Report 63
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell Short Duration Fixed Income Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
U.S. Government Mortgage-Backed Obligations (77.0%)
- --------------------------------------------------------------------------------
FHLMC CMO/REMIC
Ser 1093, Cl F
7.500%, 06/15/06 $ 8 $ 8
Ser 1538, Cl J
6.500%, 06/15/08 160 163
Ser 2509, Cl EA
4.000%, 12/15/12 886 883
Ser 2510, Cl TA
4.000%, 06/15/32 1,162 1,128
Ser 2515, Cl ED
5.000%, 03/15/17 2,663 2,673
Ser 2537, Cl LA
4.250%, 05/15/30 1,536 1,531
Ser 2541, Cl MC
6.000%, 01/15/29 43 42
Ser 2543, Cl YJ
4.500%, 03/15/32 2,178 2,139
Ser 2566, Cl LM
4.500%, 04/15/32 1,499 1,474
Ser 2575, Cl QP
4.500%, 11/15/31 1,831 1,812
Ser 2583, Cl ND
4.250%, 12/15/10 1,051 1,048
Ser 2590, Cl QY
3.750%, 04/15/28 1,376 1,342
Ser 2590, Cl UL
3.750%, 03/15/32 2,778 2,729
Ser 2596, Cl QE
4.000%, 03/15/33 1,851 1,779
Ser 2649, Cl PJ
3.500%, 06/15/33 4,425 4,319
Ser 2744, Cl TA
5.500%, 03/15/26 3,843 3,868
FHLMC
Pool #C46122
7.000%, 01/01/26 1,081 1,129
Pool #C66916
7.000%, 05/01/32 199 208
Pool #D94598
6.500%, 04/01/21 313 324
Pool #E97227
7.000%, 09/01/14 488 509
Pool #G10288
6.000%, 09/01/09 52 53
Pool #G10446
6.500%, 02/01/11 76 78
Pool #G30085
7.500%, 10/01/17 337 359
Pool #M90771
5.000%, 12/01/07 801 808
FNMA CMO/REMIC
Ser 1991-133, Cl Z
8.000%, 09/25/06 35 36
Ser 1991-72, Cl G
8.000%, 07/25/06 7 7
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Ser 1994-27, Cl PJ
6.500%, 06/25/23 $ 310 $ 312
Ser 1997-81, Cl PC
5.000%, 04/18/27 81 81
Ser 1999-15, Cl PC
6.000%, 09/25/18 52 53
Ser 2002-71, Cl AP
5.000%, 11/25/32 1,682 1,679
Ser 2002-72, Cl A
5.000%, 10/25/15 499 499
Ser 2003-119, Cl PU
4.000%, 11/25/33 1,283 1,260
Ser 2003-30, Cl MB
4.000%, 06/25/27 2,733 2,709
Ser 2003-34, Cl GJ
4.000%, 02/25/33 4,695 4,571
Ser 2003-42, Cl CA
4.000%, 05/25/33 1,451 1,412
Ser 2003-7, Cl PA
4.500%, 03/25/20 390 390
Ser 2005-93, Cl XT (A)
7.000%, 10/25/35 5,000 5,022
FNMA
Pool #190054
7.000%, 10/01/13 864 902
Pool #250477
6.000%, 01/01/11 40 42
Pool #303096
7.500%, 12/01/09 108 112
Pool #313429
7.000%, 03/01/12 315 329
Pool #323441
7.000%, 12/01/13 578 604
Pool #323493
7.500%, 12/01/28 2,168 2,300
Pool #323832
7.500%, 07/01/29 328 347
Pool #334593
7.000%, 05/01/24 22 23
Pool #404993
7.500%, 11/01/27 1,472 1,561
Pool #535560
7.000%, 08/01/14 4,971 5,195
Pool #545304
7.500%, 11/01/31 3,656 3,870
Pool #546474
7.000%, 01/01/15 915 956
Pool #6222
9.000%, 04/01/16 41 44
Pool #647567
6.000%, 06/01/17 739 760
Pool #665773
7.500%, 06/01/31 856 908
Pool #704214
7.500%, 12/01/27 937 994
64 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell Short Duration Fixed Income Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Pool #725284
7.000%, 11/01/18 $2,325 $ 2,430
Pool #743490
4.000%, 10/01/33 1,019 940
Pool #794717
7.500%, 06/01/31 3,897 4,133
Pool #8245
8.000%, 12/01/08 58 60
Pool #838790
4.500%, 08/01/35 3,592 3,425
GNMA ARM
Pool #8426 (A)
4.125%, 11/20/18 33 33
GNMA CMO/REMIC
Ser 2002-13, Cl A
6.000%, 10/16/30 88 88
Ser 2002-72, Cl AB
4.500%, 10/20/32 1,752 1,702
GNMA
Pool #2707
5.500%, 01/20/14 15 15
Pool #2802
5.500%, 07/20/14 18 18
Pool #2814
8.000%, 08/20/17 199 212
Pool #2843
5.500%, 11/20/14 201 206
Pool #2999
7.500%, 11/20/30 1,831 1,935
Pool #344233
8.000%, 02/15/23 127 136
Pool #345123
8.000%, 12/15/23 295 316
Pool #351122
6.500%, 07/15/08 36 37
Pool #357343
6.500%, 10/15/08 19 20
Pool #462486
6.500%, 01/15/13 70 73
Pool #569337
6.500%, 04/15/22 91 94
Pool #578189
6.000%, 02/15/32 80 82
Pool #780322
8.000%, 11/15/22 163 175
Pool #780327
8.000%, 11/15/17 85 91
Pool #780604
7.000%, 07/15/12 1,108 1,158
Pool #781140
7.000%, 10/15/14 1,995 2,095
- --------------------------------------------------------------------------------
Total U.S. Government Mortgage-Backed Obligations
(Cost $87,330) 86,858
- --------------------------------------------------------------------------------
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
U.S. Treasury Obligations (11.0%)
- --------------------------------------------------------------------------------
U.S. Treasury Notes (11.0%)
- --------------------------------------------------------------------------------
4.125%, 05/15/15 (C) $ 2,500 $ 2,457
4.000%, 04/15/10 (C) 10,000 9,909
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $12,520) 12,366
================================================================================
U.S. Government Agency Obligations (8.2%)
- --------------------------------------------------------------------------------
FHLB
6.000%, 04/26/19 500 487
6.000%, 03/30/20 5,000 4,880
4.750%, 09/29/14 4,000 3,898
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $9,471) 9,265
================================================================================
Certificate of Deposit (1.7%)
- --------------------------------------------------------------------------------
Deutsche Bank (A) 5.375%, 06/02/08 2,000 1,946
- --------------------------------------------------------------------------------
Total Certificate of Deposit
(Cost $1,999) 1,946
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (11.5%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 12,980,062 12,980
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $12,980) 12,980
================================================================================
Repurchase Agreement (4.7%)
- --------------------------------------------------------------------------------
PNC Capital Markets, 3.56%, dated 09/30/05, to be
repurchased on 10/03/05, repurchase price $5,353,588
(collateralized by a U.S. Government obligation, par
value $5,462,000, 4.00%, 09/29/09, total market value
$5,352,760)(B) 5,352 5,352
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $5,352) 5,352
================================================================================
Cash Equivalents (0.0%)
- --------------------------------------------------------------------------------
BlackRock FedFund, Institutional Shares 379 --
BlackRock T-Fund, Institutional Shares 379 1
- --------------------------------------------------------------------------------
Total Cash Equivalents
(Cost $1) 1
================================================================================
Total Investments (114.1%)
(Cost $129,653) 128,768
================================================================================
Constellation Funds 2005 Annual Report 65
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell Short Duration Fixed Income Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-14.1)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral $(12,980)
Payable for investment securities purchased (3,431)
Payable for capital shares redeemed (88)
Payable due to Investment Adviser (19)
Payable due to Administrator (14)
Income distribution payable (4)
Payable due to Trustees (2)
Other assets and liabilities, net 603
- --------------------------------------------------------------------------------
Total Other assets and liabilities (15,935)
================================================================================
Net assets (100%) $112,833
================================================================================
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $116,798
Distributions in excess of net investment income (4)
Accumulated net realized loss on investments (3,076)
Net unrealized depreciation on investments (885)
- --------------------------------------------------------------------------------
Net assets $112,833
================================================================================
Net asset value, offering and redemption price per
share--Class I Shares
($112,832,722 / 11,433,997 shares) $ 9.87
================================================================================
(A) Variable rate security - the rate reflected on the Statement of Net Assets
is the rate in effect on September 30, 2005.
(B) Tri-Party Repurchase Agreement
(C) The security or a portion of this security is on loan at September 30, 2005
(see Note 9 in Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $12,592,323.
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
REMIC - Real Estate Mortgage Investment Conduit
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.
66 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell High Yield Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Corporate Bonds (94.9%)
- --------------------------------------------------------------------------------
Consumer Discretionary (28.0%)*
- --------------------------------------------------------------------------------
Albritton Communications
7.750%, 12/15/12 $ 80 $ 79
Allied (Escrow Security)
11.375%, 07/15/11 80 79
Aztar
7.875%, 06/15/14 95 99
Brown Shoe
8.750%, 05/01/12 65 69
Cablevision Systems, Ser B
8.000%, 04/15/12 75 73
Charter Communications (A)
8.000%, 04/30/12 75 76
Commercial Vehicle Group (A)
8.000%, 07/01/13 65 65
DIRECTV Holdings (A)
6.375%, 06/15/15 75 74
Echostar DBS
6.625%, 10/01/14 75 74
H&E Equipment
11.125%, 06/15/12 85 95
Intrawest
7.500%, 10/15/13 75 77
Invista (A)
9.250%, 05/01/12 75 82
Jean Coutu Group (B)
8.500%, 08/01/14 95 95
Lamar Media (A)
6.625%, 08/15/15 75 76
Loews Cineplex Entertainment
9.000%, 08/01/14 90 88
Mediacom Broadband
11.000%, 07/15/13 65 70
Norcraft
9.000%, 11/01/11 45 47
Sonic Automotive, Ser B
8.625%, 08/15/13 65 64
Starwood Hotels & Resorts
7.375%, 11/15/15 90 98
Tenneco Automotive
8.625%, 11/15/14 70 71
Time Warner (B)
9.750%, 07/15/08 90 91
Town Sports International
9.625%, 04/15/11 10 10
Vertis, Ser B (B)
10.875%, 06/15/09 55 54
W.H. Holdings
9.500%, 04/01/11 6 6
Wynn Las Vegas
6.625%, 12/01/14 75 72
------
1,784
------
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Consumer Staples (5.5%)
- --------------------------------------------------------------------------------
American Seafood Group
10.125%, 04/15/10 $105 $ 112
Chiquita Brands International
7.500%, 11/01/14 75 71
Stater Brothers Holdings
8.125%, 06/15/12 85 84
United Agri Products
8.250%, 12/15/11 77 81
------
348
------
Energy (6.9%)
- --------------------------------------------------------------------------------
ANR Pipeline
8.875%, 03/15/10 60 65
Chesapeake Energy
6.250%, 01/15/18 105 103
El Paso Natural Gas, Ser A
7.625%, 08/01/10 60 62
Kerr-McGee
7.000%, 11/01/11 75 75
Transcontinental Gas Pipe, Ser B
7.000%, 08/15/11 60 64
Whiting Petroleum
7.250%, 05/01/13 70 71
------
440
------
Financials (5.4%)
- --------------------------------------------------------------------------------
Bluewater Finance
10.250%, 02/15/12 75 81
E*trade Financial
8.000%, 06/15/11 80 83
La Quinta Properties
8.875%, 03/15/11 100 107
LaBranche
11.000%, 05/15/12 65 72
------
343
------
Health Care (5.0%)
- --------------------------------------------------------------------------------
HCA
5.750%, 03/15/14 90 86
Iasis Healthcare
8.750%, 06/15/14 90 93
Mylan Laboratories (A)
6.375%, 08/15/15 85 85
Norcross Safety Products, Ser B
9.875%, 08/15/11 50 54
------
318
------
Industrials (24.9%)
- --------------------------------------------------------------------------------
Allied Waste North America, Ser B
8.500%, 12/01/08 80 83
Buhrmann US
8.250%, 07/01/14 50 51
CE Generation
7.416%, 12/15/18 95 101
Constellation Funds 2005 Annual Report 67
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell High Yield Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Cenveo
9.625%, 03/15/12 $ 80 $ 86
Coinmach
9.000%, 02/01/10 112 115
Douglas Dynamics (A)
7.750%, 01/15/12 75 75
Geo Group
8.250%, 07/15/13 125 124
Goodman Global Holdings (A)(B)
7.875%, 12/15/12 75 68
K. Hovnanian Enterprises
6.500%, 01/15/14 85 82
Koppers
9.875%, 10/15/13 100 110
L-3 Communications (A)
6.375%, 10/15/15 85 86
Noble Group (A)
6.625%, 03/17/15 90 83
Ply Gem Industries
9.000%, 02/15/12 85 71
Sensus Metering Systems
8.625%, 12/15/13 80 74
Ship Finance International
8.500%, 12/15/13 90 88
Spectrum Brands
8.500%, 10/01/13 85 82
Tech Olympic USA
9.000%, 07/01/10 75 78
Trinity
6.500%, 03/15/14 50 49
Williams Scotsman (A)
8.500%, 10/01/15 80 81
------
1,587
------
Materials (8.2%)
- --------------------------------------------------------------------------------
Ainsworth Lumber
7.250%, 10/01/12 65 61
Arch Western Finance
6.750%, 07/01/13 75 76
Domtar
7.125%, 08/15/15 85 78
Freeport-McMoRan Copper & Gold
10.125%, 02/01/10 70 77
Georgia-Pacific
7.700%, 06/15/15 85 94
Propex Fabrics
10.000%, 12/01/12 95 88
Solo Cup
8.500%, 02/15/14 50 44
------
518
------
Telecommunication Services (5.3%)
- --------------------------------------------------------------------------------
Cincinnati Bell
8.375%, 01/15/14 100 98
Qwest (A)
7.625%, 06/15/15 85 87
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
Rogers Wireless
7.250%, 12/15/12 $ 75 $ 79
Superior Essex Communications
9.000%, 04/15/12 75 76
------
340
------
Utilities (5.7%)
- --------------------------------------------------------------------------------
AES
9.500%, 06/01/09 95 103
Consumers Energy
6.300%, 02/01/12 75 76
TXU, Ser P
5.550%, 11/15/14 85 81
Tenaska Alabama (A)
7.000%, 06/30/21 100 101
------
361
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $6,231) 6,039
================================================================================
Common Stock (2.2%)
- --------------------------------------------------------------------------------
Industrials (2.2%)
- --------------------------------------------------------------------------------
Coinmach Service 5,000 70
Synagro Technologies 15,000 70
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $141) 140
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (5.1%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 322,650 323
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $323) 323
================================================================================
Cash Equivalent (1.4%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 90,495 90
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $90) 90
================================================================================
Repurchase Agreement (0.7%)
- --------------------------------------------------------------------------------
PNC Capital Markets, 3.56%, dated 09/30/05, to be
repurchased on 10/03/05, repurchase price $43,013
(collateralized by a U.S. Government obligation,
par value $44,000, 4.00%, 09/22/09, total market
value $43,120) (C) 43 43
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $43) 43
================================================================================
Total Investments (104.3%)
(Cost $6,828) 6,635
================================================================================
68 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Chartwell High Yield Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-4.3)%
- --------------------------------------------------------------------------------
Receivable due from Investment Adviser $ 2
Obligation to return securities lending collateral (323)
Payable for capital shares redeemed (34)
Income distribution payable (31)
Payable due to Administrator (1)
Other assets and liabilities, net 115
- --------------------------------------------------------------------------------
Total Other assets and liabilities (272)
================================================================================
Net assets (100%) $ 6,363
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $ 21,627
Undistributed net investment income 2
Accumulated net realized loss on investments (15,073)
Net unrealized depreciation on investments (193)
- --------------------------------------------------------------------------------
Net assets $ 6,363
================================================================================
Net asset value, offering and redemption
price per share--Class I Shares
($6,363,198 / 1,285,644 shares) $ 4.95
================================================================================
* More narrow industries are utilized for compliance purposes, whereas broad
sectors are utilized for reporting purposes.
(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. The total value of
such securities as of September 30, 2005, was $1,038,960 and represented
16.33% of net assets.
(B) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $314,421.
(C) Tri-Party Repurchase Agreement
Ser - Series
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 69
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation HLAM Large Cap Quality Stock Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (99.4%)
- --------------------------------------------------------------------------------
Consumer Discretionary (24.2%)
- --------------------------------------------------------------------------------
Comcast, Cl A (A)* 18,725 $ 550
Gannett 2,170 149
Harley-Davidson 11,960 579
Home Depot 19,585 747
International Game Technology 6,865 185
Mattel 13,345 223
Nike, Cl B 2,025 166
Omnicom Group 8,150 682
TJX 9,765 200
Viacom, Cl B 5,280 174
Walt Disney 10,520 254
-------
3,909
-------
Consumer Staples (10.1%)
- --------------------------------------------------------------------------------
CVS (A) 12,445 361
Gillette 4,600 268
PepsiCo (A) 12,145 689
Walgreen 6,965 302
-------
1,620
-------
Financials (23.7%)
- --------------------------------------------------------------------------------
American International Group (A) 12,776 792
Berkshire Hathaway, Cl A* 7 574
Cincinnati Financial 8,085 339
Freddie Mac 7,175 405
JPMorgan Chase 4,910 167
Morgan Stanley 6,570 354
Synovus Financial 21,875 606
US Bancorp (A) 10,950 308
Washington Mutual 7,150 280
-------
3,825
-------
Health Care (20.3%)
- --------------------------------------------------------------------------------
Allergan (A) 3,790 347
Amgen* 4,720 376
Cardinal Health 4,630 294
Johnson & Johnson (A) 8,605 544
Pfizer 16,410 410
Teva Pharmaceutical
Industries ADR (A) 6,850 229
Varian Medical Systems* 4,590 181
Waters* 16,030 667
Wyeth 5,030 233
-------
3,281
-------
Industrials (4.2%)
- --------------------------------------------------------------------------------
Cintas (A) 3,890 159
Dover 6,025 246
Tyco International 9,900 276
-------
681
-------
Information Technology (15.4%)
- --------------------------------------------------------------------------------
Applied Materials 21,000 356
Automatic Data Processing 16,370 705
Cisco Systems* 12,900 231
Value
Shares (000)
- --------------------------------------------------------------------------------
EMC* 9,680 $ 125
First Data 13,330 533
Microsoft 11,330 292
Texas Instruments (A) 7,140 242
-------
2,484
-------
Telecommunication Services (1.5%)
- --------------------------------------------------------------------------------
Nokia ADR* 14,510 245
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $12,284) 16,045
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (25.4%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 4,103,331 4,103
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $4,103) 4,103
================================================================================
Cash Equivalent (0.7%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 111,541 112
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $112) 112
================================================================================
Total Investments (125.5%)
(Cost $16,499) 20,260
================================================================================
Other assets and liabilities (-25.5)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (4,103)
Payable due to Investment Adviser (9)
Payable for capital shares redeemed (6)
Payable due to Shareholder Servicing Agent (3)
Payable due to Administrator (2)
Other assets and liabilities, net 3
- --------------------------------------------------------------------------------
Total Other assets and liabilities (4,120)
================================================================================
Net assets (100%) $16,140
================================================================================
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $ 8,691
Accumulated net realized gain on investments 3,688
Net unrealized appreciation on investments 3,761
- --------------------------------------------------------------------------------
Net assets $16,140
================================================================================
Net asset value, offering and redemption price per
share -- Class I Shares
($16,139,670 / 810,273 shares) $ 19.92
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $3,989,129.
ADR - American Depositary Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
70 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Diversified Value Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (98.7%)
- --------------------------------------------------------------------------------
Consumer Discretionary (9.0%)
- --------------------------------------------------------------------------------
Dollar Tree Stores* 69,280 $ 1,500
Home Depot 85,880 3,275
Viacom, Cl B 131,376 4,337
Walt Disney 255,095 6,155
--------
15,267
--------
Consumer Staples (6.9%)
- --------------------------------------------------------------------------------
Altria Group (A) 67,475 4,974
Anheuser-Busch 62,365 2,684
Procter & Gamble (A) 43,960 2,614
Wal-Mart Stores 32,250 1,413
--------
11,685
--------
Energy (16.1%)
- --------------------------------------------------------------------------------
Devon Energy 104,030 7,141
ENSCO International 77,440 3,608
Exxon Mobil 193,200 12,276
Marathon Oil 59,500 4,101
--------
27,126
--------
Financials (34.1%)**
- --------------------------------------------------------------------------------
Bank of New York 159,625 4,695
Bear Stearns (A) 59,520 6,532
Capital One Financial (A) 68,930 5,481
CapitalSource (A)* 155,100 3,381
Centerpoint Properties Trust 47,345 2,121
Citigroup 171,710 7,816
Everest Re Group 33,430 3,273
First Industrial Realty Trust (A) 68,575 2,747
North Fork Bancorporation 218,600 5,574
Radian Group (A) 49,035 2,604
TCF Financial (A) 84,600 2,263
Torchmark 46,591 2,461
Washington Mutual (A) 39,250 1,539
Wells Fargo 120,325 7,048
--------
57,535
--------
Health Care (6.9%)
- --------------------------------------------------------------------------------
Eli Lilly 61,000 3,265
Pfizer 211,080 5,270
WellPoint* 41,270 3,129
--------
11,664
--------
Industrials (6.7%)
- --------------------------------------------------------------------------------
3M 44,900 3,294
FedEx 24,940 2,173
General Dynamics (A) 22,140 2,647
Rockwell Automation 59,745 3,160
--------
11,274
--------
Value
Shares (000)
- --------------------------------------------------------------------------------
Information Technology (4.1%)
- --------------------------------------------------------------------------------
Applied Materials 83,420 $ 1,415
Dell* 33,005 1,129
Flextronics International* 131,255 1,686
Microsoft 103,925 2,674
--------
6,904
--------
Materials (2.5%)
- --------------------------------------------------------------------------------
Air Products & Chemicals (A) 50,400 2,779
Weyerhaeuser (A) 19,965 1,373
--------
4,152
--------
Telecommunication Services (5.4%)
- --------------------------------------------------------------------------------
SBC Communications (A) 195,350 4,683
Sprint Nextel 184,460 4,386
--------
9,069
--------
Utilities (7.0%)
- --------------------------------------------------------------------------------
Entergy 59,527 4,424
FPL Group 91,560 4,359
PG&E 77,280 3,033
--------
11,816
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $144,049) 166,492
================================================================================
Exchange Traded Fund (1.0%)
- --------------------------------------------------------------------------------
iShares Russell 1000 Value Index Fund 24,300 1,673
- --------------------------------------------------------------------------------
Total Exchange Traded Fund
(Cost $1,622) 1,673
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (24.4%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 41,040,297 41,040
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $41,040) 41,040
================================================================================
Cash Equivalent (0.3%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 510,873 511
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $511) 511
================================================================================
Total Investments (124.4%)
(Cost $187,222) 209,716
================================================================================
Constellation Funds 2005 Annual Report 71
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Diversified Value Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-24.4)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral $(41,040)
Payable for investment securities purchased (3,470)
Income distribution payable (291)
Payable for capital shares redeemed (255)
Payable due to Investment Adviser (59)
Payable due to Shareholder Servicing Agent (34)
Payable due to Administrator (20)
Payable due to Trustees (2)
Other assets and liabilities, net 3,997
- --------------------------------------------------------------------------------
Total Other Assets and liabilities (41,174)
================================================================================
Net assets (100%) $168,542
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $132,646
Accumulated net realized gain on investments 13,402
Net unrealized appreciation on investments 22,494
- --------------------------------------------------------------------------------
Net assets $168,542
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($168,542,232 / 13,380,135 shares) $ 12.60
================================================================================
* Non-income producing security.
** More narrow industries are utilized for compliance purposes, whereas broad
sectors are utilized for reporting purposes.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $40,085,233.
Cl - Class
The accompanying notes are an integral part of the financial statements.
72 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Select Value Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (99.0%)
- --------------------------------------------------------------------------------
Consumer Discretionary (8.2%)
- --------------------------------------------------------------------------------
Dollar Tree Stores* 80,875 $ 1,751
Walt Disney 150,180 3,624
--------
5,375
--------
Consumer Staples (8.8%)
- --------------------------------------------------------------------------------
Altria Group (A) 45,745 3,372
Anheuser-Busch 22,850 984
Wal-Mart Stores (A) 32,000 1,402
--------
5,758
--------
Energy (17.5%)
- --------------------------------------------------------------------------------
Devon Energy 64,180 4,405
ENSCO International 70,580 3,288
Exxon Mobil 58,560 3,721
--------
11,414
--------
Financials (30.8%)
- --------------------------------------------------------------------------------
Bank of New York 57,885 1,702
Capital One Financial (A) 43,500 3,459
CapitalSource (A)* 90,565 1,974
Citigroup 52,230 2,378
Everest Re Group 24,345 2,383
Host Marriott 99,660 1,684
North Fork Bancorporation 122,145 3,115
Wells Fargo 58,350 3,418
--------
20,113
--------
Health Care (7.6%)
- --------------------------------------------------------------------------------
Biomet 36,760 1,276
Medicis Pharmaceutical, Cl A (A) 40,630 1,323
Pfizer 95,515 2,385
--------
4,984
--------
Industrials (4.9%)
- --------------------------------------------------------------------------------
FedEx 13,770 1,200
Rockwell Automation 37,600 1,989
--------
3,189
--------
Information Technology (4.8%)
- --------------------------------------------------------------------------------
Applied Materials 97,035 1,645
Flextronics International* 117,650 1,512
--------
3,157
--------
Materials (4.1%)
- --------------------------------------------------------------------------------
Air Products & Chemicals (A) 28,445 1,568
Weyerhaeuser (A) 16,170 1,112
--------
2,680
--------
Telecommunication Services (5.2%)
- --------------------------------------------------------------------------------
Sprint Nextel 143,085 3,403
--------
Utilities (7.1%)
- --------------------------------------------------------------------------------
FPL Group 55,410 2,638
PG&E 51,775 2,032
--------
4,670
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $58,314) 64,743
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
Exchange Traded Fund (0.5%)
- --------------------------------------------------------------------------------
iShares Russell 1000 Value Index Fund 5,565 $ 384
- --------------------------------------------------------------------------------
Total Exchange Traded Fund (Cost $375) 384
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (22.2%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 14,497,435 14,497
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $14,497) 14,497
================================================================================
Cash Equivalent (0.3%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 175,414 175
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $175) 175
================================================================================
Total Investments (122.0%)
(Cost $73,361) 79,799
================================================================================
Other assets and liabilities (-22.0)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (14,497)
Income distribution payable (74)
Payable for capital shares redeemed (34)
Payable due to Investment Adviser (24)
Payable due to Shareholder Servicing Agent (13)
Payable due to Administrator (8)
Payable due to Trustees (1)
Other assets and liabilities, net 252
- --------------------------------------------------------------------------------
Total Other assets and liabilities (14,399)
================================================================================
Net assets (100%) $ 65,400
================================================================================
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $ 52,920
Accumulated net realized gain on investments 6,042
Net unrealized appreciation on investments 6,438
- --------------------------------------------------------------------------------
Net assets $ 65,400
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($65,399,877 / 5,638,819 shares) $ 11.60
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $14,043,286.
Cl - Class
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 73
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Diversified Growth Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (96.9%)
- --------------------------------------------------------------------------------
Consumer Discretionary (15.2%)
- --------------------------------------------------------------------------------
Advance Auto Parts* 40,642 $ 1,572
Aeropostale* 57,340 1,219
Brinker International* 23,330 876
Centex 19,005 1,227
Dollar Tree Stores* 83,522 1,808
eBay* 46,419 1,913
Harley-Davidson (A) 18,750 908
JC Penney 33,095 1,569
Lowe's 49,205 3,169
Marriott International, Cl A (A) 26,185 1,650
Walt Disney 75,905 1,832
--------
17,743
--------
Consumer Staples (12.7%)
- --------------------------------------------------------------------------------
Altria Group 26,860 1,980
Anheuser-Busch 24,002 1,033
PepsiCo (A) 55,780 3,163
Procter & Gamble (A) 98,950 5,884
Wal-Mart Stores (A) 61,512 2,695
--------
14,755
--------
Energy (3.5%)
- --------------------------------------------------------------------------------
National Oilwell Varco* 41,270 2,715
Noble Energy 28,930 1,357
--------
4,072
--------
Financials (6.5%)
- --------------------------------------------------------------------------------
Bear Stearns 17,075 1,874
Capital One Financial (A) 31,110 2,474
Everest Re Group 13,215 1,294
Host Marriott 47,955 810
Wells Fargo 19,230 1,126
--------
7,578
--------
Health Care (20.2%)
- --------------------------------------------------------------------------------
Amgen* 52,332 4,169
Cooper 23,900 1,831
Johnson & Johnson (A) 96,671 6,117
Laboratory Corp of America Holdings* 25,905 1,262
Medicis Pharmaceutical, Cl A (A) 45,125 1,469
Medtronic 75,947 4,072
Pfizer 59,251 1,480
WellPoint* 40,910 3,102
--------
23,502
--------
Industrials (11.1%)
- --------------------------------------------------------------------------------
Cintas (A) 23,345 958
FedEx 18,035 1,571
General Electric 100,111 3,371
Goodrich 26,630 1,181
L-3 Communications Holdings (A) 15,165 1,199
Rockwell Automation 56,170 2,972
Value
Shares (000)
- --------------------------------------------------------------------------------
United Technologies 33,425 $ 1,733
--------
12,985
--------
Information Technology (24.8%)
- --------------------------------------------------------------------------------
Alliance Data Systems (A)* 40,175 1,573
Altera (A)* 53,340 1,019
Apple Computer* 21,715 1,164
Applied Materials 100,680 1,708
Cisco Systems* 173,532 3,112
Citrix Systems* 85,000 2,137
Dell* 75,124 2,569
Flextronics International* 90,245 1,160
Intel 132,783 3,273
Microsoft 230,259 5,925
Paychex 68,205 2,529
Qualcomm 30,869 1,381
Yahoo!* 40,435 1,368
--------
28,918
--------
Materials (2.1%)
- --------------------------------------------------------------------------------
Air Products & Chemicals (A) 23,425 1,292
Sealed Air* 25,165 1,194
--------
2,486
--------
Telecommunication Services (0.8%)
- --------------------------------------------------------------------------------
Sprint Nextel 40,840 971
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $112,963) 113,010
================================================================================
Exchange Traded Funds (2.6%)
- --------------------------------------------------------------------------------
iShares Russell 1000 Growth Index Fund (A) 26,950 1,343
iShares S&P MidCap 400/BARRA Growth Index Fund 22,700 1,641
- --------------------------------------------------------------------------------
Total Exchange Traded Funds
(Cost $2,827) 2,984
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (21.9%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 25,528,081 25,528
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $25,528) 25,528
================================================================================
Cash Equivalent (0.4%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 499,362 499
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $499) 499
================================================================================
Total Investments (121.8%)
(Cost $141,817) 142,021
================================================================================
74 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Diversified Growth Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-21.8)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral $(25,528)
Payable for investment securities purchased (499)
Payable due to Investment Adviser (52)
Payable due to Shareholder Servicing Agent (24)
Payable for capital shares redeemed (18)
Payable due to Administrator (14)
Income distribution payable (9)
Payable due to Trustees (2)
Other assets and liabilities, net 685
- --------------------------------------------------------------------------------
Total Other assets and liabilities (25,461)
================================================================================
Net assets (100%) $116,560
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $188,850
Accumulated net realized loss on investments (72,494)
Net unrealized appreciation on investments 204
- --------------------------------------------------------------------------------
Net assets $116,560
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($116,560,234 / 20,096,826 shares) $ 5.80
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $25,013,818.
Cl - Class
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 75
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Small Cap Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (100.6%)
- --------------------------------------------------------------------------------
Consumer Discretionary (14.6%)
- --------------------------------------------------------------------------------
Advo 36,298 $ 1,136
Aeropostale* 54,796 1,164
America's Car-Mart* 86,384 1,550
Comstock Homebuilding, Cl A* 50,601 1,008
Fossil* 90,745 1,651
Linens 'n Things (A)* 49,793 1,329
McCormick & Schmick's Seafood Restaurants* 54,696 1,155
Orient-Express Hotels, Cl A 27,156 772
Regis 26,354 997
Stanley Furniture 79,041 2,070
Wolverine World Wide 55,300 1,164
-------
13,996
-------
Consumer Staples (3.2%)
- --------------------------------------------------------------------------------
Hain Celestial Group* 119,129 2,311
Pantry* 21,555 805
-------
3,116
-------
Energy (6.7%)
- --------------------------------------------------------------------------------
Forest Oil (A)* 64,117 3,341
W-H Energy Services* 94,151 3,052
-------
6,393
-------
Financials (22.5%)
- --------------------------------------------------------------------------------
ACE Cash Express* 35,795 698
American Equity Investment Life Holding (A) 97,172 1,103
Central Pacific Financial 70,771 2,490
Commercial Capital Bancorp 45,440 772
Community Banks 63,417 1,783
Euronet Worldwide* 74,757 2,212
First Cash Financial Services* 100,679 2,650
First Industrial Realty Trust (A) 57,671 2,310
Flagstar Bancorp (A) 38,760 624
Hersha Hospitality Trust 172,366 1,712
IPC Holdings 32,636 1,065
Jefferies Group 27,699 1,206
LaSalle Hotel Properties 38,016 1,310
Trico Bancshares 74,586 1,605
-------
21,540
-------
Health Care (14.4%)
- --------------------------------------------------------------------------------
Greatbatch* 72,879 2,000
Horizon Health* 22,655 615
Martek Biosciences (A)* 86,885 3,052
Matria Healthcare* 144,095 5,440
Medicis Pharmaceutical, Cl A 82,793 2,696
-------
13,803
-------
Value
Shares (000)
- --------------------------------------------------------------------------------
Industrials (13.0%)
- --------------------------------------------------------------------------------
Applied Films* 117,164 $ 2,461
Barrett Business Services* 104,431 2,386
ElkCorp (A) 44,809 1,603
Greenbrier 35,990 1,196
Layne Christensen* 30,722 724
Netratings* 32,980 502
Orbital Sciences* 84,266 1,053
Pacer International* 52,204 1,376
Tenneco Automotive* 64,321 1,126
-------
12,427
-------
Information Technology (17.3%)
- --------------------------------------------------------------------------------
Aeroflex* 483,934 4,530
Agere Systems* 44,439 462
Anteon International (A)* 31,318 1,339
Credence Systems* 157,994 1,261
Hyperion Solutions* 64,476 3,137
j2 Global Communications* 45,992 1,859
SBS Technologies* 47,958 462
Symbol Technologies 151,676 1,468
Veeco Instruments* 52,881 848
Vishay Intertechnology* 105,102 1,256
-------
16,622
-------
Materials (5.2%)
- --------------------------------------------------------------------------------
Crown Holdings* 144,434 2,302
Ferro 53,711 984
RPM International 93,241 1,716
-------
5,002
-------
Telecommunication Services (2.1%)
- --------------------------------------------------------------------------------
Airspan Networks* 404,129 2,033
-------
Utilities (1.6%)
- --------------------------------------------------------------------------------
Northwest Natural Gas 41,619 1,549
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $85,510) 96,481
================================================================================
Exchange Traded Fund (0.2%)
- --------------------------------------------------------------------------------
iShares Russell 2000 Growth Index Fund 3,463 238
- --------------------------------------------------------------------------------
Total Exchange Traded Fund
(Cost $215) 238
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (12.5%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 11,975,650 11,976
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $11,976) 11,976
================================================================================
76 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Small Cap Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Cash Equivalent (0.6%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 560,229 $ 560
- --------------------------------------------------------------------------------
Total Cash Equivalent (Cost $560) 560
================================================================================
Total Investments (113.9%) (Cost $98,261) 109,255
================================================================================
Other assets and liabilities (-13.9)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (11,976)
Payable for investment securities purchased (1,253)
Payable for capital shares redeemed (219)
Payable due to Investment Adviser (32)
Payable due to Shareholder Servicing Agent (20)
Payable due to Administrator (12)
Payable due to Trustees (1)
Other assets and liabilities, net 197
- --------------------------------------------------------------------------------
Total Other assets and liabilities (13,316)
================================================================================
Net assets (100%) $ 95,939
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $ 72,297
Accumulated net realized gain on investments 12,648
Net unrealized appreciation on investments 10,994
- --------------------------------------------------------------------------------
Net assets $ 95,939
================================================================================
Net asset value, offering and redemption price per
share--Class II Shares
($95,939,320 / 5,811,061 shares) $ 16.51
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $11,582,178.
Cl - Class
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 77
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Family Heritage(R) Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (100.0%)
- --------------------------------------------------------------------------------
Consumer Discretionary (10.8%)
- --------------------------------------------------------------------------------
Best Buy 22,071 $ 961
Carnival (A) 33,489 1,674
Comcast, Cl A (A)* 48,333 1,420
International Speedway, Cl A 14,500 761
Marriott International, Cl A (A) 18,060 1,138
Nike, Cl B 25,621 2,092
Viacom, Cl B 33,266 1,098
--------
9,144
--------
Consumer Staples (9.0%)
- --------------------------------------------------------------------------------
Estee Lauder, Cl A (A) 19,415 676
JM Smucker (A) 29,197 1,417
Lancaster Colony 20,314 874
Wal-Mart Stores 51,335 2,249
Wm. Wrigley Jr. 33,661 2,420
--------
7,636
--------
Energy (9.6%)
- --------------------------------------------------------------------------------
Apache 23,817 1,792
Chesapeake Energy 58,986 2,256
Devon Energy 34,955 2,399
Murphy Oil 32,910 1,641
--------
8,088
--------
Financials (21.8%)
- --------------------------------------------------------------------------------
Berkshire Hathaway, Cl B* 725 1,980
Capital One Financial (A) 28,650 2,278
CapitalSource (A)* 77,600 1,692
Commerce Bancshares 41,409 2,132
Federated Investors, Cl B 60,820 2,021
Flagstar Bancorp (A) 92,614 1,491
Philadelphia Consolidated Holding* 9,614 816
Progressive 10,163 1,065
SL Green Realty (A) 29,719 2,026
TCF Financial (A) 107,387 2,873
--------
18,374
--------
Health Care (11.9%)
- --------------------------------------------------------------------------------
Cephalon (A)* 31,797 1,476
Eli Lilly (A) 51,536 2,758
Medicis Pharmaceutical, Cl A 47,698 1,553
Stryker 60,327 2,982
Universal Health Services, Cl B 25,918 1,235
--------
10,004
--------
Industrials (9.2%)
- --------------------------------------------------------------------------------
Danaher 20,270 1,091
Fastenal 21,239 1,298
General Dynamics (A) 13,795 1,649
Illinois Tool Works 18,066 1,487
Value
Shares (000)
- --------------------------------------------------------------------------------
Molex, Cl A 57,245 $ 1,472
Werner Enterprises 43,418 751
--------
7,748
--------
Information Technology (18.5%)
- --------------------------------------------------------------------------------
Dell* 65,170 2,229
Fiserv* 33,300 1,527
Marvell Technology Group* 47,233 2,178
Microsoft 162,906 4,191
Paychex 49,788 1,846
Qualcomm 41,359 1,851
Vishay Intertechnology* 58,143 695
Yahoo!* 32,501 1,100
--------
15,617
--------
Materials (4.2%)
- --------------------------------------------------------------------------------
E.I. du Pont de Nemours 50,861 1,992
Worthington Industries 74,088 1,558
--------
3,550
--------
Telecommunication Services (2.2%)
- --------------------------------------------------------------------------------
Telephone & Data Systems (A)* 25,499 957
Wireless Facilities* 152,524 885
--------
1,842
--------
Utilities (2.8%)
- --------------------------------------------------------------------------------
AES* 143,341 2,355
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $69,790) 84,358
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (25.0%)
- --------------------------------------------------------------------------------
BlackRock Institutional
Money Market Trust 21,124,765 21,125
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as
Collateral for Loaned Securities
(Cost $21,125) 21,125
================================================================================
Cash Equivalent (0.0%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 35,305 35
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $35) 35
================================================================================
Total Investments (125.0%)
(Cost $90,950) 105,518
================================================================================
78 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Family Heritage(R) Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-25.0)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral $(21,125)
Payable due to Investment Adviser (41)
Payable for capital shares redeemed (38)
Payable due to Shareholder Servicing Agent (17)
Payable due to Administrator (10)
Payable due to Trustees (1)
Other assets and liabilities, net 162
- --------------------------------------------------------------------------------
Total Other assets and liabilities (21,070)
================================================================================
Net assets (100%) $ 84,448
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $ 84,754
Undistributed net investment income 1
Accumulated net realized loss on investments (14,875)
Net unrealized appreciation on investments 14,568
- --------------------------------------------------------------------------------
Net assets $ 84,448
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($84,448,254 / 8,476,833 shares) $ 9.96
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $20,489,444.
Cl - Class
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 79
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Taxable Bond Fund
September 30, 2005
Face
Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Corporate Bonds (51.1%)
- --------------------------------------------------------------------------------
Consumer Discretionary (4.5%)
- --------------------------------------------------------------------------------
Harman International
7.320%, 07/01/07 $1,143 $ 1,183
May Department Stores
7.450%, 09/15/11 847 943
-------
2,126
-------
Consumer Staples (2.3%)
- --------------------------------------------------------------------------------
H.J. Heinz
6.000%, 03/15/08 1,045 1,071
-------
Energy (2.1%)
- --------------------------------------------------------------------------------
Burlington Resources Finance
5.600%, 12/01/06 1,000 1,011
-------
Financials (24.3%)
- --------------------------------------------------------------------------------
Bank of America
5.375%, 06/15/14 1,000 1,030
Block Financial
8.500%, 04/15/07 235 248
CIT Group
7.750%, 04/02/12 1,000 1,146
5.500%, 11/30/07 1,500 1,525
Colonial Realty
8.050%, 07/15/06 400 409
Ford Motor Credit
7.375%, 10/28/09 (A) 904 874
6.875%, 02/01/06 1,250 1,255
HSBC Finance
4.750%, 05/15/09 1,000 997
Heller Financial
7.375%, 11/01/09 500 549
Kimco Realty, MTN, Ser B
7.900%, 12/07/07 450 481
Lehman Brothers Holdings
7.000%, 02/01/08 1,316 1,382
Merrill Lynch
4.000%, 09/15/08 750 736
St. Paul
8.125%, 04/15/10 904 1,018
-------
11,650
-------
Health Care (2.0%)
- --------------------------------------------------------------------------------
GlaxoSmithKline
4.375%, 04/15/14 1,000 969
-------
Industrials (9.9%)
- --------------------------------------------------------------------------------
First Data
3.900%, 10/01/09 1,500 1,461
Honeywell International
7.500%, 03/01/10 1,052 1,170
Tyco International Group
6.375%, 10/15/11 2,000 2,132
-------
4,763
-------
Face
Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Sovereign Bond (1.1%)
- --------------------------------------------------------------------------------
Aid-Israel
5.500%, 04/26/24 $ 500 $ 534
-------
Telecommunication Services (4.9%)
- --------------------------------------------------------------------------------
GTE
8.750%, 11/01/21 1,000 1,279
7.510%, 04/01/09 1,000 1,085
-------
2,364
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $24,348) 24,488
================================================================================
U.S. Government Agency Obligations (26.5%)
- --------------------------------------------------------------------------------
FHLB
5.000%, 08/10/10 1,000 997
FHLB, Ser EX10
5.125%, 06/26/18 1,635 1,587
FHLB, Ser RA18
5.000%, 09/01/10 1,500 1,496
FHLMC
6.250%, 03/05/12 1,500 1,536
5.200%, 03/05/19 1,000 988
6.350%, 10/05/35 5,000 766
FHLMC, MTN
5.050%, 01/26/15 1,000 999
FHLMC, MTN (B)
5.986%, 03/04/19 1,000 455
FNMA 8.200%, 03/10/16 1,000 1,287
5.000%, 01/15/07 350 353
4.010%, 10/21/09 1,000 980
TVA, Ser B
6.235%, 07/15/45 1,175 1,265
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $12,394) 12,709
================================================================================
U.S. Treasury Obligations (16.3%)
- --------------------------------------------------------------------------------
U.S. Treasury Bonds (16.3%)
- --------------------------------------------------------------------------------
8.750%, 05/15/17 1,500 2,078
8.125%, 08/15/19 (A) 1,500 2,048
7.875%, 02/15/21 615 837
7.625%, 11/15/22 913 1,236
7.500%, 11/15/16 830 1,050
5.375%, 02/15/31 (A) 500 560
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $6,922) 7,809
================================================================================
80 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Taxable Bond Fund
September 30, 2005
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
Municipal Bonds (3.6%)
- --------------------------------------------------------------------------------
Maryland (2.5%)
- --------------------------------------------------------------------------------
Baltimore, Consolidated Public Improvement GO, Ser B,
AMBAC
5.000%, 10/15/10 $ 1,185 $ 1,207
-------
New York (1.1%)
- --------------------------------------------------------------------------------
Sales Tax Asset Receivable RB, Ser B, FGIC
4.760%, 10/15/15 500 492
- --------------------------------------------------------------------------------
Total Municipal Bonds
(Cost $1,725) 1,699
================================================================================
Asset-Backed Security (2.5%)
- --------------------------------------------------------------------------------
Standard Credit Card Master Trust, Ser 1994-2, Cl A
7.250%, 04/07/06 1,199 1,217
- --------------------------------------------------------------------------------
Total Asset-Backed Security
(Cost $1,208) 1,217
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (7.6%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 3,665,830 3,666
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $3,666) 3,666
================================================================================
Cash Equivalent (0.3%)
- --------------------------------------------------------------------------------
PNC Money Bank Market Fund 163,036 163
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $163) 163
================================================================================
Total Investments (107.9%)
(Cost $50,426) 51,751
================================================================================
Other assets and liabilities (-7.9)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (3,666)
Payable for investment securities purchased (766)
Income distribution payable (113)
Payable due to Shareholder Servicing Agent (10)
Payable due to Investment Adviser (8)
Payable due to Administrator (6)
Payable due to Trustees (1)
Other assets and liabilities, net 788
- --------------------------------------------------------------------------------
Total Other assets and liabilities (3,782)
================================================================================
Net assets (100%) $47,969
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $47,273
Undistributed net investment income 2
Accumulated net realized loss on investments (631)
Net unrealized appreciation on investments 1,325
- --------------------------------------------------------------------------------
Net assets $47,969
================================================================================
Net asset value, offering and redemption price per
share--Class II Shares
($47,968,592 / 4,567,171 shares) $ 10.50
================================================================================
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $3,529,790.
(B) The rate reported is the effective yield as of September 30, 2005.
AMBAC - American Municipal Bond Assurance Corporation
Cl - Class
FGIC - Financial Guaranty Insurance Corporation
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GO - General Obligation
MTN - Medium Term Note
RB - Revenue Bond
Ser - Series
TVA - Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 81
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Municipal Bonds (98.6%)
- --------------------------------------------------------------------------------
Alabama (1.0%)
- --------------------------------------------------------------------------------
Bessemer RB, AMBAC, Callable 02/01/10 @ 102
5.600%, 02/01/30 $1,000 $ 1,087
-------
Arizona (1.0%)
- --------------------------------------------------------------------------------
Arizona School Facilities Board COP, MBIA, Pre-Refunded
03/01/13 @ 100
5.250%, 09/01/17 1,000 1,107
-------
California (10.1%)
- --------------------------------------------------------------------------------
California Community College Finance Authority RB,
Mission Community College, MBIA,
Callable 05/01/07 @ 102
5.500%, 05/01/17 1,000 1,057
California Health Facilities Finance Authority RB,
St. Francis Memorial Hospital, Ser C, ETM
5.875%, 11/01/23 2,000 2,424
California State GO, AMBAC, Callable 04/01/14 @ 100
5.000%, 04/01/31 3,000 3,127
California State GO, Callable 02/01/13 @ 100
5.250%, 02/01/33 1,840 1,953
California State, Economic Recovery GO, Ser A,
Callable 07/01/11 @ 100
5.000%, 07/01/17 2,000 2,118
Stockton Housing Facility RB, O'Connor Woods Project,
Ser A, ETM, GNMA, Callable 05/06/05 @ 100
5.200%, 09/20/09 550 556
-------
11,235
-------
Colorado (1.0%)
- --------------------------------------------------------------------------------
South Suburban Park & Recreation District GO, AMBAC,
Callable 09/15/10 @ 100
5.375%, 09/15/18 1,000 1,081
-------
Connecticut (1.4%)
- --------------------------------------------------------------------------------
Connecticut State GO, Ser B, MBIA
5.000%, 12/01/10 1,500 1,620
-------
Delaware (1.0%)
- --------------------------------------------------------------------------------
Delaware State, Economic Development Authority, Pollution
Control RB, Delmarva Power, AMBAC,
Callable 05/01/11 @ 100 (A)
4.900%, 05/01/26 1,000 1,070
-------
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
District of Columbia (1.2%)
- --------------------------------------------------------------------------------
District of Columbia RB, Howard University Project, MBIA
5.500%, 10/01/16 $ 1,000 $ 1,134
Washington D.C., Convention Center Authority RB,
Dedicated Tax Revenue, Senior Lien, AMBAC,
Callable 10/01/08 @ 101
5.250%, 10/01/09 200 216
-------
1,350
-------
Florida (1.3%)
- --------------------------------------------------------------------------------
Tampa Water & Sewer Revenue RB,
Pre-Refunded 10/01/09 @ 101
5.500%, 10/01/29 1,300 1,425
-------
Georgia (4.5%)
- --------------------------------------------------------------------------------
Atlanta Water & Waste Water, RB, FSA,
Callable 11/01/14 @ 100
5.000%, 11/01/37 2,500 2,612
Henry County, Water & Sewer Authority RB, AMBAC
6.150%, 02/01/20 2,000 2,448
-------
5,060
-------
Hawaii (4.2%)
- --------------------------------------------------------------------------------
Honolulu, City & County GO, Ser B, ETM
8.000%, 10/01/10 1,680 2,038
University of Hawaii RB, Ser A, FGIC,
Callable 07/15/12 @ 100
5.500%, 07/15/21 2,385 2,613
-------
4,651
-------
Illinois (9.0%)
- --------------------------------------------------------------------------------
Chicago GO, FGIC, Callable 01/01/08 @ 102
5.500%, 01/01/21 400 429
Chicago GO, FGIC, Pre-Refunded 01/01/08 @ 102
5.500%, 01/01/21 1,100 1,179
Chicago, Park District GO, Aquarium & Museum Project,
FGIC, Callable 01/01/08 @ 100
5.500%, 01/01/10 1,000 1,047
Illinois Development Finance Authority RB,
Elgin School District Project, FSA (B)
4.371%, 01/01/18 2,350 1,369
Illinois Health Facilities Authority RB, Hospital Sisters
Services Project, Ser A, MBIA, Callable 06/01/08 @ 101
5.250%, 06/01/12 1,000 1,053
82 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Metropolitan Pier & Exposition Authority RB,
Illinois Dedicated State Tax Revenue, AMBAC,
Callable 06/01/07 @ 101
5.125%, 06/01/13 $1,200 $ 1,249
Metropolitan Pier & Exposition Authority RB,
Illinois Dedicated State Tax Revenue, Ser A, FGIC
5.500%, 12/15/23 500 580
Metropolitan Pier & Exposition Authority RB,
Illinois Dedicated State Tax Revenue, Ser A,
FGIC, ETM
5.500%, 12/15/23 500 576
Southern Illinois University RB, Medical Facilities
System Project, MBIA, Callable 04/01/07 @ 102
5.875%, 04/01/23 1,000 1,056
Will County, Community School District GO, USD #365,
FSA (B)
6.160%, 11/01/12 2,000 1,512
-------
10,050
-------
Indiana (2.1%)
- --------------------------------------------------------------------------------
Indiana Transportation Finance Authority RB, Ser A, MBIA
6.800%, 12/01/16 1,000 1,198
Indianapolis, Public Improvement Authority RB, Ser A,
Callable 01/01/10 @ 101
6.000%, 01/01/25 1,000 1,099
-------
2,297
-------
Kentucky (1.0%)
- --------------------------------------------------------------------------------
Kentucky State, Property & Buildings Commission RB,
Project Number 67, Pre-Refunded 09/01/10 @ 100
5.625%, 09/01/13 1,050 1,160
-------
Louisiana (2.1%)
- --------------------------------------------------------------------------------
Louisiana Public Facilities Authority RB, Franciscan
Missionaries Project, Ser A, FSA
5.500%, 07/01/11 2,115 2,302
-------
Maryland (2.8%)
- --------------------------------------------------------------------------------
Maryland State, Health & Higher Education Authority RB,
Johns Hopkins University, Ser A,
Callable 07/01/14 @ 100
5.000%, 07/01/38 3,000 3,109
-------
Massachusetts (3.0%)
- --------------------------------------------------------------------------------
Massachusetts State, Housing Finance Agency RB, Ser B,
MBIA, Callable 06/01/08 @ 101
5.300%, 12/01/17 1,000 1,029
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Massachusetts State, Special Obligation RB,
Consolidated Loan, Ser A, Callable 06/01/08 @ 101
5.000%, 06/01/15 $ 70 $ 73
Massachusetts State, Special Obligation RB,
Consolidated Loan, Ser A, Pre-Refunded 06/01/08 @ 101
5.000%, 06/01/15 930 984
Massachusetts State, Water Resources Authority RB,
Ser D, MBIA, GOA
6.000%, 08/01/14 1,060 1,238
-------
3,324
-------
Michigan (0.9%)
- --------------------------------------------------------------------------------
Michigan State, Building Authority RB, Facilities
Program, Ser II, MBIA, Callable 10/15/13 @ 100
5.000%, 10/15/23 1,000 1,056
-------
Mississippi (1.0%)
- --------------------------------------------------------------------------------
Mississippi Developing Bank RB, Capital Project &
Equipment Acquisition, Ser A2, AMBAC
5.000%, 07/01/24 1,000 1,098
-------
Nevada (1.8%)
- --------------------------------------------------------------------------------
Clark County, Industrial Development, Nevada Power
Authority RB, AMBAC, Callable 05/06/05 @ 100
7.200%, 10/01/22 2,000 2,047
-------
New Jersey (2.3%)
- --------------------------------------------------------------------------------
New Jersey State GO, Ser D
6.000%, 02/15/11 150 168
New Jersey State, Educational Facilities Authority RB,
Princeton University, Callable 07/01/13 @ 100
5.000%, 07/01/15 2,000 2,173
New Jersey State, Transportation System RB, Ser A
5.625%, 06/15/14 250 280
-------
2,621
-------
New Mexico (1.6%)
- --------------------------------------------------------------------------------
Santa Fe County RB, Correctional Facilities Project, FSA
6.000%, 02/01/27 1,500 1,804
-------
New York (4.9%)
- --------------------------------------------------------------------------------
New York City, Transitional Finance Authority RB, Ser A,
Callable 11/01/11 @ 100 (A)
5.500%, 11/01/26 2,000 2,195
New York State, Mortgage Agency RB, Homeowner Mortgage,
Ser 80, Callable 03/01/09 @ 101 5.100%, 10/01/17 1,000 1,033
Constellation Funds 2005 Annual Report 83
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
September 30, 2005
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
New York State, Thruway Authority RB,
Highway & Bridge Project, Callable 04/01/12 @ 100
5.500%, 04/01/15 $2,000 $ 2,193
-------
5,421
-------
North Carolina (2.3%)
- --------------------------------------------------------------------------------
North Carolina State, Eastern Municipal
Power Authority RB, Ser B, MBIA, Callable
01/01/07 @ 102
5.800%, 01/01/16 1,000 1,051
University of North Carolina Wilmington, RB, AMBAC,
Callable 01/01/13 @ 100
5.250%, 01/01/21 1,380 1,494
-------
2,545
-------
Oklahoma (3.7%)
- --------------------------------------------------------------------------------
Oklahoma City, Water Utilities Authority RB,
Ser A, Callable 07/01/09 @ 100
5.000%, 07/01/24 2,000 2,080
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 2,066
-------
4,146
-------
Pennsylvania (12.9%)
- --------------------------------------------------------------------------------
Derry Township, Industrial & Commercial Development RB,
Arena Project, Ser A (LOC: PNC Bank) (A)
5.375%, 11/01/30 1,700 1,702
Montgomery County Higher Education & Health Authority RB,
Pottstown Healthcare, Pre-Refunded 01/01/09 @ 101
5.000%, 01/01/27 2,000 2,132
Norwin Penn School District GO, FGIC, Pre-Refunded
04/01/10 @ 100
6.000%, 04/01/24 2,000 2,215
Pennsbury Penn School District GO, FSA,
Callable 08/01/14 @ 100
5.000%, 08/01/25 2,000 2,110
Pennsylvania State, Higher Educational Facilities
Authority RB, Saint Joseph's University, Callable
05/01/06 @ 100 (LOC: Allied Irish Banks PLC) (A)
5.000%, 05/01/11 1,470 1,488
Pennsylvania State, Public School Building Authority RB,
Harrisburg Area Community College Project, AMBAC,
Callable 04/01/14 @ 100
5.250%, 04/01/24 1,000 1,079
Face Amount Value
(000) (000)
- --------------------------------------------------------------------------------
Philadelphia, Authority for Industrial Development Lease
Revenue RB, Ser B, FSA, Callable 10/01/11 @ 101
5.500%, 10/01/12 $1,500 $ 1,663
Philadelphia, Hospital & Higher Education Authority RB,
Presbyterian Medical Center Project, ETM
6.500%, 12/01/11 1,300 1,435
Philadelphia, Water & Waste Water RB, MBIA
6.250%, 08/01/09 525 581
-------
14,405
-------
Puerto Rico (2.8%)
- --------------------------------------------------------------------------------
Puerto Rico Commonwealth, Infrastructure RB, Ser B,
Callable 07/01/15 @ 100
5.000%, 07/01/41 2,500 2,569
Puerto Rico Electric Power Authority RB, Ser RR,
Callable 07/01/15 @ 100
5.000%, 07/01/29 500 527
-------
3,096
-------
Rhode Island (1.1%)
- --------------------------------------------------------------------------------
Rhode Island, Depositors Economic Protection Authority
RB, Special Obligation, Ser A, ETM
6.375%, 08/01/22 1,000 1,255
-------
South Carolina (3.5%)
- --------------------------------------------------------------------------------
Darlington County, Water & Sewer Authority RB, AMBAC,
Callable 12/01/12 @ 101 5.625%, 12/01/23 2,530 2,799
Piedmont, Municipal Power Agency Authority RB,
South Carolina Electric Project, MBIA, ETM
6.250%, 01/01/09 1,000 1,095
-------
3,894
-------
Texas (10.2%)
- --------------------------------------------------------------------------------
Duncanville Independent School District, GO, PSF-GTD,
Callable 02/15/13 @ 100 5.650%, 02/15/28 1,350 1,484
Fort Worth Water & Sewer RB, Partially Pre-Refunded
08/15/10 @ 100 5.750%, 02/15/14 2,000 2,201
Fort Worth Water & Sewer RB, Pre-Refunded 02/15/12 @ 100
5.625%, 02/15/15 1,000 1,118
84 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Pitcairn Tax-Exempt Bond Fund
September 30, 2005
Face Amount Value
(000)/Shares (000)
- --------------------------------------------------------------------------------
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 $ 1,939
Houston, Water & Sewer Systems Authority RB,
Junior Lien, Ser C, FGIC, Pre-Refunded 12/01/07
@ 101
5.375%, 12/01/27 1,140 1,208
North Texas Thruway RB, Ser A, FSA,
Callable 01/01/15 @ 100
5.000%, 01/01/40 2,000 2,065
San Antonio GO, ETM
5.000%, 08/01/07 15 15
Texas Water Development Board RB, Revolving Fund,
Senior Lein, Ser B, Callable 01/15/10 @ 100
5.500%, 07/15/15 1,250 1,347
--------
11,377
--------
Washington (2.9%)
- --------------------------------------------------------------------------------
Central Puget Sound, Regional Transportation
Authority RB, Sales Tax & Motor Project, FGIC
5.250%, 02/01/21 1,000 1,116
Clark County, School District No. 177 GO, AMBAC
5.250%, 12/01/14 1,000 1,107
Washington State GO, Ser A, FSA 5.000%, 07/01/20 1,000 1,067
--------
3,290
- --------------------------------------------------------------------------------
Total Municipal Bonds
(Cost $104,271) 109,983
================================================================================
Cash Equivalent (0.3%)
- --------------------------------------------------------------------------------
ABN Amro Tax Exempt Money Market Fund 335,514 336
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $336) 336
================================================================================
Total Investments (98.9%)
(Cost $104,607) 110,319
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (1.1)%
- --------------------------------------------------------------------------------
Income distribution payable $ (348)
Payable due to Shareholder Servicing Agent (23)
Payable due to Administrator (14)
Payable due to Investment Adviser (7)
Payable due to Trustees (2)
Other assets and liabilities, net 1,650
- --------------------------------------------------------------------------------
Total Other assets and liabilities 1,256
================================================================================
Net assets (100%) $111,575
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $104,512
Undistributed net investment income 109
Accumulated net realized gain on investments 1,242
Net unrealized appreciation on investments 5,712
- --------------------------------------------------------------------------------
Net assets $111,575
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($111,574,525 / 10,525,735 shares) $ 10.60
================================================================================
(A) Variable rate security. The rate reflected on the Statement of Net Assets
is the rate in effect on September 30, 2005.
(B) Zero coupon security. The rate reported on the Statement of Net Assets is
the effective yield at time of purchase.
AMBAC - American Municipal Bond Assurance Corporation
COP - Certificate of Participation
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
PLC - Public Limited Company
PSF-GTD - Permanent School Fund - Guaranteed
RB - Revenue Bond
Ser - Series
USD - Unified School District
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 85
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation Sands Capital Select Growth Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (97.7%)
- --------------------------------------------------------------------------------
Consumer Discretionary (22.6%)
- --------------------------------------------------------------------------------
Bed Bath & Beyond* 142,165 $ 5,712
eBay* 459,859 18,946
Kohl's* 115,816 5,812
Lowe's (A) 164,883 10,618
Starbucks* 286,701 14,364
---------
55,452
---------
Consumer Staples (2.4%)
- --------------------------------------------------------------------------------
Walgreen 138,803 6,031
---------
Financials (11.9%)
- --------------------------------------------------------------------------------
Capital One Financial (A) 162,841 12,949
Chicago Mercantile Exchange Holdings 25,700 8,669
Moody's 147,200 7,519
---------
29,137
---------
Health Care (36.1%)
- --------------------------------------------------------------------------------
Allergan (A) 93,526 8,569
American Pharmaceutical Partners* 57,300 2,616
Amgen* 112,138 8,934
Genentech* 250,434 21,089
Genzyme* 149,998 10,746
Intuitive Surgical* 33,300 2,441
Medtronic 164,255 8,807
Patterson* 91,920 3,680
Stryker 132,530 6,550
Teva Pharmaceutical
Industries ADR (A) 313,559 10,479
Zimmer Holdings (A)* 64,689 4,456
---------
88,367
---------
Industrials (6.6%)
- --------------------------------------------------------------------------------
Apollo Group, Cl A (A)* 202,086 13,417
Iron Mountain (A)* 76,100 2,793
---------
16,210
---------
Information Technology (18.1%)
- --------------------------------------------------------------------------------
Dell (A)* 326,804 11,177
Google, Cl A* 54,614 17,283
Qualcomm 237,138 10,612
Red Hat (A)* 246,274 5,219
---------
44,291
---------
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $205,435) 239,488
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (25.1%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 61,392,395 61,392
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as
Collateral for Loaned Securities
(Cost $61,392) 61,392
================================================================================
Value
Shares (000)
- --------------------------------------------------------------------------------
Cash Equivalent (2.5%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 6,102,448 $ 6,102
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $6,102) 6,102
================================================================================
Total Investment (125.3%)
(Cost $272,929) 306,982
================================================================================
Other assets and liabilities (-25.3)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (61,392)
Payable for investment securities purchased (2,030)
Payable due to Investment Adviser (145)
Payable for capital shares redeemed (94)
Payable due to Shareholder Servicing Agent (32)
Payable due to Administrator (28)
Payable due to Trustees (3)
Other assets and liabilities, net 1,717
- --------------------------------------------------------------------------------
Total Other assets and liabilities (62,007)
================================================================================
Net assets (100%) $ 244,975
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital (unlimited
authorization -- no par value) $ 241,258
Accumulated net realized loss on investments (30,336)
Net unrealized appreciation on investments 34,053
- --------------------------------------------------------------------------------
Net assets $ 244,975
================================================================================
Net asset value, offering and redemption price
per share--Class I Shares
($81,976,005 / 10,491,498 shares) $ 7.81
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($162,999,099 / 20,910,494 shares) $ 7.80
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $59,372,071.
ADR - American Depositary Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
86 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation TIP Small Cap Value Opportunities Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (93.1%)
- --------------------------------------------------------------------------------
Consumer Discretionary (8.1%)
- --------------------------------------------------------------------------------
CSK Auto* 33,830 $ 503
Domino's Pizza 25,380 592
Gaylord Entertainment* 16,180 771
Keystone Automotive Industries* 30,170 869
Leapfrog Enterprises (A)* 28,390 419
Orient-Express Hotels, Cl A 16,780 477
Playtex Products* 50,180 552
RC2* 9,290 314
RH Donnelley* 16,690 1,056
Steinway Musical Instruments* 18,640 491
-------
6,044
-------
Consumer Staples (2.0%)
- --------------------------------------------------------------------------------
Casey's General Stores 33,990 789
Lance 41,490 724
-------
1,513
-------
Energy (5.9%)
- --------------------------------------------------------------------------------
Comstock Resources* 32,390 1,063
Lone Star Technologies* 15,930 885
Oil States International* 24,480 889
Remington Oil & Gas* 18,990 788
Universal Compression Holdings* 19,630 781
-------
4,406
-------
Financials (28.7%)**
- --------------------------------------------------------------------------------
Advanta, Cl B 36,570 1,032
Alexandria Real Estate Equities 11,310 935
Allmerica Financial* 23,140 952
Apollo Investment 45,840 908
BioMed Realty Trust 33,550 832
Columbia Equity Trust* 23,870 349
Corporate Office Properties Trust 23,150 809
Delphi Financial Group, Cl A 9,580 448
EastGroup Properties 21,090 923
Fidelity Bankshares 22,300 681
First Community Bancorp 11,050 529
First Republic Bank 19,885 701
FPIC Insurance Group* 23,530 847
Gold Banc 56,630 844
Hanmi Financial 29,740 534
Heritage Commerce* 42,960 894
Kilroy Realty (A) 16,930 949
Maguire Properties 31,160 936
MarketAxess Holdings* 63,550 864
Metris* 37,810 553
Ohio Casualty 36,860 1,000
Phoenix 44,030 537
Platinum Underwriters Holdings (A) 30,160 901
Provident Bankshares 14,700 511
Signature Bank* 25,800 696
Taylor Capital Group 8,930 338
United America Indemnity, Cl A* 36,740 674
Value
Shares (000)
- --------------------------------------------------------------------------------
Virginia Commerce Bancorp* 24,855 $ 673
W. Holding 43,740 418
-------
21,268
-------
Health Care (5.8%)
- --------------------------------------------------------------------------------
Amedisys (A)* 10,280 401
Analogic 23,490 1,184
Conmed* 15,300 427
Option Care 39,697 581
Quidel* 72,230 683
West Pharmaceutical Services 33,660 999
-------
4,275
-------
Industrials (23.5%)
- --------------------------------------------------------------------------------
Actuant, Cl A* 8,580 402
Amerco* 16,610 966
American Commercial Lines* 15,000 392
Aviall* 15,450 522
Brightpoint* 31,805 609
Clean Harbors* 31,590 1,072
Consolidated Graphics* 13,190 568
DRS Technologies 19,860 980
EDO 23,040 692
Esterline Technologies (A)* 11,660 442
Freightcar America* 21,310 869
Genco Shipping & Trading* 22,430 428
Griffon* 27,340 673
Jarden* 25,305 1,039
Kaman, Cl A 30,090 615
Laidlaw International* 25,560 618
McDermott International* 22,550 826
Measurement Specialties* 16,570 351
Mercury Computer Systems* 16,190 425
PHH* 20,420 561
Team* 14,150 318
Wabtec 24,510 669
Walter Industries (A) 44,700 2,187
Washington Group International* 22,570 1,216
-------
17,440
-------
Information Technology (8.3%)
- --------------------------------------------------------------------------------
Advanced Digital Information* 65,670 617
Coherent* 18,760 549
Genesis Microchip* 31,250 686
Intergraph (A)* 14,805 662
NAM TAI Electronics (A) 29,200 743
Overland Storage* 42,930 350
Sonic Solutions* 37,580 808
Standard Microsystems* 30,240 904
THQ* 21,820 465
Varian Semiconductor Equipment Associates* 9,270 393
-------
6,177
-------
Constellation Funds 2005 Annual Report 87
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation TIP Small Cap Value Opportunities Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Materials (6.8%)
- --------------------------------------------------------------------------------
Apex Silver Mines* 28,280 $ 444
Cleveland-Cliffs (A) 12,410 1,081
Foundation Coal Holdings* 27,960 1,075
Hawk, Cl A* 55,500 694
HB Fuller 16,700 519
Ladish* 28,290 493
Oregon Steel Mills* 27,490 767
-------
5,073
-------
Telecommunication Services (3.5%)
- --------------------------------------------------------------------------------
Alamosa Holdings* 47,730 817
Leap Wireless International* 34,750 1,223
Tekelec* 26,090 546
-------
2,586
-------
Utilities (0.5%)
- --------------------------------------------------------------------------------
Allete 7,900 362
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $63,735) 69,144
================================================================================
Exchange Traded Fund (0.8%)
- --------------------------------------------------------------------------------
iShares Russell 2000 Value Index Fund 8,380 552
- --------------------------------------------------------------------------------
Total Exchange Traded Fund (Cost $530) 552
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (7.8%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 5,806,712 5,807
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as
Collateral for Loaned Securities
(Cost $5,807) 5,807
================================================================================
Cash Equivalent (7.5%)
- --------------------------------------------------------------------------------
PNC Bank Money Market Fund 5,575,834 5,576
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $5,576) 5,576
================================================================================
Total Investments (109.2%)
(Cost $75,648) 81,079
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-9.2)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral $(5,807)
Payable for investment securities purchased (4,005)
Payable for capital shares redeemed (122)
Payable due to Investment Adviser (41)
Payable due to Shareholder Servicing Agent (13)
Payable due to Administrator (8)
Payable due to Trustees (1)
Other assets and liabilities, net 3,153
- --------------------------------------------------------------------------------
Total Other assets and liabilities (6,844)
================================================================================
Net assets (100%) $74,235
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $67,355
Undistributed net investment income 123
Accumulated net realized gain on investments 1,326
Net unrealized appreciation on investments 5,431
- --------------------------------------------------------------------------------
Net assets $74,235
================================================================================
Net asset value, offering and redemption
price per share--Class II Shares
($74,234,577 / 4,045,344 shares) $ 18.35
================================================================================
* Non-income producing security.
** More narrow industries are utilized for compliance purposes, whereas broad
sectors are utilized for reporting purposes.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $5,698,392.
Cl - Class
The accompanying notes are an integral part of the financial statements.
88 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation TIP Mid Cap Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (98.5%)
- --------------------------------------------------------------------------------
Consumer Discretionary (12.0%)
- --------------------------------------------------------------------------------
7-Eleven* 240 $ 8
Chico's FAS* 180 7
Goodyear Tire & Rubber* 610 9
GTECH Holdings 310 10
Hilton Hotels 360 8
Hovnanian Enterprises, Cl A* 160 8
RH Donnelley* 250 16
Station Casinos 130 9
Urban Outfitters* 370 11
Warner Music Group* 800 15
-----
101
-----
Consumer Staples (4.4%)
- --------------------------------------------------------------------------------
Church & Dwight 380 14
Constellation Brands, Cl A* 420 11
Whole Foods Market 90 12
-----
37
-----
Energy (8.9%)
- --------------------------------------------------------------------------------
Cal Dive International* 210 13
Consol Energy 180 14
Cooper Cameron* 180 13
Massey Energy 210 11
Range Resources 310 12
Stolt Offshore ADR* 1,000 12
-----
75
-----
Financials (17.2%)
- --------------------------------------------------------------------------------
Allmerica Financial* 350 14
Assurant 280 11
CBL & Associates Properties 300 12
City National 160 11
Endurance Specialty Holdings 260 9
Fidelity National Financial 330 15
Host Marriott 500 8
Huntington Bancshares 360 8
People's Bank 342 10
Reckson Associates Realty 350 12
Refco* 370 11
SL Green Realty 180 12
SVB Financial Group* 240 12
-----
145
-----
Health Care (8.8%)
- --------------------------------------------------------------------------------
Covance* 240 12
Dade Behring Holdings 240 9
DaVita* 290 13
Gen-Probe* 250 12
Protein Design Labs* 320 9
Sierra Health Services* 150 10
WellChoice* 120 9
-----
74
-----
Value
Shares (000)
- --------------------------------------------------------------------------------
Industrials (20.0%)
- --------------------------------------------------------------------------------
Briggs & Stratton 230 $ 8
Brink's 360 15
Chicago Bridge & Iron 260 8
Copart* 350 8
Goodrich 190 8
Jarden* 495 20
Joy Global 295 15
L-3 Communications Holdings 100 8
Lafarge North America 170 12
Laidlaw International* 570 14
Precision Castparts 340 18
Ryanair Holdings ADR* 260 12
Trinity Industries 220 9
Walter Industries 280 14
-----
169
-----
Information Technology (15.6%)
- --------------------------------------------------------------------------------
Amphenol, Cl A 220 9
Compuware* 1,420 14
Global Payments 210 16
Harris 320 13
Intersil, Cl A 670 15
Logitech International ADR* 330 13
McAfee* 490 15
MEMC Electronic Materials* 470 11
NAM TAI Electronics 490 12
Scientific-Atlanta 340 13
-----
131
-----
Materials (2.3%)
- --------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold, Cl B 210 10
Louisiana-Pacific 310 9
-----
19
-----
Telecommunication Services (6.2%)
- --------------------------------------------------------------------------------
Alamosa Holdings* 720 12
Leap Wireless International* 470 17
NII Holdings* 270 23
-----
52
-----
Utilities (3.1%)
- --------------------------------------------------------------------------------
MDU Resources Group 360 13
Questar 150 13
-----
26
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $713) 829
================================================================================
Cash Equivalent (1.3%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 11,008 11
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $11) 11
================================================================================
Total Investments (99.8%)
(Cost $724) 840
================================================================================
Constellation Funds 2005 Annual Report 89
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation TIP Mid Cap Fund
September 30, 2005
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (0.2)%
================================================================================
Receivable from Investment Adviser $ 16
Payable for investment securities purchased (4)
Other assets and liabilities, net (10)
- --------------------------------------------------------------------------------
Total Other assets and liabilities 2
================================================================================
Net assets (100%) $ 842
================================================================================
Net assets:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares
(unlimited authorization -- no par value) $ 664
Accumulated net realized gain on investments 62
Net unrealized appreciation on investments 116
- --------------------------------------------------------------------------------
Net assets $ 842
================================================================================
Net asset value, offering and redemption
price per share--Class I Shares
($841,616 / 54,799 shares) $15.36
================================================================================
* Non-income producing security.
ADR - American Depositary Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
90 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation TIP Financial Services Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (99.4%)
- --------------------------------------------------------------------------------
Financials (88.6%)
- --------------------------------------------------------------------------------
Affiliated Managers Group (A)* 4,650 $ 337
American Express 9,280 533
American International Group (A) 16,110 998
Ameritrade Holding* 15,480 332
Bank of America (A) 7,590 320
Bank of Hawaii 6,310 311
CB Richard Ellis Group, Cl A* 6,590 324
Charles Schwab 24,770 357
Chicago Mercantile Exchange Holdings 950 320
Citigroup (A) 18,030 821
City National 4,480 314
Community Bancorp* 8,720 288
East West Bancorp 9,160 312
Euronet Worldwide* 9,530 282
Fidelity Bankshares 9,480 290
Fidelity National Financial 7,140 318
GFI Group* 7,650 315
Global Cash Access* 19,210 271
Greenhill 7,380 308
Heartland Payment Systems* 12,970 309
Host Marriott 17,970 304
Investment Technology Group* 11,200 332
Jackson Hewitt Tax Service 11,390 272
Jefferies Group 7,900 344
Jones Lang LaSalle* 6,110 281
Kilroy Realty (A) 5,790 324
Legg Mason 2,720 298
Lehman Brothers Holdings (A) 2,950 344
Mellon Financial 10,080 322
Merrill Lynch 4,800 294
Morgan Stanley 6,190 334
Net 1 Ueps Technologies* 14,550 326
Northern Trust 6,680 338
Preferred Bank* 6,790 273
Principal Financial Group 6,990 331
Prudential Financial 4,930 333
Selective Insurance Group 6,480 317
Simon Property Group 3,920 291
Sovereign Bancorp (A) 11,920 263
Sunstone Hotel Investors 12,890 314
SVB Financial Group* 6,440 313
T.Rowe Price Group 4,990 326
-------
14,534
-------
Industrials (2.0%)
- --------------------------------------------------------------------------------
GATX (A) 8,140 322
-------
Information Technology (8.8%)
- --------------------------------------------------------------------------------
Alliance Data Systems (A)* 7,530 295
Digital Insight* 10,460 273
Global Payments 4,180 325
Value
Shares (000)
- --------------------------------------------------------------------------------
Jack Henry & Associates 13,290 $ 258
MoneyGram International 13,520 293
-------
1,444
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $14,211) 16,300
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (23.5%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 3,854,180 3,854
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as
Collateral for Loaned Securities
(Cost $3,854) 3,854
================================================================================
Cash Equivalent (0.3%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 43,901 44
- --------------------------------------------------------------------------------
Total Cash Equivalent
(Cost $44) 44
================================================================================
Total Investments (123.2%)
(Cost $18,109) 20,198
================================================================================
Other assets and liabilities (-23.2)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (3,854)
Payable for investment securities purchased (124)
Payable due to Investment Adviser (15)
Payable due to Administrator (2)
Other assets and liabilities, net 190
- --------------------------------------------------------------------------------
Total Other assets and liabilities (3,805)
================================================================================
Net assets (100%) $16,393
================================================================================
- --------------------------------------------------------------------------------
Net assets:
- --------------------------------------------------------------------------------
Portfolio capital of Class I Shares (unlimited
authorization -- no par value) $11,904
Undistributed net investment income 60
Accumulated net realized gain on investments 2,340
Net unrealized appreciation on investments 2,089
- --------------------------------------------------------------------------------
Net assets $16,393
================================================================================
Net asset value, offering and redemption price per
share--Class I Shares
($16,393,168 / 1,068,731 shares) $ 15.34
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $3,745,306.
Cl - Class
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 91
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation TIP Healthcare & Biotechnology Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Common Stock (87.7%)
- --------------------------------------------------------------------------------
Financials (1.3%)
- --------------------------------------------------------------------------------
Ventas 24,130 $ 777
-------
Health Care (86.4%)
- --------------------------------------------------------------------------------
Alcon 6,910 884
Allergan (A) 5,860 537
Amgen* 17,240 1,373
Bausch & Lomb 17,270 1,393
Biosite* 12,830 794
C.R. Bard 32,680 2,158
Caremark Rx* 48,020 2,398
Celgene* 6,520 354
Community Health Systems* 27,560 1,070
Cooper 8,030 615
CV Therapeutics* 14,610 391
Dade Behring Holdings 27,820 1,020
DaVita* 8,300 382
Encysive Pharmaceuticals* 41,740 492
Fisher Scientific International* 26,230 1,628
Forest Laboratories* 13,330 519
Genentech* 17,730 1,493
Gentiva Health Services* 24,530 444
Genzyme* 7,430 532
Gilead Sciences* 26,020 1,269
Henry Schein* 33,012 1,407
Horizon Health* 15,570 423
Immucor* 33,100 908
Intuitive Surgical* 9,150 671
Johnson & Johnson (A) 51,390 3,252
Kos Pharmaceuticals* 6,200 415
LCA-Vision 13,660 507
Medco Health Solutions* 19,320 1,059
Mentor (A) 10,510 578
MGI Pharma* 16,790 391
Momenta Pharmaceuticals* 13,340 364
NitroMed (A)* 11,700 211
Omnicare (A) 38,350 2,156
Pacificare Health Systems* 35,160 2,805
Pfizer 125,740 3,140
Quality Systems 9,840 680
Roche Holdings ADR 19,370 1,351
Sanofi-Aventis ADR 14,860 617
Sepracor (A)* 20,380 1,202
Shire Pharmaceuticals ADR 39,958 1,478
Sierra Health Services* 11,150 768
St. Jude Medical* 37,490 1,755
SuperGen (A)* 60,070 378
United Therapeutics* 22,390 1,563
UnitedHealth Group 9,550 537
Viropharma* 46,740 972
WellCare Health Plans* 26,650 987
Value
Shares (000)
- --------------------------------------------------------------------------------
WellPoint* 17,260 $ 1,309
-------
51,630
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $45,204) 52,407
================================================================================
Short-Term Investment Held as Collateral for Loaned
Securities (12.4%)
- --------------------------------------------------------------------------------
BlackRock Institutional Money Market Trust 7,423,050 7,423
- --------------------------------------------------------------------------------
Total Short-Term Investment Held as Collateral for
Loaned Securities
(Cost $7,423) 7,423
================================================================================
Cash Equivalents (11.7%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 2,956,656 2,957
BlackRock TempCash Fund, Institutional Shares 2,956,656 2,956
PNC Bank Money Market Fund 1,075,258 1,075
- --------------------------------------------------------------------------------
Total Cash Equivalents
(Cost $6,988) 6,988
================================================================================
Total Investments (111.8%)
(Cost $59,615) 66,818
================================================================================
Other assets and liabilities (-11.8)%
- --------------------------------------------------------------------------------
Obligation to return securities lending collateral (7,423)
Payable due to Investment Adviser (56)
Payable due to Shareholder Servicing Agent (12)
Payable for investment securities purchased (10)
Payable due to Administrator (7)
Payable for capital shares redeemed (4)
Payable due to Trustees (1)
Other assets and liabilities, net 437
- --------------------------------------------------------------------------------
Total Other assets and liabilities (7,076)
================================================================================
Net assets (100%) $59,742
================================================================================
Net assets consist of:
- --------------------------------------------------------------------------------
Portfolio capital of Class II Shares (unlimited
authorization -- no par value) $50,852
Accumulated net realized gain on investments 1,687
Net unrealized appreciation on investments 7,203
- --------------------------------------------------------------------------------
Net assets $59,742
================================================================================
Net asset value, offering and redemption price per
share--Class II Shares
($59,742,203 / 3,704,845 shares) $ 16.13
================================================================================
* Non-income producing security.
(A) The security or a portion of this security is on loan at September 30,
2005. (See Note 9 in the Notes to Financial Statements). The total value of
securities on loan at September 30, 2005 was $7,197,046.
ADR - American Depositary Receipt
The accompany notes are an integral part of the financial statements.
92 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation International Equity Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Foreign Common Stock (94.5%)
- --------------------------------------------------------------------------------
Australia (1.0%)
- --------------------------------------------------------------------------------
Amcor 58,306 $ 298
National Australia Bank 13,100 330
Rio Tinto 13,331 601
-------
1,229
-------
Belgium (0.3%)
- --------------------------------------------------------------------------------
Fortis* 12,270 355
-------
Brazil (1.3%)
- --------------------------------------------------------------------------------
Brasil Telecom Participacoes ADR* 12,100 515
Cia Paranaense de Energia ADR* 66,800 516
Petroleo Brasileiro ADR* 5,100 364
Telecomunicacoes Brasileiras ADR* 7,540 244
-------
1,639
-------
Canada (1.4%)
- --------------------------------------------------------------------------------
Alcan 6,370 202
Barrick Gold 15,700 456
Bombardier, Cl B* 79,600 197
Canadian Imperial Bank of Commerce 2,600 162
Quebecor World 21,830 410
Sobeys 7,340 268
Torstar, Cl B 6,980 140
-------
1,835
-------
China (0.6%)
- --------------------------------------------------------------------------------
China Telecom, Cl H 607,900 229
Huadian Power International, Cl H 661,400 183
PetroChina ADR* 3,400 284
-------
696
-------
Denmark (0.4%)
- --------------------------------------------------------------------------------
Carlsberg, Cl B* 3,452 202
Danske Bank 11,487 352
-------
554
-------
Finland (1.1%)
- --------------------------------------------------------------------------------
M-real, Cl B 39,100 212
Metso* 17,900 454
Nokia 21,600 362
Nokia ADR* 8,510 144
UPM-Kymmene 10,611 212
-------
1,384
-------
France (9.6%)
- --------------------------------------------------------------------------------
Accor* 7,478 378
Alcatel* 35,000 466
AXA 23,200 637
BNP Paribas 4,930 375
Carrefour* 19,424 894
Credit Agricole 12,160 357
Eiffage 3,424 320
Value
Shares (000)
- --------------------------------------------------------------------------------
France Telecom* 28,426 $ 816
LVMH Moet Hennessy Louis Vuitton 12,194 1,006
Pinault-Printemps-Redoute* 1,239 130
Sanofi-Aventis* 12,668 1,047
Schneider Electric 2,164 171
Societe Generale* 5,900 673
Technip* 14,400 852
Thomson 22,790 474
Total* 9,818 2,680
Valeo* 8,641 359
Veolia Environnement 15,051 635
-------
12,270
-------
Germany (9.4%)
- --------------------------------------------------------------------------------
Adidas-Salomon* 5,320 924
Allianz* 2,130 287
Bayer* 38,254 1,402
Bayerische Hypo-und Vereinsbank* 19,100 538
Bayerische Motoren Werke* 13,100 615
Deutsche Bank* 10,753 1,006
Deutsche Boerse* 5,400 516
Deutsche Lufthansa* 18,240 242
Deutsche Post* 19,310 452
Deutsche Postbank* 2,300 126
Deutsche Telekom* 38,240 696
E.ON* 3,110 286
Hannover Rueckversicherung* 4,980 172
Heidelberger Druckmaschinen* 4,400 151
Henkel KGaA* 6,100 555
Infineon Technologies* 21,820 214
Medion* 3,710 58
MLP* 22,400 468
Rhoen Klinikum* 15,800 608
Schering* 5,562 352
Siemens* 16,519 1,273
Volkswagen* 17,950 1,105
-------
12,046
-------
Greece (0.2%)
- --------------------------------------------------------------------------------
National Bank of Greece 4,965 199
-------
Guernsey (0.6%)
- --------------------------------------------------------------------------------
Amdocs* 25,000 693
-------
Hong Kong (1.8%)
- --------------------------------------------------------------------------------
Bank of East Asia 97,774 286
Cheung Kong Holdings 47,000 531
Citic Pacific 21,000 59
Denway Motors 1,053,992 384
Hung Hing Printing Group 100,000 63
Sun Hung Kai Properties 36,973 383
Swire Pacific, Cl A 65,887 607
-------
2,313
-------
Constellation Funds 2005 Annual Report 93
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation International Equity Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Hungary (0.2%)
- --------------------------------------------------------------------------------
Magyar Telekom* 500 $ 13
Magyar Telekom ADR* 37,400 193
-------
206
-------
India (0.6%)
- --------------------------------------------------------------------------------
Hindalco Industries GDR* 62,000 205
Infosys Technologies ADR* 2,506 186
Mahanagar Telephone Nigam ADR* 18,700 123
Reliance Industries GDR* 7,600 274
-------
788
-------
Indonesia (0.1%)
- --------------------------------------------------------------------------------
Gudang Garam 166,400 176
-------
Ireland (1.0%)
- --------------------------------------------------------------------------------
Bank of Ireland 32,050 505
Ryanair Holdings ADR* 16,700 760
-------
1,265
-------
Italy (2.5%)
- --------------------------------------------------------------------------------
Banca Intesa* 148,302 691
Banche Popolari Unite 3,430 70
Banco Popolare di Verona e Novara* 7,060 133
Benetton Group* 13,336 143
Enel* 37,554 324
ENI 28,750 854
Finmeccanica 6,219 123
Mediaset 37,553 444
UniCredito Italiano* 81,890 462
-------
3,244
-------
Japan (21.6%)
- --------------------------------------------------------------------------------
77 Bank 38,100 280
Aeon 18,400 370
Alps Electric 7,900 128
Asatsu-DK 7,100 221
Astellas Pharma 5,000 189
Bridgestone 30,000 642
Canon 13,200 713
Credit Saison 8,600 377
Denso 22,200 644
Dentsu 79 224
East Japan Railway 10 57
Fanuc 7,400 599
Fuji Heavy Industries 55,700 252
Fuji Photo Film 8,500 280
Funai Electric 2,950 262
Hitachi Construction Machinery 14,400 275
JS Group 12,100 206
JSR 16,500 343
Kao 11,500 283
KDDI 81 457
Keyence* 800 201
Kuraray 21,500 191
Mabuchi Motor 6,200 306
Value
Shares (000)
- --------------------------------------------------------------------------------
Matsumotokiyoshi 2,800 $ 91
Matsushita Electric Industrial 23,000 390
Millea Holdings* 95 1,523
Minebea* 47,000 194
Miraca Holdings 35,800 823
Mitsubishi Estate 56,000 769
Mitsubishi UFJ Financial Group* 117 1,536
Murata Manufacturing 2,400 134
Nippon Express 99,000 488
Nipponkoa Insurance 178,000 1,372
Nissan Motor 61,500 702
Nitto Denko 3,200 180
NTT Data 145 560
ORIX* 5,748 1,038
Pioneer 20,900 298
Rinnai 10,400 239
Rohm 4,400 382
Secom* 13,500 649
Sega Sammy Holdings* 5,800 229
Sega Sammy Holdings*(A) 5,800 225
Sekisui House 25,000 306
Sharp 23,000 333
Shimamura 2,100 233
Shin-Etsu Chemical 7,978 348
Skylark 14,700 217
Sohgo Security Services* 7,000 103
Sony 18,900 621
Sumitomo Bakelite 19,400 133
Sumitomo Chemical 25,500 157
Sumitomo Mitsui Financial Group 69 650
T&D Holdings* 9,550 569
Takeda Pharmaceutical 1,120 66
Takefuji 11,280 880
TDK 6,500 463
Tokyu 126,000 668
Toyoda Gosei 12,500 238
UFJ NICOS* 155,000 1,312
Yamada Denki 10,500 798
Yamaguchi Bank 19,000 246
-------
27,663
-------
Malaysia (0.2%)
- --------------------------------------------------------------------------------
Sime Darby 112,900 186
Tenaga Nasional 29,800 85
-------
271
-------
Mexico (1.3%)
- --------------------------------------------------------------------------------
Cemex ADR* 2,235 117
Coca-Cola Femsa ADR* 9,490 253
Grupo Televisa ADR* 3,378 242
Telefonos de Mexico ADR* 38,300 815
Wal-Mart de Mexico, Cl V* 41,279 211
-------
1,638
-------
94 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation International Equity Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Netherlands (5.2%)
- --------------------------------------------------------------------------------
ABN AMRO Holding* 12,623 $ 302
Aegon 22,880 340
Akzo Nobel* 21,700 946
DSM* 11,400 448
Fortis Bank Nederland Holdings* 3,125 --
Heineken* 12,365 397
ING Groep 14,382 429
Koninklijke Ahold* 68,900 521
Koninklijke Philips Electronics* 38,540 1,024
Koninklijke Philips Electronics, NY Shares* 5,860 156
Royal Dutch Shell, Cl A* 49,783 1,644
VNU* 6,620 208
Wolters Kluwer* 15,278 284
------
6,699
------
Norway (0.1%)
- --------------------------------------------------------------------------------
Telenor ASA* 18,748 168
------
Portugal (0.6%)
- --------------------------------------------------------------------------------
Banco Comercial Portugues* 102,101 283
Energias de Portugal* 92,690 258
Portugal Telecom SGPS* 28,195 258
------
799
------
Singapore (1.1%)
- --------------------------------------------------------------------------------
DBS Group Holdings* 95,641 893
Flextronics International* 21,200 272
United Overseas Bank* 31,400 262
------
1,427
------
South Africa (0.5%)
- --------------------------------------------------------------------------------
Nampak 72,300 182
Nedbank Group 17,482 254
Sappi 21,300 251
------
687
------
South Korea (4.5%)
- --------------------------------------------------------------------------------
Hyundai Motor 2,840 222
Kookmin Bank* 39,538 2,343
Korea Electric Power 5,300 181
Korea Electric Power ADR* 1,800 32
KT* 19,700 443
NCSoft* 2,310 190
Samsung Electronics 1,780 1,003
Shinsegae 758 281
SK Telecom ADR* 46,770 1,021
------
5,716
------
Spain (2.6%)
- --------------------------------------------------------------------------------
Acerinox 10,775 150
Banco Sabadell* 5,230 134
Endesa* 9,060 242
Inditex* 6,357 187
Value
Shares (000)
- --------------------------------------------------------------------------------
Repsol YPF* 59,321 $1,922
Telefonica* 42,317 693
------
3,328
------
Sweden (0.9%)
- --------------------------------------------------------------------------------
Electrolux, Cl B 19,200 450
Svenska Cellulosa, Cl B* 10,490 367
Trelleborg, Cl B 17,300 289
------
1,106
------
Switzerland (6.6%)
- --------------------------------------------------------------------------------
Ciba Specialty Chemicals* 6,603 390
Clariant 10,190 146
Compagnie Financiere Richemont, Cl A* 3,695 146
Converium Holding* 43,600 440
Credit Suisse Group* 9,900 438
Lonza Group* 11,293 667
Nestle 8,096 2,371
Novartis* 40,379 2,048
Roche Holding* 7,087 985
Swiss Reinsurance* 6,070 399
UBS* 4,900 417
------
8,447
------
Taiwan (1.1%)
- --------------------------------------------------------------------------------
AU Optronics ADR* 29,277 380
Chunghwa Telecom ADR* 20,800 385
Compal Electronics GDR* 51,364 257
Taiwan Semiconductor Manufacturing ADR* 17,673 145
United Microelectronics ADR* 65,014 234
------
1,401
------
Thailand (0.7%)
- --------------------------------------------------------------------------------
Bangkok Bank* 176,500 452
Kasikornbank* 138,200 225
PTT 41,500 247
------
924
------
United Kingdom (15.1%)
- --------------------------------------------------------------------------------
Aegis Group 234,500 579
Anglo American 41,758 1,245
AstraZeneca 29,743 1,382
BAA 24,002 264
BAE Systems 21,640 131
Barclays 35,727 361
BOC Group 2,737 56
Boots Group 32,725 351
BP 73,118 869
BT Group 73,044 286
Capita Group 36,891 245
Carnival 7,456 386
Centrica 81,440 353
Compass Group 78,246 285
Constellation Funds 2005 Annual Report 95
Financial Statements
- --------------------------------------------------------------------------------
Statement of Net Assets
Constellation International Equity Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Diageo 149,308 $ 2,146
GKN 62,351 324
GlaxoSmithKline 57,926 1,473
HBOS 32,300 486
HSBC Holdings 20,931 339
Imperial Tobacco Group 13,770 395
International Power 196,739 862
Invensys* 1,168,700 299
J. Sainsbury 37,798 186
Kingfisher 223,124 850
Lloyds TSB Group 64,200 529
Marks & Spencer Group 35,991 238
Michael Page International 96,200 417
Old Mutual 85,600 210
Pearson 41,000 477
Rexam 15,282 139
Royal & Sun Alliance Insurance Group 282,600 483
Royal Bank of Scotland Group 20,946 594
Smith & Nephew 50,947 428
Telewest Global* 11,500 264
Unilever 37,000 386
Vodafone Group 390,414 1,016
--------
19,334
--------
United States (0.3%)
- --------------------------------------------------------------------------------
NTL* 5,200 347
- --------------------------------------------------------------------------------
Total Foreign Common Stock
(Cost $96,627) 120,847
================================================================================
Cash Equivalents (5.6%)
- --------------------------------------------------------------------------------
BlackRock TempCash Fund, Institutional Shares 988,385 988
BlackRock TempFund, Institutional Shares 970,790 971
PNC Bank Money Market Fund 5,199,614 5,199
- --------------------------------------------------------------------------------
Total Cash Equivalents
(Cost $7,158) 7,158
================================================================================
Total Investments (100.1%)
(Cost $103,785) 128,005
================================================================================
Value
(000)
- --------------------------------------------------------------------------------
Other assets and liabilities (-0.1)%
- --------------------------------------------------------------------------------
Payable for investment securities purchased $ (1,014)
Payable for capital shares redeemed (112)
Payable due to Investment Adviser (56)
Payable due to Shareholder Servicing Agent (26)
Payable due to Administrator (15)
Payable due to Trustees (2)
Other assets and liabilities 1,149
- --------------------------------------------------------------------------------
Total Other assets and liabilities (76)
================================================================================
Net assets (100%) $127,929
================================================================================
- --------------------------------------------------------------------------------
Net assets consist of:
================================================================================
Portfolio capital of Class II Shares
(unlimited authorization -- no par value) $128,286
Undistributed net investment income 633
Accumulated net realized loss on investments (25,209)
Net unrealized appreciation on investments 24,220
Net unrealized depreciation on foreign currency and translation of
other assets and liabilities in foreign currency (1)
- --------------------------------------------------------------------------------
Net assets $127,929
================================================================================
Net asset value, offering and redemption price
per share--Class II Shares
($127,928,943 / 14,625,579 shares) $ 8.75
================================================================================
As of September 30, 2005, the Constellation International Equity Fund had the
following foreign currency contract outstanding:
Settlement Currency to Currency to Contract Unrealized
Date Deliver Receive Value Depreciation
- ---------- ----------- ----------- -------- ------------
10/3/05 USD (23,371) JPY 20,750 $23,272 $(1,254)
-------
Currency Legend
JPY - Japanese Yen
USD - U.S. Dollar
* Non-income producing security.
(A) When-Issued Security
ADR - American Depositary Receipt
Cl - Class
GDR - Global Depositary Receipts
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
96 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
Schedule of Investments
Constellation Strategic Value and High Income Fund
September 30, 2005
Value
Shares (000)
- --------------------------------------------------------------------------------
Affiliated Equity Fund (60.9%)
- --------------------------------------------------------------------------------
Constellation TIP Small Cap Value Opportunities Fund,
Class II Shares 26,780 $491
- --------------------------------------------------------------------------------
Total Affiliated Equity Fund
(Cost $358) 491
================================================================================
Affiliated Fixed Income Funds (40.2%)
- --------------------------------------------------------------------------------
Constellation Chartwell High Yield Fund, Class I Shares 32,504 161
Constellation Chartwell Ultra Short
Duration Fixed Income Fund, Class I Shares 16,131 163
- --------------------------------------------------------------------------------
Total Affiliated Fixed Income Funds
(Cost $320) 324
================================================================================
Total Investments (101.1%)
(Cost $678) $815
================================================================================
Percentages are based on net assets of $806,304.
The accompanying notes are an integral part of the financial statements.
Constellation Funds 2005 Annual Report 97
Financial Statements
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (000)
Constellation
Constellation Constellation Strategic Value
Clover Core Clover Income and High
Value Fund Plus Fund Income Fund
-----------------------------------------------
9/30/05 9/30/05 9/30/05
- -------------------------------------------------------------------------------------------------------------------
Assets:
===================================================================================================================
Investment securities at cost $ 164,699 $ 4,592 $ 678
- -------------------------------------------------------------------------------------------------------------------
Investment securities at value(1) $ 184,919 $ 4,748 $ 815
Cash(2) -- 1,388 --
Receivable for capital shares sold 15,271 242
Receivable for investment securities sold 1,581 -- 168
Receivable for dividend and interest income 141 11 1
Receivable due from Investment Adviser -- 2 3
- -------------------------------------------------------------------------------------------------------------------
Total assets 201,912 6,391 987
===================================================================================================================
Liabilities:
Obligation to return securities lending collateral 26,967 -- --
Payable for securities sold short at value (proceeds ($1,349)) -- 1,407 --
Payable for investment securities purchased 3,488 28 --
Payable due to Investment Adviser 103 -- --
Payable for capital shares redeemed 50 -- 168
Payable due to Administrator 18 1 --
Payable due to Trustees 2 -- --
Payable due to Shareholder Servicing Agent -- 1 --
Accrued expenses 33 13 13
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 30,661 1,450 181
- -------------------------------------------------------------------------------------------------------------------
Net assets $ 171,251 $ 4,941 $ 806
===================================================================================================================
Net assets consist of:
Portfolio capital $ 140,052 $ 4,904 $ 665
Distributions in excess of net investment income (1) -- --
Accumulated net realized gain (loss) on investments
and securities sold short 10,980 (61) 4
Net unrealized appreciation on investments
and securities sold short 20,220 98 137
- -------------------------------------------------------------------------------------------------------------------
Net assets $ 171,251 $ 4,941 $ 806
===================================================================================================================
Outstanding shares of beneficial interest:(3)
Class I Shares(4) 9,011,315 n/a 56,752
Class II Shares(4) n/a 490,068 n/a
===================================================================================================================
Net asset value, offering and redemption
price per share:
Class I Shares $ 19.00 n/a $ 14.21
Class II Shares n/a $ 10.08 n/a
===================================================================================================================
- ----------
(1) Includes short-term investment held as collateral for loaned securities of
$26,966,850, $0 and $0, respectively.
(2) Cash in the Constellation Clover Income Plus Fund is held as collateral for
securities sold short.
(3) Unlimited authorization -- no par value.
(4) Shares have not been rounded.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
98 Constellation Funds 2005 Annual Report
Financial Statements
- --------------------------------------------------------------------------------
This Page Intentionally Left Blank
Constellation Funds 2005 Annual Report 99
Financial Statements
- --------------------------------------------------------------------------------
Statements of Operations (000)
Constellation
Constellation Constellation Clover Core
Clover Core Clover Small Fixed Income
Value Fund Cap Value Fund Fund
----------------------------------------------
year ended year ended year ended
9/30/05 9/30/05 9/30/05
- ------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 1,335 $ 3,668 $ 16
Interest -- -- 1,370
Securities lending 11 241 1
Foreign taxes withheld (13) -- --
- ------------------------------------------------------------------------------------------------
Total Investment income 1,333 3,909 1,387
- ------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 754 4,176 133
Administrator fees 143 760 43
Trustees' fees 6 33 2
Shareholder servicing fees(3) -- -- --
Distribution fees Investor A Shares(4) -- -- --
Distribution fees Investor B Shares(4) -- -- --
Transfer agent fees 99 901 43
Professional fees 34 106 12
Custodian fees 20 108 5
Registration fees 16 146 8
Printing fees 14 59 3
Dividends on securities sold short -- -- --
Insurance and other fees 12 81 3
- ------------------------------------------------------------------------------------------------
Total expenses 1,098 6,370 252
- ------------------------------------------------------------------------------------------------
Less:
Investment advisory fees waived -- -- (17)
Reimbursement from adviser -- -- --
- ------------------------------------------------------------------------------------------------
Net expenses 1,098 6,370 235
- ------------------------------------------------------------------------------------------------
Net investment income (loss) 235 (2,461) 1,152
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment
securities sold and securities sold short 12,077 71,862 664
Net change in unrealized appreciation
(depreciation) of investment securities
and securities sold short 9,515 8,593 (1,101)
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and securities sold short 21,592 80,455 (437)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $21,827 $77,994 $ 715
================================================================================================
- ----------
(1) Commencement of operations.
(2) On November 8, 2004 the Constellation Funds acquired the assets and
liabilities of the Hilliard Lyons Growth Fund, Inc. in a tax-free
reorganization. See Note 10 in Notes to Financial Statements for additional
information. Effective January 1, 2005, the Fund changed its fiscal year
end from December 31 to September 30.
(3) Attributable to Class II Shares only.
(4) On November 8, 2004 Investor A Shares were converted into Class II Shares.
Subsequently, Investor B Shares were fully liquidated and exchanged for
Class II Shares. 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.
100 Constellation Funds 2005 Annual Report
Constellation
Chartwell Ultra Constellation
Constellation Short Duration Chartwell Short Constellation
Clover Income Fixed Income Duration Fixed Chartwell High Constellation HLAM Large
Plus Fund Fund Income Fund Yield Fund Cap Quality Stock Fund(2)
----------------------------------------------------------------------------------------
2/28/05(1) thru year ended year ended year ended 1/1/05 thru year ended
9/30/05 9/30/05 9/30/05 9/30/05 9/30/05 12/31/04
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 80 $ 3 $ 1 $ 6 $ 154 $ 432
Interest -- 12,377 5,298 525 -- 3
Securities lending -- 2 14 6 2 --
Foreign taxes withheld -- -- -- -- (2) (5)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment income 80 12,382 5,313 537 154 430
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 17 881 350 37 99 267
Administrator fees 3 518 206 10 19 5
Trustees' fees -- 23 9 1 -- 24
Shareholder servicing fees(3) 6 6 14 -- 33 8
Distribution fees Investor A Shares(4) -- -- -- -- -- 65
Distribution fees Investor B Shares(4) -- -- -- -- -- 40
Transfer agent fees 16 486 212 28 44 80
Professional fees 9 78 39 11 13 123
Custodian fees 5 42 21 11 7 47
Registration fees -- 94 45 2 2 19
Printing fees -- 35 13 1 -- 43
Dividends on securities sold short 3 -- -- -- -- --
Insurance and other fees -- 38 24 -- -- 1
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 59 2,201 933 101 217 722
- ----------------------------------------------------------------------------------------------------------------------------------
Less:
Investment advisory fees waived (17) (127) (75) (37) (53) (257)
Reimbursement from adviser (11) -- -- (16) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 31 2,074 858 48 164 465
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 49 10,308 4,455 489 (10) (35)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from
investment securities sold and
securities sold short (59) 171 (180) 85 3,698 6,721
Net change in unrealized appreciation
(depreciation) of investment
securities and securities sold short 98 (1,071) (1,390) (281) (4,183) (5,981)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
securities sold short 39 (900) (1,570) (196) (485) 740
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 88 $ 9,408 $ 2,885 $ 293 $ (495) $ 705
==================================================================================================================================
Constellation Funds 2005 Annual Report 101
Financial Statements
- --------------------------------------------------------------------------------
Statements of Operations (000)
Constellation Constellation Constellation
Pitcairn Diversified Pitcairn Select Pitcairn Diversified
Value Fund Value Fund Growth Fund
--------------------------------------------------------------
year ended year ended year ended
9/30/05 9/30/05 9/30/05
- -----------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 3,446 $ 1,133 $ 1,759
Interest -- -- --
Securities lending 18 8 14
Foreign taxes withheld -- -- --
- -----------------------------------------------------------------------------------------------------------
Total Investment income 3,464 1,141 1,773
- -----------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 1,124 446 788
Administrator fees 239 95 165
Trustees' fees 10 4 7
Shareholder servicing fees(1) 406 161 281
Transfer agent fees 44 31 37
Professional fees 52 26 36
Custodian fees 19 9 15
Registration fees 30 11 21
Printing fees 24 10 17
Insurance and other fees 24 9 17
- -----------------------------------------------------------------------------------------------------------
Total expenses 1,972 802 1,384
- -----------------------------------------------------------------------------------------------------------
Less:
Investment advisory fees waived (199) (66) (146)
- -----------------------------------------------------------------------------------------------------------
Net expenses 1,773 736 1,238
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) 1,691 405 535
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) from
investment securities sold 13,595 6,622 147
Net change in unrealized appreciation
(depreciation) of investment
securities 5,032 (1,620) 8,563
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 18,627 5,002 8,710
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $20,318 $ 5,407 $ 9,245
===========================================================================================================
- ----------
(1) 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 2005 Annual Report
Constellation Constellation Constellation Constellation TIP
Constellation Pitcairn Family Constellation Pitcairn Sands Capital Small Cap Value
Pitcairn Small Heritage(R) Pitcairn Taxable Tax-Exempt Select Growth Opportunities
Cap Fund Fund Bond Fund Bond Fund Fund Fund
----------------------------------------------------------------------------------------------
year ended year ended year ended year ended year ended year ended
9/30/05 9/30/05 9/30/05 9/30/05 9/30/05 9/30/05
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 743 $1,462 $ 18 $ -- $ 792 $ 514
Interest -- -- 2,362 5,184 -- --
Securities lending 58 11 2 -- 24 5
Foreign taxes withheld (1) -- -- -- (10) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment income 800 1,473 2,382 5,184 806 519
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 666 732 190 340 1,355 284
Administrator fees 142 121 71 170 231 43
Trustees' fees 6 5 3 7 9 2
Shareholder servicing fees(1) 241 205 121 288 251 74
Transfer agent fees 42 42 29 37 113 115
Professional fees 32 31 21 37 66 20
Custodian fees 15 10 7 15 38 54
Registration fees 19 15 10 22 16 5
Printing fees 14 12 7 17 28 5
Insurance and other fees 14 12 6 17 12 3
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,191 1,185 465 950 2,119 605
- -----------------------------------------------------------------------------------------------------------------------------------
Less:
Investment advisory fees waived (130) (125) (34) (149) (120) (172)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,061 1,060 431 801 1,999 433
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (261) 413 1,951 4,383 (1,193) 86
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from
investment securities sold 12,671 4,188 (111) 1,242 (3,399) 1,491
Net change in unrealized
appreciation (depreciation)
of investment securities (4,457) 645 (1,116) (2,509) 24,744 3,583
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 8,214 4,833 (1,227) (1,267) 21,345 5,074
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 7,953 $5,246 $ 724 $ 3,116 $20,152 $5,160
===================================================================================================================================
Constellation Funds 2005 Annual Report 103
Financial Statements
- --------------------------------------------------------------------------------
Statements of Operations (000)
Constellation
TIP Financial
Constellation TIP Mid Cap Fund(1) Services Fund
-------------------------------------------------
1/01/05 thru year ended year ended
9/30/05 12/31/04 9/30/05
- ------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 5 $ 5 $ 308
Interest -- -- --
Securities lending -- -- 1
Foreign taxes withheld -- -- --
- ------------------------------------------------------------------------------------------------------
Total Investment income 5 5 309
- ------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 4 3 188
Administrator fees 1 -- 24
Trustees' fees -- -- 1
Shareholder servicing fees(2) -- -- --
Transfer agent fees 14 -- 33
Professional fees 19 -- 13
Custodian fees 3 -- 5
Registration fees -- -- 4
Printing fees -- -- 2
Insurance and other fees -- -- 2
- ------------------------------------------------------------------------------------------------------
Total expenses 41 3 272
- ------------------------------------------------------------------------------------------------------
Less:
Investment advisory fees waived (4) -- (20)
Reimbursement from adviser (32) -- --
- ------------------------------------------------------------------------------------------------------
Net expenses 5 3 252
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) -- 2 57
- ------------------------------------------------------------------------------------------------------
Net realized gain from securities sold 62 63 2,456
Net realized loss from foreign currency
transactions -- -- --
Net change in unrealized appreciation of
investment securities 56 8 141
Net change in unrealized depreciation on
translation of foreign currency and
other assets and liabilities
denominated in foreign currency -- -- --
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 118 71 2,597
- ------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $118 $73 $2,654
======================================================================================================
- ----------
* 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 April 15, 2005 the Constellation Funds acquired the assets and
liabilities of the Constellation Institutional Portfolios TIP Midcap Core
Portfolio in a tax-free reorganization. See Note 10 in Notes to Financial
Statements for additional information. Effective January 1, 2005, the Fund
changed its fiscal year end from December 31 to September 30.
(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 2005 Annual Report
Constellation Constellation
TIP Healthcare Constellation Strategic Value
& Biotechnology International and High
Fund Equity Fund Income Fund
-------------------------------------------------
year ended year ended year ended
9/30/05 9/30/05 9/30/05
- ------------------------------------------------------------------------------------------------------
Investment Income:
Dividend $ 220 $ 2,952 $ 51*
Interest -- 48 --
Securities lending 9 -- --
Foreign taxes withheld -- (348) --
- ------------------------------------------------------------------------------------------------------
Total Investment income 229 2,652 51
- ------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 490 1,117 1
Administrator fees 63 174 1
Trustees' fees 3 7 --
Shareholder servicing fees(2) 107 296 --
Transfer agent fees 93 37 29
Professional fees 21 39 10
Custodian fees 11 227 --
Registration fees 7 12 --
Printing fees 6 9 --
Insurance and other fees 5 31 --
- ------------------------------------------------------------------------------------------------------
Total expenses 806 1,949 41
- ------------------------------------------------------------------------------------------------------
Less:
Investment advisory fees waived -- (240) (1)
Reimbursement from adviser -- -- (39)
- ------------------------------------------------------------------------------------------------------
Net expenses 806 1,709 1
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) (577) 943 50
- ------------------------------------------------------------------------------------------------------
Net realized gain from securities sold 2,459 13,833 4*
Net realized loss from foreign currency
transactions -- (213) --
Net change in unrealized appreciation of
investment securities 6,019 10,818 51*
Net change in unrealized depreciation on
translation of foreign currency and
other assets and liabilities
denominated in foreign currency -- (28) --
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 8,478 24,410 55
- ------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $7,901 $25,353 $105
======================================================================================================
Constellation Funds 2005 Annual Report 105
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation Clover Constellation Clover
Core Value Fund Small Cap Value Fund
-------------------------------------------------
year ended year ended year ended year ended
9/30/05 9/30/04(1) 9/30/05 9/30/04(1)
- ----------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 235 $ 220 $ (2,461) $ (423)
Net realized gain (loss) from securities sold
and securities sold short 12,077 4,878 71,862 54,685
Net change in unrealized appreciation (depreciation)
of investments and securities sold short 9,515 4,420 8,593 40,856
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 21,827 9,518 77,994 95,118
- ----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares (247) (213) -- (652)
Class II Shares -- -- -- --
Realized capital gains
Class I Shares (5,134) (1,697) -- --
- ----------------------------------------------------------------------------------------------------------------
Total dividends and distributions (5,381) (1,910) -- (652)
- ----------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 124,720 23,355 90,562 230,219
Proceeds from shares issued in lieu of cash distributions 5,275 1,838 -- 593
Cost of shares redeemed (34,904) (19,760) (258,823) (179,946)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Class I Shares transactions 95,091 5,433 (168,261) 50,866
- ----------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued -- -- -- --
Proceeds from shares issued in lieu of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets from Class II Shares transactions -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions 95,091 5,433 (168,261) 50,866
- ----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 111,537 13,041 (90,267) 145,332
- ----------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 59,714 46,673 540,278 394,946
- ----------------------------------------------------------------------------------------------------------------
End of period $171,251 $ 59,714 $ 450,011 $540,278
================================================================================================================
Undistributed net investment income (distributions in excess
of net investment income) $ (1) $ 6 $ 46 $ 46
================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued 7,026 1,446 3,505 10,042
Issued in lieu of cash distributions 307 120 -- 26
Redeemed (1,939) (1,240) (9,957) (7,868)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares 5,394 326 (6,452) 2,200
================================================================================================================
Class II Shares
Issued -- -- -- --
Issued in lieu of cash distributions -- -- -- --
Redeemed -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net increase in Class II Shares -- -- -- --
================================================================================================================
Net increase (decrease) in share transactions 5,394 326 (6,452) 2,200
================================================================================================================
- ----------
(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 10 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.
106 Constellation Funds 2005 Annual Report
Constellation Clover Constellation Clover
Core Fixed Income Fund Income Plus Fund
----------------------------------------------
year ended year ended 2/28/05(2) thru
9/30/05 9/30/04(1) 9/30/05
- -------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 1,152 $ 1,441 $ 49
Net realized gain (loss) from securities sold
and securities sold short 664 859 (59)
Net change in unrealized appreciation (depreciation)
of investments and securities sold short (1,101) (1,401) 98
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 715 899 88
- -------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares (1,211) (1,530) --
Class II Shares -- -- (51)
Realized capital gains
Class I Shares (395) -- --
- -------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1,606) (1,530) (51)
- -------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 10,191 12,793 --
Proceeds from shares issued in lieu of cash distributions 1,529 1,389 --
Cost of shares redeemed (16,997) (24,608) --
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Class I Shares transactions (5,277) (10,426) --
- -------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued -- -- 5,624
Proceeds from shares issued in lieu of cash distributions -- -- 50
Cost of shares redeemed -- -- (770)
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets from Class II Shares transactions -- -- 4,904
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions (5,277) (10,426) 4,904
- -------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (6,168) (11,057) 4,941
- -------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 32,334 43,391 --
- -------------------------------------------------------------------------------------------------------------
End of period $ 26,166 $ 32,334 $4,941
=============================================================================================================
Undistributed net investment income (distributions in excess
of net investment income) $ -- $ -- $ --
=============================================================================================================
Shares issued and redeemed:
Class I Shares
Issued 1,014 1,247 --
Issued in lieu of cash distributions 152 136 --
Redeemed (1,682) (2,407) --
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares (516) (1,024) --
=============================================================================================================
Class II Shares
Issued -- -- 563
Issued in lieu of cash distributions -- -- 5
Redeemed -- -- (78)
- -------------------------------------------------------------------------------------------------------------
Net increase in Class II Shares -- -- 490
=============================================================================================================
Net increase (decrease) in share transactions (516) (1,024) 490
=============================================================================================================
Constellation Funds 2005 Annual Report 107
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation Chartwell
Ultra Short Duration
Fixed Income Fund
------------------------
year ended year ended
9/30/05 9/30/04(1)
- --------------------------------------------------------------------------------------------
Investment activities:
Net investment income $ 10,308 $ 8,655
Net realized gain (loss) from securities sold 171 (90)
Net change in unrealized depreciation of investments (1,071) (1,750)
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,408 6,815
- --------------------------------------------------------------------------------------------
Dividends to shareholders:
Net investment income
Class I Shares (10,513) (8,654)
Class II Shares (63) (125)
- --------------------------------------------------------------------------------------------
Total dividends (10,576) (8,779)
- --------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 110,726 169,703
Proceeds from shares issued in lieu of cash distributions 10,207 8,365
Proceeds from shares issued in connection with conversion
into Class I Shares(2) 7,625 --
Cost of shares redeemed (214,111) (246,769)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class I
Shares transactions (85,553) (68,701)
- --------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 1,265 6,182
Proceeds from shares issued in lieu of cash distributions 40 101
Cost of shares redeemed in connection with conversion into
Class I Shares(2) (7,625) --
Cost of shares redeemed (2,566) (3,320)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares
transactions (8,886) 2,963
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital
share transactions (94,439) (65,738)
- --------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (95,607) (67,702)
- --------------------------------------------------------------------------------------------
Net assets:
Beginning of year 400,829 468,531
- --------------------------------------------------------------------------------------------
End of year $305,222 $ 400,829
============================================================================================
Undistributed net investment income (distributions in excess of
net investment income) $ 1 $ (2)
============================================================================================
Shares issued and redeemed:
Class I Shares
Issued 10,957 16,728
Issued in lieu of cash distributions 1,010 825
Issued in connection with conversion into Class I Shares(2) 755 --
Redeemed (21,188) (24,310)
- --------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares (8,466) (6,757)
============================================================================================
Class II Shares
Issued 124 607
Issued in lieu of cash distributions 4 10
Redeemed in connection with conversion into Class I Shares(2) (752) --
Redeemed (252) (325)
- --------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares (876) 292
============================================================================================
Net increase (decrease) in share transactions (9,342) (6,465)
============================================================================================
- ----------
(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 10 in Notes to Financial Statements for
additional information.
(2) On January 28, 2005, Class II Shares merged into Class I Shares. 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.
108 Constellation Funds 2005 Annual Report
Constellation Chartwell
Short Duration Constellation Chartwell
Fixed Income Fund High Yield Fund
-------------------------- -----------------------
year ended year ended year ended year ended
9/30/05 9/30/04(1) 9/30/05 9/30/04(1)
- ---------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income $ 4,455 $ 5,188 $ 489 $ 754
Net realized gain (loss) from securities sold (180) 489 85 650
Net change in unrealized depreciation of investments (1,390) (2,013) (281) (479)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,885 3,664 293 925
- ---------------------------------------------------------------------------------------------------------------------
Dividends to shareholders:
Net investment income
Class I Shares (5,053) (5,741) (489) (753)
Class II Shares (195) (69) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends (5,248) (5,810) (489) (753)
- ---------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 9,316 30,025 7,676 10,285
Proceeds from shares issued in lieu of cash distributions 4,885 5,666 103 171
Proceeds from shares issued in connection with conversion
into Class I Shares(2) 25,880 -- -- --
Cost of shares redeemed (97,355) (114,133) (11,391) (9,865)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class I
Shares transactions (57,274) (78,442) (3,612) 591
- ---------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 24,452 5,502 -- --
Proceeds from shares issued in lieu of cash distributions 119 66 -- --
Cost of shares redeemed in connection with conversion into
Class I Shares(2) (25,880) -- -- --
Cost of shares redeemed (1,337) (4,882) --
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class II Shares
transactions (2,646) 686 -- --
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital
share transactions (59,920) (77,756) (3,612) 591
- ---------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (62,283) (79,902) (3,808) 763
- ---------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of year 175,116 255,018 10,171 9,408
- ---------------------------------------------------------------------------------------------------------------------
End of year $112,833 $ 175,116 $ 6,363 $10,171
===========================================================================================-=========================
Undistributed net investment income (distributions in excess of
net investment income) $ (4) $ (1) $ 2 $ 2
=====================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued 934 2,975 1,491 2,010
Issued in lieu of cash distributions 490 562 20 33
Issued in connection with conversion into Class I Shares(2) 2,606 -- -- --
Redeemed (9,747) (11,321) (2,211) (1,930)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares (5,717) (7,784) (700) 113
=====================================================================================================================
Class II Shares
Issued 2,445 547 -- --
Issued in lieu of cash distributions 12 6 -- --
Redeemed in connection with conversion into Class I Shares(2) (2,613) -- -- --
Redeemed (134) (485) -- --
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares (290) 68 -- --
=====================================================================================================================
Net increase (decrease) in share transactions (6,007) (7,716) (700) 113
=====================================================================================================================
Constellation Funds 2005 Annual Report 109
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation HLAM
Large Cap Quality Stock Fund
----------------------------------------
1/1/05 thru year ended year ended
9/30/05 12/31/04(1) 12/31/03
- --------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ (10) $ (35) $ (155)
Net realized gain (loss) from securities sold 3,698 6,721 4,623
Net change in unrealized appreciation
(depreciation) of investments (4,183) (5,981) 2,747
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (495) 705 7,215
- --------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares -- -- --
Realized capital gains
Class II Shares/Investor A Shares (956) (3,543) (4,992)
Investor B Shares -- -- (873)
- --------------------------------------------------------------------------------------------
Total dividends and distributions (956) (3,543) (5,865)
- --------------------------------------------------------------------------------------------
Capital share transactions:
Class II Shares/Investor A Shares
Proceeds from shares issued 971 1,180 1,345
Proceeds from shares issued in lieu of cash
distributions 916 3,377 4,897
Proceeds from shares issued in connection
with conversion into Class II Shares(3) -- 3,415 --
Cost of shares redeemed (5,255) (20,003) (6,591)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Class II Shares/Investor A Shares transactions (3,368) (12,031) (349)
- --------------------------------------------------------------------------------------------
Investor B Shares
Proceeds from shares issued -- 60 150
Proceeds from shares issued in lieu of cash
distributions -- -- 857
Proceeds from shares issued in connection with
conversion into Class II Shares(3) -- (3,415) --
Cost of shares redeemed -- (2,463) (2,152)
- --------------------------------------------------------------------------------------------
Net decrease in net assets from Investor B Shares
transactions -- (5,818) (1,145)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions (3,368) (17,849) (1,494)
- --------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (4,819) (20,687) (144)
- --------------------------------------------------------------------------------------------
Net assets:
Beginning of period 20,959 41,646 41,790
- --------------------------------------------------------------------------------------------
End of period $16,140 $ 20,959 $41,646
============================================================================================
Undistributed net investment income $ -- $ -- $ --
============================================================================================
Shares issued and redeemed:
Class II Shares/Investor A Shares
Issued 45 46 55
Issued in lieu of cash distributions 46 156 202
Issued in connection with conversion into
Class II Shares(3) -- 137 --
Redeemed (252) (816) (265)
- --------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares/Investor A
Shares (161) (477) (8)
============================================================================================
Investor B Shares
Issued -- 3 6
Issued in lieu of cash distributions -- -- 37
Issued in connection with conversion into
Class I Shares(3) -- (144) --
Redeemed -- (106) (89)
- --------------------------------------------------------------------------------------------
Decrease in Investor B Shares -- (247) (46)
============================================================================================
Net increase (decrease) in share transactions (161) (724) (54)
============================================================================================
- ----------
(1) On November 8, 2004 the Constellation Funds acquired the assets and
liabilities of the Hilliard Lyons Growth Fund, Inc. in a tax-free
reorganization. See Note 10 in Notes to Financial Statements for additional
information. Effective January 1, 2005, the Fund changed its fiscal year
end from December 31 to September 30.
(2) 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 10 in Notes to Financial Statements for
additional information.
(3) On November 8, 2004 Investor A Shares were converted into Class II Shares.
Subsequently, Investor B Shares were fully liquidated and exchanged for
Class II Shares. See Note 10 in Notes to Financial Statements for
additional information.
110 Constellation Funds 2005 Annual Report
Constellation Pitcairn Constellation
Diversified Value Fund Pitcairn Select Value Fund
-------------------------------------------------------------------------------
year ended 11/1/03 thru year ended year ended 11/1/03 thru year ended
9/30/05 9/30/04(2) 10/31/03 9/30/05 9/30/04(2) 10/31/03
- ----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 1,691 $ 1,436 $ 1,659 $ 405 $ 463 $ 422
Net realized gain (loss) from securities sold 13,595 7,037 (4,189) 6,622 5,939 (1,877)
Net change in unrealized appreciation
(depreciation) of investments 5,032 6,166 29,045 (1,620) (2,360) 13,361
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 20,318 14,639 26,515 5,407 4,042 11,906
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares (1,707) (1,559) (1,782) (407) (492) (509)
Realized capital gains
Class II Shares/Investor A Shares -- -- -- (884) (902) --
Investor B Shares -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1,707) (1,559) (1,782) (1,291) (1,394) (509)
- ----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class II Shares/Investor A Shares
Proceeds from shares issued 6,497 7,361 6,443 3,929 5,616 6,080
Proceeds from shares issued in lieu of cash
distributions 113 134 168 486 529 90
Proceeds from shares issued in connection
with conversion into Class II Shares(3) -- -- -- -- -- --
Cost of shares redeemed (8,881) (12,014) (10,094) (4,948) (5,109) (7,889)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Class II Shares/Investor A Shares transactions (2,271) (4,519) (3,483) (533) 1,036 (1,719)
- ----------------------------------------------------------------------------------------------------------------------------------
Investor B Shares
Proceeds from shares issued -- -- -- -- -- --
Proceeds from shares issued in lieu of cash
distributions -- -- -- -- -- --
Proceeds from shares issued in connection with
conversion into Class II Shares(3) -- -- -- -- -- --
Cost of shares redeemed -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Investor B Shares
transactions -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions (2,271) (4,519) (3,483) (533) 1,036 (1,719)
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 16,340 8,561 21,250 3,583 3,684 9,678
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 152,202 143,641 122,391 61,817 58,133 48,455
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $168,542 $152,202 $143,641 $65,400 $61,817 $58,133
==========================================================================================-=======================================
Undistributed net investment income $ -- $ -- $ 154 $ -- $ -- $ 29
==========================================================================================-=======================================
Shares issued and redeemed:
Class II Shares/Investor A Shares
Issued 537 679 720 348 519 685
Issued in lieu of cash distributions 9 12 19 42 50 10
Issued in connection with conversion into
Class II Shares(3) -- -- -- -- -- --
Redeemed (735) (1,117) (1,148) (440) (478) (895)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares/Investor A
Shares (189) (426) (409) (50) 91 (200)
==================================================================================================================================
Investor B Shares
Issued -- -- -- -- -- --
Issued in lieu of cash distributions -- -- -- -- -- --
Issued in connection with conversion into
Class I Shares(3) -- -- -- -- -- --
Redeemed -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in Investor B Shares -- -- -- -- -- --
==================================================================================================================================
Net increase (decrease) in share transactions (189) (426) (409) (50) 91 (200)
==================================================================================================================================
- ----------
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 2005 Annual Report 111
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation Pitcairn
Diversified Growth Fund
----------------------------------------
year ended 11/1/03 thru year ended
9/30/05 9/30/04(1) 10/31/03
- --------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 535 $ -- $ 44
Net realized gain (loss) from securities sold 147 644 (11,325)
Net change in unrealized appreciation
(depreciation) of investments 8,563 1,228 26,682
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 9,245 1,872 15,401
- --------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares (536) (46) --
Realized capital gains
Class II Shares -- -- --
Return of capital
Class II Shares -- -- --
- --------------------------------------------------------------------------------------------
Total dividends and distributions (536) (46) --
- --------------------------------------------------------------------------------------------
Capital share transactions:
Class II Shares
Proceeds from shares issued 13,521 13,230 17,450
Proceeds from shares issued in lieu of cash
distributions 58 5 --
Proceeds from shares issued in connection with
Fund Reorganization(2) -- -- --
Cost of shares redeemed (10,256) (6,257) (19,495)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
II Shares transactions 3,323 6,978 (2,045)
- --------------------------------------------------------------------------------------------
Total increase in net assets 12,032 8,804 13,356
- --------------------------------------------------------------------------------------------
Net assets:
Beginning of period 104,528 95,724 82,368
- --------------------------------------------------------------------------------------------
End of period $116,560 $104,528 $ 95,724
============================================================================================
Undistributed net investment income $ -- $ -- $ 44
============================================================================================
Shares issued and redeemed:
Class II Shares
Issued 2,375 2,434 3,773
Issued in lieu of cash distributions 10 1 --
Issued in connection with Fund
Reorganization(2) -- -- --
Redeemed (1,798) (1,168) (4,232)
- --------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares 587 1,267 (459)
============================================================================================
- ----------
(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 10 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 2005 Annual Report
Constellation Pitcairn Constellation Pitcairn
Small Cap Fund Family Heritage(R) Fund
-------------------------------------------------------------------------------
year ended 11/1/03 thru year ended year ended 11/1/03 thru year ended
9/30/05 9/30/04(1) 10/31/03 9/30/05 9/30/04(1) 10/31/03
- ----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ (261) $ (216) $ (94) $ 413 $ 4 $ 39
Net realized gain (loss) from securities sold 12,671 13,756 11,111 4,188 (6,033) (4,941)
Net change in unrealized appreciation
(depreciation) of investments (4,457) (4,005) 14,082 645 13,076 18,782
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 7,953 9,535 25,099 5,246 7,047 13,880
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares -- (3) (17) (418) (38) --
Realized capital gains
Class II Shares (732) -- -- -- -- --
Return of capital
Class II Shares -- -- -- -- (2) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (732) (3) (17) (418) (40) --
- ----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class II Shares
Proceeds from shares issued 2,648 3,348 3,024 5,302 4,564 3,668
Proceeds from shares issued in lieu of cash
distributions 359 -- 2 52 5 --
Proceeds from shares issued in connection with
Fund Reorganization(2) -- -- 25,687 -- -- --
Cost of shares redeemed (7,137) (7,552) (16,371) (3,837) (6,963) (10,184)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
II Shares transactions (4,130) (4,204) 12,342 1,517 (2,394) (6,516)
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 3,091 5,328 37,424 6,345 4,613 7,364
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 92,848 87,520 50,096 78,103 73,490 66,126
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $95,939 $92,848 $ 87,520 $84,448 $78,103 $ 73,490
==================================================================================================================================
Undistributed net investment income $ -- $ -- $ -- $ 1 $ -- $ 39
==================================================================================================================================
Shares issued and redeemed:
Class II Shares
Issued 165 226 280 542 501 490
Issued in lieu of cash distributions 21 -- -- 5 1 --
Issued in connection with Fund
Reorganization(2) -- -- 2,603 -- -- --
Redeemed (443) (509) (1,610) (394) (769) (1,388)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares (257) (283) 1,273 153 (267) (898)
==================================================================================================================================
Constellation Funds 2005 Annual Report 113
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation
Pitcairn Taxable Bond Fund
----------------------------------------
year ended 11/1/03 thru year ended
9/30/05 9/30/04(1) 10/31/03
- -------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 1,951 $ 1,739 $ 1,859
Net realized gain (loss) from securities sold (111) 658 234
Net change in unrealized appreciation
(depreciation) of investments (1,116) (473) 852
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 724 1,924 2,945
- -------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares (1,946) (1,725) (1,858)
Realized capital gains
Class II Shares -- -- --
- -------------------------------------------------------------------------------------------
Total dividends and distributions (1,946) (1,725) (1,858)
- -------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares(2)
Proceeds from shares issued -- -- --
Cost of shares redeemed -- -- --
- -------------------------------------------------------------------------------------------
Net increase in net assets from Class I Shares
transactions -- -- --
- -------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 9,455 4,881 10,661
Proceeds from shares issued in lieu of cash
distributions 491 301 384
Cost of shares redeemed (3,994) (5,574) (8,758)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
II Shares transactions 5,952 (392) 2,287
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions 5,952 (392) 2,287
- -------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 4,730 (193) 3,374
- -------------------------------------------------------------------------------------------
Net assets:
Beginning of period 43,239 43,432 40,058
- -------------------------------------------------------------------------------------------
End of period $47,969 $43,239 $43,432
===========================================================================================
Undistributed net investment income $ 2 $ -- $ --
===========================================================================================
Shares issued and redeemed:
Class I Shares(2)
Issued -- -- --
Issued in lieu of cash distributions -- -- --
Redeemed -- -- --
- -------------------------------------------------------------------------------------------
Increase in Class I Shares -- -- --
===========================================================================================
Class II Shares
Issued 882 458 1,003
Issued in lieu of cash distributions 46 28 36
Redeemed (375) (520) (818)
- -------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares 553 (34) 221
- -------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions 553 (34) 221
===========================================================================================
- ----------
(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 10 in Notes to Financial Statements for
additional information.
(2) Class I Shares were offered beginning on August 27, 2004 for 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 2005 Annual Report
Constellation Constellation
Pitcairn Tax-Exempt Bond Fund Sands Capital Select Growth Fund
--------------------------------------- --------------------------------------
year ended 11/1/03 thru year ended year ended 11/1/03 thru year ended
9/30/05 9/30/04(1) 10/31/03 9/30/05 9/30/04(1) 10/31/03
- -----------------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 4,383 $ 4,063 $ 4,655 $ (1,193) $ (638) $ (294)
Net realized gain (loss) from securities sold 1,242 716 432 (3,399) 730 (6,078)
Net change in unrealized appreciation
(depreciation) of investments (2,509) (314) 273 24,744 4,953 15,475
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,116 4,465 5,360 20,152 5,045 9,103
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class II Shares (4,403) (4,075) (4,623) -- -- --
Realized capital gains
Class II Shares (716) (432) (294) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (5,119) (4,507) (4,917) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares(2)
Proceeds from shares issued -- -- -- 53,246 32,632 --
Cost of shares redeemed -- -- -- (11,009) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Class I Shares
transactions -- -- -- 42,237 32,632 --
- -----------------------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 10,981 14,164 11,201 109,776 54,888 6,476
Proceeds from shares issued in lieu of cash
distributions 336 222 174 -- -- --
Cost of shares redeemed (11,619) (11,934) (16,253) (29,808) (33,825) (4,519)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
II Shares transactions (302) 2,452 (4,878) 79,968 21,063 1,957
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions (302) 2,452 (4,878) 122,205 53,695 1,957
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (2,305) 2,410 (4,435) 142,357 58,740 11,060
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 113,880 111,470 115,905 102,618 43,878 32,818
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $111,575 $113,880 $111,470 $244,975 $102,618 $43,878
===================================================================================================================================
Undistributed net investment income $ 109 $ 129 $ 141 $ -- $ -- $ --
===================================================================================================================================
Shares issued and redeemed:
Class I Shares(2)
Issued -- -- -- 7,212 4,792 --
Issued in lieu of cash distributions -- -- -- -- -- --
Redeemed -- -- -- (1,513) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Class I Shares -- -- -- 5,699 4,792 --
===================================================================================================================================
Class II Shares
Issued 1,023 1,309 1,034 14,797 8,136 1,225
Issued in lieu of cash distributions 31 21 15 -- -- --
Redeemed (1,089) (1,121) (1,516) (4,180) (5,007) (882)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares (35) 209 (467) 10,617 3,129 343
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions (35) 209 (467) 16,316 7,921 343
===================================================================================================================================
Constellation Funds 2005 Annual Report 115
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation TIP Small Cap
Value Opportunities Fund
-----------------------------
year ended year ended
9/30/05 9/30/04(1)
- --------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 86 $ (39)
Net realized gain from securities sold 1,491 2,070
Net change in unrealized appreciation
of investments 3,583 1,494
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 5,160 3,525
- --------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares -- --
Realized capital gains
Class I Shares -- --
Class II Shares (1,990) (223)
- --------------------------------------------------------------------------------
Total dividends and distributions (1,990) (223)
- --------------------------------------------------------------------------------
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 86,351 29,439
Proceeds from shares issued in lieu of cash
distributions 1,947 221
Cost of shares redeemed (31,766) (24,169)
- --------------------------------------------------------------------------------
Net increase in net assets from
Class II Shares transactions 56,532 5,491
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions 56,532 5,491
- --------------------------------------------------------------------------------
Total increase (decrease) in net assets 59,702 8,793
- --------------------------------------------------------------------------------
Net assets:
Beginning of period 14,533 5,740
- --------------------------------------------------------------------------------
End of period $ 74,235 $ 14,533
================================================================================
Undistributed net investment income $ 123 $ 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 4,968 1,999
Issued in lieu of cash distributions 116 15
Redeemed (1,935) (1,569)
- --------------------------------------------------------------------------------
Increase in Class II Shares 3,149 445
- --------------------------------------------------------------------------------
Net increase (decrease) in share transactions 3,149 445
================================================================================
- ----------
(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 10 in Notes to Financial Statements for
additional information.
(2) On April 15, 2005 the Constellation Funds acquired the assets and
liabilities of the Constellation Institutional Portfolios TIP Midcap Core
Portfolio in a tax-free reorganization. See Note 10 in Notes to Financial
Statements for additional information. Effective January 1, 2005, the Fund
changed its fiscal year end from December 31 to September 30.
(3) 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.
116 Constellation Funds 2005 Annual Report
Constellation TIP Financial
Constellation TIP Mid Cap Fund Services Fund
--------------------------------------------- ---------------------------
1/1/05(2) thru year ended 1/2/03(3) thru year ended year ended
9/30/05 12/31/04 12/31/03 9/30/05 9/30/04(1)
- --------------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ -- $ 2 $ -- $ 57 $ (40)
Net realized gain from securities sold 62 63 45 2,456 1,782
Net change in unrealized appreciation
of investments 56 8 52 141 256
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 118 73 97 2,654 1,998
- --------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares -- (2) -- -- --
Realized capital gains
Class I Shares (21) (58) -- (1,102) (1,753)
Class II Shares -- -- (29) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (21) (60) (29) (1,102) (1,753)
- --------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued 481 -- 240 451 1,131
Proceeds from shares issued in lieu of cash
distributions 21 60 29 1,040 1,671
Cost of shares redeemed (167) -- -- (1,919) (5,087)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Class I Shares transactions 335 60 269 (428) (2,285)
- --------------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued -- -- -- -- --
Proceeds from shares issued in lieu of cash
distributions -- -- -- -- --
Cost of shares redeemed -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Class II Shares transactions -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions 335 60 269 (428) (2,285)
- --------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 432 73 337 1,124 (2,040)
- --------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 410 337 -- 15,269 17,309
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 842 $410 $337 $16,393 $15,269
==========================================================================================================================
Undistributed net investment income $ -- $ -- $ -- $ 60 $ --
==========================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued 34 -- 24 30 78
Issued in lieu of cash distributions 1 5 2 70 122
Redeemed (11) -- -- (131) (373)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class I Shares 24 5 26 (31) (173)
==========================================================================================================================
Class II Shares
Issued -- -- -- -- --
Issued in lieu of cash distributions -- -- -- -- --
Redeemed -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Increase in Class II Shares -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions 24 5 26 (31) (173)
==========================================================================================================================
Constellation Funds 2005 Annual Report 117
Financial Statements
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (000)
Constellation TIP
Healthcare &
Biotechnology Fund
--------------------------
year ended year ended
9/30/05 9/30/04(1)
- -----------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ (577) $ (256)
Net realized gain (loss) from securities sold 2,459 1,403
Net realized loss from foreign currency
transactions -- --
Net change in unrealized appreciation
(depreciation) of investments 6,019 (540)
Net change in unrealized appreciation
(depreciation) on translation of foreign
currency and other assets and liabilities
denominated in foreign currency -- --
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 7,901 607
- -----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares -- --
Class II Shares -- --
Realized capital gains
Class I Shares -- --
Class II Shares (1,234) (14)
- -----------------------------------------------------------------------------
Total dividends and distributions (1,234) (14)
- -----------------------------------------------------------------------------
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 34,841 32,296
Proceeds from shares issued in lieu of cash
distributions 1,219 13
Cost of shares redeemed (18,356) (12,384)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
II Shares transactions 17,704 19,925
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions 17,704 19,925
- -----------------------------------------------------------------------------
Total increase in net 24,371 20,518
- -----------------------------------------------------------------------------
Net assets:
Beginning of period 35,371 14,853
- -----------------------------------------------------------------------------
End of period $ 59,742 $ 35,371
=============================================================================
Undistributed net investment income
(distributions in excess of 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 2,321 2,265
Issued in lieu of cash distributions 84 1
Redeemed (1,265) (907)
- -----------------------------------------------------------------------------
Increase (decrease) in Class II Shares 1,140 1,359
- -----------------------------------------------------------------------------
Net increase (decrease) in share transactions 1,140 1,359
=============================================================================
- ----------
* 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 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.
118 Constellation Funds 2005 Annual Report
Constellation
Constellation Strategic Value and
International Equity Fund High Income Fund
---------------------------------------- -----------------------
year ended 11/1/03 thru year ended year ended year ended
9/30/05 9/30/04(1) 10/31/03 9/30/05 9/30/04(1)
- -------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (loss) $ 943 $ 861 $ 956 $ 50* $ 116*
Net realized gain (loss) from securities sold 13,833 12,637 (9,048) 4* 524*
Net realized loss from foreign currency
transactions (213) (62) (116) -- --
Net change in unrealized appreciation
(depreciation) of investments 10,818 (2,756) 27,564 51* 64*
Net change in unrealized appreciation
(depreciation) on translation of foreign
currency and other assets and liabilities
denominated in foreign currency (28) (15) 29 -- --
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 25,353 10,665 19,385 105 704
- -------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Net investment income
Class I Shares -- -- -- (50) (116)
Class II Shares (238) (2,621) (459) -- --
Realized capital gains
Class I Shares -- -- -- (64) (9)
Class II Shares -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (238) (2,621) (459) (114) (125)
- -------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Class I Shares
Proceeds from shares issued -- -- -- 911 13,524
Proceeds from shares issued in lieu of cash
distributions -- -- -- 113 123
Cost of shares redeemed -- -- -- (915) (13,963)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
I Shares transactions -- -- -- 109 (316)
- -------------------------------------------------------------------------------------------------------------------
Class II Shares
Proceeds from shares issued 22,188 29,752 10,740 -- --
Proceeds from shares issued in lieu of cash
distributions 27 340 62 -- --
Cost of shares redeemed (26,402) (28,952) (15,424) -- --
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Class
II Shares transactions (4,187) 1,140 (4,622) -- --
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital share transactions (4,187) 1,140 (4,622) 109 (316)
- -------------------------------------------------------------------------------------------------------------------
Total increase in net 20,928 9,184 14,304 100 263
- -------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 107,001 97,817 83,513 706 443
- -------------------------------------------------------------------------------------------------------------------
End of period $127,929 $107,001 $ 97,817 $ 806 $ 706
===================================================================================================================
Undistributed net investment income
(distributions in excess of net investment
income) $ 633 $ (491) $ 898 $ -- $ --
===================================================================================================================
Shares issued and redeemed:
Class I Shares
Issued -- -- -- 66 985
Issued in lieu of cash distributions -- -- -- 8 9
Redeemed -- -- -- (67) (979)
- -------------------------------------------------------------------------------------------------------------------
Increase in Class I Shares -- -- -- 7 15
===================================================================================================================
Class II Shares
Issued 2,725 4,201 2,016 -- --
Issued in lieu of cash distributions 3 51 12 -- --
Redeemed (3,251) (4,219) (2,869) -- --
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Class II Shares (523) 33 (841) -- --
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share transactions (523) 33 (841) 7 15
===================================================================================================================
Constellation Funds 2005 Annual Report 119
Financial Statements
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period
Realized
and
Net asset Net unrealized Dividends Total
value, investment gains Total from from net Distributions dividends
beginning income (losses) on investment investment from capital and
of period (loss) investments activities income gains distributions
- --------------------------------------------------------------------------------------------------------
Constellation Clover Core Value Fund - Class I Shares
- --------------------------------------------------------------------------------------------------------
2005 $16.51 0.04 3.90 3.94 (0.04) (1.41) (1.45)
2004(1) $14.18 0.06 2.84 2.90 (0.06) (0.51) (0.57)
2003(2) $11.71 0.05 2.47 2.52 (0.05) -- (0.05)
2002 $14.85 0.08 (0.61) (0.53) (0.08) (2.53) (2.61)
2001(3) $14.23 0.05 0.59 0.64 (0.02) -- (0.02)
- --------------------------------------------------------------------------------------------------------
Constellation Clover Small Cap Value Fund - Class I Shares
- --------------------------------------------------------------------------------------------------------
2005 $23.76 (0.14) 4.01 3.87 -- -- --
2004(1) $19.23 (0.01) 4.57 4.56 (0.03) -- (0.03)
2003 $15.20 0.01 4.04 4.05 (0.02)(4) -- (0.02)
2002 $16.69 0.06 (1.50) (1.44) (0.05) -- (0.05)
2001(5) $16.36 0.10 1.67 1.77 (0.05) (1.39) (1.44)
- --------------------------------------------------------------------------------------------------------
Constellation Clover Core Fixed Income Fund - Class I Shares
- --------------------------------------------------------------------------------------------------------
2005 $10.27 0.42 (0.19) 0.23 (0.42) (0.14) (0.56)
2004(1) $10.40 0.43 (0.13) 0.30 (0.43) -- (0.43)
2003 $10.55 0.45 (0.10) 0.35 (0.47) (0.03) (0.50)
2002 $10.20 0.52 0.35 0.87 (0.52) -- (0.52)
2001(6) $ 9.62 0.54 0.58 1.12 (0.54) -- (0.54)
- --------------------------------------------------------------------------------------------------------
Constellation Clover Income Plus Fund - Class II Shares
- --------------------------------------------------------------------------------------------------------
2005(7) $10.00 0.12 0.08 0.20 (0.12) -- (0.12)
- --------------------------------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration Fixed Income Fund - Class I Shares
- --------------------------------------------------------------------------------------------------------
2005(8) $10.12 0.30 (0.03) 0.27 (0.31) -- (0.31)
2004(1) $10.17 0.21 (0.05) 0.16 (0.21) -- (0.21)
2003 $10.23 0.08(9) 0.06 0.14 (0.19) (0.01) (0.20)
2002 $10.22 0.25 0.05 0.30 (0.29) -- (0.29)
2001 $10.05 0.54 0.15 0.69 (0.52) -- (0.52)
- ----------
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of fees paid indirectly, waivers, reimbursements and expense
offsets.
+++ Excludes effect of in-kind transfers and mergers.
++++ Ratio of net expenses to average net assets would have been 1.30%, if the
dividend expense was excluded.
(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 10 in Notes to
Financial Statements for additional information.
(2) Effective April 15, 2003, the Board of Trustees of Turner Funds 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.
(3) 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 2005 Annual Report
Ratio of Ratio of
Ratio of total net
net expenses expenses investment
to average to average income
Net asset net assets, net assets, (loss)
value, Net assets including including to average Portfolio
end of Total end of period dividend dividend net turnover
period return (000) expense++ expense assets++ rate+++
- ------------------------------------------------------------------------------------------------------
Constellation Clover Core Value Fund - Class I Shares
- ------------------------------------------------------------------------------------------------------
2005 $19.00 24.83% $171,251 1.13% 1.13% 0.24% 75%
2004(1) $16.51 20.75% $ 59,714 1.08% 1.08% 0.39% 55%
2003(2) $14.18 21.61% $ 46,673 1.13% 1.13% 0.43% 67%
2002 $11.71 (6.37)% $ 43,571 1.10% 1.13% 0.56% 103%
2001(3) $14.85 4.50% $ 41,715 1.10% 1.16% 0.30% 128%
- ------------------------------------------------------------------------------------------------------
Constellation Clover Small Cap Value Fund - Class I Shares
- ------------------------------------------------------------------------------------------------------
2005 $27.63 16.29% $450,011 1.23% 1.23% (0.48)% 78%
2004(1) $23.76 23.72% $540,278 1.22% 1.22% (0.09)% 61%
2003 $19.23 26.66% $394,946 1.27% 1.27% 0.08% 52%
2002 $15.20 (8.69)% $464,576 1.26% 1.26% 0.31% 38%
2001(5) $16.69 12.15% $178,164 1.28% 1.28% 0.37% 120%
- ------------------------------------------------------------------------------------------------------
Constellation Clover Core Fixed Income Fund - Class I Shares
- ------------------------------------------------------------------------------------------------------
2005 $ 9.94 2.27% $ 26,166 0.80% 0.86% 3.91% 70%
2004(1) $10.27 2.97% $ 32,334 0.80% 0.85% 3.94% 45%
2003 $10.40 3.37% $ 43,391 0.78% 0.87% 4.25% 46%
2002 $10.55 8.85% $ 42,924 0.75% 0.87% 5.03% 49%
2001(6) $10.20 11.99% $ 34,074 0.75% 1.01% 5.50% 34%
- ------------------------------------------------------------------------------------------------------
Constellation Clover Income Plus Fund - Class II Shares
- ------------------------------------------------------------------------------------------------------
2005(7) $10.08 2.04%+ $ 4,941 1.43%++++ 2.72% 2.21% 19%
- ------------------------------------------------------------------------------------------------------
Constellation Chartwell Ultra Short Duration Fixed Income Fund - Class I Shares
- ------------------------------------------------------------------------------------------------------
2005(8) $10.08 2.67% $305,222 0.59% 0.62% 2.93% 68%
2004(1) $10.12 1.63% $391,934 0.46% 0.58% 2.08% 44%
2003 $10.17 1.40% $462,567 0.41% 0.62% 0.78% 222%
2002 $10.23 2.95% $470,021 0.36% 0.60% 2.27% 71%
2001 $10.22 7.09% $ 93,531 0.36% 0.87% 5.09% 119%
- ---------------
(4) Includes return of capital of $0.004.
(5) On April 30, 2001, shareholders 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.
(6) On April 30, 2001, shareholders 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 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.
(7) Commenced operations on February 28, 2005. All ratios for the period have
been annualized.
(8) On January 28, 2005, Class II Shares merged into Class I Shares. See Note
10 in Notes to Financial Statements for additional information.
(9) 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 2005 Annual Report 121
Financial Statements
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period
Realized
and
Net asset Net unrealized Dividends Total
value, investment gains Total from from net Distributions dividends
beginning income (losses) on investment investment from capital and
of period (loss) investments activities income gains distributions
- -----------------------------------------------------------------------------------------------------------
Constellation Chartwell Short Duration Fixed Income Fund - Class I Shares
- -----------------------------------------------------------------------------------------------------------
2005(1) $10.04 0.31 (0.10) 0.21 (0.38) -- (0.38)
2004(2) $10.14 0.28 (0.10) 0.18 (0.28) -- (0.28)
2003 $10.24 0.17(3) 0.05 0.22 (0.25) (0.07) (0.32)
2002 $10.16 0.35 0.12 0.47 (0.39) -- (0.39)
2001 $ 9.82 0.57 0.32 0.89 (0.55) -- (0.55)
- -----------------------------------------------------------------------------------------------------------
Constellation Chartwell High Yield Fund - Class I Shares
- -----------------------------------------------------------------------------------------------------------
2005 $ 5.12 0.35 (0.17) 0.18 (0.35) -- (0.35)
2004(2) $ 5.02 0.35 0.10 0.45 (0.35) -- (0.35)
2003 $ 4.45 0.37 0.56 0.93 (0.36) -- (0.36)
2002(4) $ 5.49 0.64 (1.04) (0.40) (0.64) -- (0.64)
2001 $ 8.10 0.78 (2.61) (1.83) (0.78) -- (0.78)
- -----------------------------------------------------------------------------------------------------------
Constellation HLAM Large Cap Quality Stock Fund - Investor A Shares/Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005(5)(6) $21.58 (0.01) (0.43) (0.44) -- (1.22) (1.22)
2004 $24.73 0.01 1.16 1.17 -- (4.32) (4.32)
2003 $24.02 (0.07) 4.58 4.51 -- (3.80) (3.80)
2002 $30.89 (0.08) (6.79) (6.87) -- -- --
2001 $33.89 (0.12) (2.88) (3.00) -- -- --
2000 $33.71 (0.06) 0.24 0.18 -- -- --
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Value Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $11.22 0.13 1.38 1.51 (0.13) -- (0.13)
2004(2)(7) $10.26 0.10 0.97 1.07 (0.11) -- (0.11)
2003 $ 8.50 0.12 1.77 1.89 (0.13) -- (0.13)
2002 $ 9.19 0.10 (0.69) (0.59) (0.10) -- (0.10)
2001 $10.52 0.09 (1.33) (1.24) (0.09) -- (0.09)
2000(8) $10.00 0.01(3) 0.51 0.52 -- -- --
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Select Value Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $10.87 0.07 0.89 0.96 (0.07) (0.16) (0.23)
2004(2)(7) $10.38 0.08 0.66 0.74 (0.09) (0.16) (0.25)
2003 $ 8.36 0.08 2.03 2.11 (0.09) -- (0.09)
2002 $10.01 0.09 (1.65) (1.56) (0.09) -- (0.09)
2001 $10.96 0.09 (0.95) (0.86) (0.09) -- (0.09)
2000(9) $10.00 0.02 0.95 0.97 (0.01) -- (0.01)
- ----------
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of fees paid indirectly, waivers and reimbursements.
+++ Excludes effect of in-kind transfers and mergers.
(1) On January 28, 2005, Class II Shares merged into Class I Shares. See Note
10 in Notes to Financial Statements for additional information.
(2) 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 10 in Notes to
Financial Statements for additional information.
(3) Based on average shares outstanding.
(4) 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.
122 Constellation Funds 2005 Annual Report
Ratio of
net
investment
Ratio of income
Net asset Ratio of total (loss)
value, Net assets net expenses expenses to average Portfolio
end of Total end of period to average to average net turnover
period return (000) net assets++ net assets assets++ rate+++
- ------------------------------------------------------------------------------------------------------
Constellation Chartwell Short Duration Fixed Income Fund - Class I Shares
- ------------------------------------------------------------------------------------------------------
2005(1) $ 9.87 2.12% $112,833 0.61% 0.66% 3.18% 46%
2004(2) $10.04 1.84% $172,213 0.46% 0.60% 2.49% 84%
2003 $10.14 2.15% $252,772 0.41% 0.62% 1.65% 200%
2002 $10.24 4.69% $264,010 0.36% 0.60% 3.27% 178%
2001 $10.16 9.35% $ 68,405 0.36% 0.72% 5.65% 104%
- ------------------------------------------------------------------------------------------------------
Constellation Chartwell High Yield Fund - Class I Shares
- ------------------------------------------------------------------------------------------------------
2005 $ 4.95 3.60% $ 6,363 0.68% 1.41% 6.85% 183%
2004(2) $ 5.12 9.34% $ 10,171 0.86% 1.14% 6.98% 199%
2003 $ 5.02 21.61% $ 9,408 0.76% 1.16% 7.71% 241%
2002(4) $ 4.45 (8.05)% $ 9,432 0.68% 1.47% 12.78% 171%
2001 $ 5.49 (23.66)% $ 13,977 0.68% 1.38% 11.18% 86%
- ------------------------------------------------------------------------------------------------------
Constellation HLAM Large Cap Quality Stock Fund - Investor A Shares/Class II Shares
- ------------------------------------------------------------------------------------------------------
2005(5)(6) $19.92 (2.09)%+ $ 16,140 1.25% 1.65% (0.08)% 37%
2004 $21.58 4.73% $ 20,959 1.30% 1.97% 0.04% 7%
2003 $24.73 19.07% $ 35,806 1.30% 1.82% (0.27)% 28%
2002 $24.02 (22.20)% $ 34,963 1.29% 1.46% (0.32)% 19%
2001 $30.89 (8.85)% $ 51,402 1.25% 1.44% (0.36)% 19%
2000 $33.89 0.53% $ 62,884 1.29% 1.37% (0.17)% 34%
- ------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Value Fund - Class II Shares
- ------------------------------------------------------------------------------------------------------
2005 $12.60 13.47% $168,542 1.09% 1.21% 1.04% 64%
2004(2)(7) $11.22 10.50%+ $152,202 1.02% 1.14% 1.06% 75%
2003 $10.26 22.43% $143,641 1.01% 1.14% 1.32% 59%
2002 $ 8.50 (6.43)% $122,391 1.02% 1.13% 1.17% 26%
2001 $ 9.19 (11.87)% $139,767 1.00% 1.16% 0.92% 48%
2000(8) $10.52 5.24%+ $165,823 1.00% 1.22% 0.73% 12%
- ------------------------------------------------------------------------------------------------------
Constellation Pitcairn Select Value Fund - Class II Shares
- ------------------------------------------------------------------------------------------------------
2005 $11.60 8.82% $ 65,400 1.14% 1.24% 0.63% 94%
2004(2)(7) $10.87 7.16%+ $ 61,817 1.03% 1.19% 0.84% 111%
2003 $10.38 25.48% $ 58,133 1.02% 1.23% 0.86% 104%
2002 $ 8.36 (15.77)% $ 48,455 1.02% 1.19% 0.92% 110%
2001 $10.01 (7.90)% $ 60,986 1.00% 1.19% 0.85% 104%
2000(9) $10.96 9.70%+ $ 62,392 1.00% 1.33% 0.95% 27%
- -------------
(5) On November 8, 2004, the Constellation Funds acquired the assets and
liabilities of the Hilliard Lyons Growth Fund, Inc., in a tax-free
reorganization. Investor A Shares were converted into Class II Shares.
Subsequently, Investor B Shares were liquidated and exchanged for Class II
Shares. Investor A Shares were the accounting survivor in this transaction,
and as a result, its operating results for the periods prior to November 8,
2004 have been carried forward in these financial highlights. See Note 10
in Notes to Financial Statements for additional information.
(6) For the nine-month period ended September 30, 2005. All ratios for the
period have been annualized. Effective January 1, 2005, the Fund changed
its fiscal year end from December 31 to September 30.
(7) 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.
(8) Commenced operations on August 4, 2000. All ratios for the period have been
annualized.
(9) Commenced operations on August 11, 2000. 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.
Constellation Funds 2005 Annual Report 123
Financial Statements
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period
Realized
and
Net asset Net unrealized Dividends Total
value, investment gains Total from from net Distributions dividends
beginning income (losses) on investment investment from capital and
of period (loss) investments activities income gains distributions
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Growth Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $ 5.36 0.03 0.44 0.47 (0.03) -- (0.03)
2004(1)(2) $ 5.25 -- 0.11 0.11 --.(3) -- --
2003 $ 4.40 -- 0.85 0.85 -- -- --
2002 $ 5.66 (0.01) (1.25) (1.26) --.-- -- --
2001 $ 9.18 (0.03) (3.49) (3.52) -- -- --
2000(4) $10.00 (0.01) (0.81) (0.82) -- -- --
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Small Cap Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $15.30 (0.04) 1.37 1.33 -- (0.12) (0.12)
2004(1)(2) $13.78 (0.04) 1.56 1.52 --.(3) -- --
2003 $ 9.87 --.(5) 3.91 3.91 --.(3) -- --
2002 $10.67 0.07 (0.78) (0.71) (0.09) -- (0.09)
2001 $10.18 0.10 0.49 0.59 (0.10) -- (0.10)
2000(7) $10.00 0.02 0.16 0.18 -- -- --
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R) Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $ 9.38 0.05 0.58 0.63 (0.05) -- (0.05)
2004(1)(2) $ 8.55 -- 0.83 0.83 --.(3)* -- --
2003 $ 6.97 -- 1.58 1.58 -- -- --
2002 $ 7.82 (0.01) (0.84) (0.85) -- -- --
2001 $ 9.87 (0.02) (2.03) (2.05) -- -- --
2000(4) $10.00 (0.01) (0.12) (0.13) -- -- --
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $10.77 0.43 (0.27) 0.16 (0.43) -- (0.43)
2004(1)(2) $10.73 0.43 0.04 0.47 (0.43) -- (0.43)
2003 $10.47 0.51 0.26 0.77 (0.51) -- (0.51)
2002 $10.98 0.56 (0.42) 0.14 (0.56) (0.09) (0.65)
2001 $10.09 0.59 0.90 1.49 (0.60) -- (0.60)
2000(4) $10.00 0.15 0.09 0.24 (0.15) -- (0.15)
- -----------------------------------------------------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Bond Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $10.78 0.41 (0.11) 0.30 (0.41) (0.07) (0.48)
2004(1)(2) $10.77 0.39 0.05 0.44 (0.39) (0.04) (0.43)
2003 $10.71 0.44 0.09 0.53 (0.44) (0.03) (0.47)
2002 $10.60 0.44 0.12 0.56 (0.44) (0.01) (0.45)
2001 $10.04 0.45 0.57 1.02 (0.46) -- (0.46)
2000(8) $10.00 0.10 0.04 0.14 (0.10) -- (0.10)
- -----------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund - Class I Shares
- -----------------------------------------------------------------------------------------------------------
2005 $ 6.80 (0.06) 1.07 1.01 -- -- --
2004(9) $ 6.74 -- 0.06 0.06 -- -- --
- -----------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------
2005 $ 6.80 (0.03) 1.03 1.00 -- -- --
2004(1)(2) $ 6.13 (0.06) 0.73 0.67 -- -- --
2003 $ 4.81 (0.04)(5) 1.36 1.32 -- -- --
2002 $ 5.55 (0.04) (0.70) (0.74) -- -- --
2001 $ 9.02 (0.04) (3.43) (3.47) -- -- --
2000(8) $10.00 (0.01) (0.97) (0.98) -- -- --
- ----------
* Includes return capital of $0.0003.
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of fees paid indirectly, 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 10 in Notes to
Financial Statements for additional information.
(2) For the eleven-month period ended September 30, 2004. All ratios have been
annualized. The Fund changed its fiscal year end from October 31 to
September 30.
124 Constellation Funds 2005 Annual Report
Ratio of
net
investment
Ratio of income
Net asset Ratio of total (loss)
value, Net assets net expenses expenses to average Portfolio
end of Total end of period to average to average net turnover
period return (000) net assets++ net assets assets++ rate+++
- ---------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Growth Fund - Class II Shares
- ---------------------------------------------------------------------------------------------------------
2005 $ 5.80 8.71% $116,560 1.10% 1.23% 0.48% 56%
2004(1)(2) $ 5.36 2.14%+ $104,528 1.02% 1.15% ...--% 53%
2003 $ 5.25 19.32% $ 95,724 1.01% 1.16% 0.05% 70%
2002 $ 4.40 (22.26)% $ 82,368 1.01% 1.14% (0.15)% 35%
2001 $ 5.66 (38.34)% $107,141 1.00% 1.17% (0.44)% 37%
2000(4) $ 9.18 (8.20)%+ $174,960 1.00% 1.22% (0.68)% 6%
- ---------------------------------------------------------------------------------------------------------
Constellation Pitcairn Small Cap Fund - Class II Shares
- ---------------------------------------------------------------------------------------------------------
2005 $16.51 8.69% $ 95,939 1.10% 1.24% (0.27)% 100%
2004(1)(2) $15.30 11.03%+ $ 92,848 1.08% 1.15% (0.26)% 72%
2003 $13.78 39.65% $ 87,520 1.20%(6) 1.17% (0.04)% 149%
2002 $ 9.87 (6.78)% $ 50,096 1.28%(6) 1.38% 0.58% 93%
2001 $10.67 5.80% $ 62,227 1.16%(6) 1.19% 0.93% 96%
2000(7) $10.18 1.80%+ $ 67,651 1.22%(6) 1.33% 1.11% 10%
- ---------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Heritage(R) Fund - Class II Shares
- ---------------------------------------------------------------------------------------------------------
2005 $ 9.96 6.72% $ 84,448 1.29% 1.44% 0.50% 25%
2004(1)(2) $ 9.38 9.77%+ $ 78,103 1.23% 1.37% 0.01% 19%
2003 $ 8.55 22.67% $ 73,490 1.23% 1.38% 0.06% 12%
2002 $ 6.97 (10.87)% $ 66,126 1.27% 1.36% (0.18)% 24%
2001 $ 7.82 (20.77)% $ 77,295 1.20% 1.37% (0.19)% 37%
2000(4) $ 9.87 (1.30)%+ $ 98,420 1.20% 1.44% (0.29)% 1%
- ---------------------------------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Fund - Class II Shares
- ---------------------------------------------------------------------------------------------------------
2005 $10.50 1.50% $ 47,969 0.89% 0.96% 4.05% 37%
2004(1)(2) $10.77 4.42%+ $ 43,239 0.75% 0.94% 4.36% 26%
2003 $10.73 7.44% $ 43,432 0.73% 0.97% 4.74% 24%
2002 $10.47 1.46% $ 40,058 0.78% 0.98% 5.35% 58%
2001 $10.98 15.19% $ 35,562 0.70% 0.99% 5.63% 54%
2000(4) $10.09 2.36%+ $ 37,212 0.70% 1.10% 6.51% 7%
- ---------------------------------------------------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Bond Fund - Class II Shares
- ---------------------------------------------------------------------------------------------------------
2005 $10.60 2.78% $111,575 0.69% 0.82% 3.80% 38%
2004(1)(2) $10.78 4.20%+ $113,880 0.62% 0.75% 3.97% 25%
2003 $10.77 4.96% $111,470 0.60% 0.74% 4.06% 14%
2002 $10.71 5.41% $115,905 0.60% 0.74% 4.19% 14%
2001 $10.60 10.30% $113,071 0.60% 0.77% 4.35% 23%
2000(8) $10.04 1.43%+ $ 99,187 0.60% 0.86% 4.88% 10%
- ---------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund - Class I Shares
- ---------------------------------------------------------------------------------------------------------
2005 $ 7.81 14.85% $ 81,976 1.11% 1.19% (0.62)% 24%
2004(9) $ 6.80 0.89%+ $ 32,591 1.10% 1.10% (0.79)% 11%
- ---------------------------------------------------------------------------------------------------------
Constellation Sands Capital Select Growth Fund - Class II Shares
- ---------------------------------------------------------------------------------------------------------
2005 $ 7.80 14.71% $162,999 1.36% 1.44% (0.84)% 24%
2004(1)(2) $ 6.80 10.93%+ $ 70,027 1.20% 1.35% (0.95)% 11%
2003 $ 6.13 27.44% $ 43,878 1.17% 1.45% (0.81)% 28%
2002 $ 4.81 (13.33)% $ 32,818 1.16% 1.43% (0.69)% 24%
2001 $ 5.55 (38.44)% $ 39,326 1.15% 1.43% (0.63)% 37%
2000(8) $ 9.02 (9.80)%+ $ 54,794 1.15% 1.50% (0.61)% 13%
- ---------------
(3) Amounts represents less than $0.01 per share.
(4) Commenced operations on August 4, 2000. All ratios for the period have been
annualized.
(5) Based on average shares outstanding.
(6) The ratio of expenses to average net assets excluding interest expense 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.
(7) Commenced operations on August 25, 2000. All ratios for the period have
been annualized.
(8) Commenced operations on August 11, 2000. All ratios for the period have
been annualized.
(9) Commenced operations on August 27, 2004. 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.
Constellation Funds 2005 Annual Report 125
Financial Statements
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period
Net asset Realized and
value, Net unrealized Total from Dividends from Distributions
beginning investment gains (losses) investment net investment from capital Total dividends
of period income (loss) on investments activities income gains and distributions
- -----------------------------------------------------------------------------------------------------------------------------
Constellation TIP Small Cap Value Opportunities Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------------------------
2005 $16.21 0.02 3.76 3.78 -- (1.64) (1.64)
2004(1) $12.72 (0.04) 3.75 3.71 -- (0.22) (0.22)
2003 $ 9.27 (0.01) 3.47 3.46 (0.01) -- (0.01)
2002(2) $10.00 -- (0.73) (0.73) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Constellation TIP Mid Cap Fund - Class I Shares
- -----------------------------------------------------------------------------------------------------------------------------
2005(3)(4) $13.29 (0.01) 2.47 2.46 -- (0.39) (0.39)
2004 $12.79 0.08 2.70 2.78 (0.09) (2.19) (2.28)
2003(5) $10.00 0.01 3.99 4.00 -- (1.21) (1.21)
- -----------------------------------------------------------------------------------------------------------------------------
Constellation TIP Financial Services Fund - Class I Shares
- -----------------------------------------------------------------------------------------------------------------------------
2005 $13.88 0.06 2.45 2.51 -- (1.05) (1.05)
2004(1) $13.60 (0.04) 1.69 1.65 -- (1.37) (1.37)
2003 $10.11 (0.02) 3.62 3.60 -- (0.11) (0.11)
2002(6) $16.67 (0.02) (1.12) (1.14) -- (5.42) (5.42)
2001(7)(8) $19.76 (0.13) (2.96) (3.09) -- -- --
2001 $17.19 (0.14) 3.30 3.16 -- (0.59) (0.59)
- -----------------------------------------------------------------------------------------------------------------------------
Constellation TIP Healthcare & Biotechnology Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------------------------
2005 $13.79 (0.16) 3.02 2.86 -- (0.52) (0.52)
2004(1) $12.31 (0.06) 1.55 1.49 -- (0.01) (0.01)
2003 $ 9.83 (0.11) 2.59 2.48 -- -- --
2002 $11.15 (0.10) (1.20) (1.30) -- (0.02) (0.02)
2001(9) $10.00 (0.03) 1.18 1.15 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Constellation International Equity Fund - Class II Shares
- -----------------------------------------------------------------------------------------------------------------------------
2005 $ 7.06 0.07 1.64 1.71 (0.02) -- (0.02)
2004(1)(10) $ 6.47 0.05 0.71 0.76 (0.17) -- (0.17)
2003 $ 5.23 0.06 1.21 1.27 (0.03) -- (0.03)
2002 $ 6.19 0.04 (0.94) (0.90) (0.06) -- (0.06)
2001 $ 9.28 0.01 (3.05) (3.04) (0.02) (0.03) (0.05)
2000(11) $10.00 (0.01) (0.71) (0.72) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Constellation Strategic Value and High Income Fund(12) - Class I Shares
- -----------------------------------------------------------------------------------------------------------------------------
2005 $14.01 0.72 1.18 1.90 (0.72) (0.98) (1.70)
2004(1) $12.58 0.47 1.53 2.00 (0.47) (0.10) (0.57)
2003(13) $10.00 0.25 2.58 2.83 (0.25) -- (0.25)
- ----------
+ Returns are for the period indicated and have not been annualized.
++ Inclusive of fees paid indirectly, 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 10 in Notes to
Financial Statements for additional information.
(2) Commenced operations on March 4, 2002. All ratios for the period have been
annualized.
(3) On April 15, 2005, the Constellation Funds acquired the assets and
liabilities of the Constellation Institutional Portfolios TIP Midcap Core
Portfolio in a tax-free reorganization. See Note 10 in Notes to Financial
Statements for additional information.
(4) For the nine-month period ended September 30, 2005. All ratios for the
period have been annualized. Effective January 1, 2005, the Fund changed
its fiscal year end from December 31 to September 30.
(5) Commenced operations on January 2, 2003. All ratios for the period have
been annualized.
(6) For the eleven-month period ended September 30, 2002. All ratios for the
period have been annualized. The Fund changed its fiscal year end from
October 31 to September 30.
126 Constellation Funds 2005 Annual Report
Ratio of Ratio of Ratio of net
Net assets net expenses total expenses investment income Portfolio
Net asset value, Total end of period to average to average (loss) to average turnover
end of period return (000) net assets++ net assets net assets++ rate+++
- -------------------------------------------------------------------------------------------------------------------------
Constellation TIP Small Cap Value Opportunities Fund - Class II Shares
- -------------------------------------------------------------------------------------------------------------------------
2005 $18.35 24.32% $ 74,235 1.46% 2.04% 0.29% 193%
2004(1) $16.21 29.36% $ 14,533 1.45% 1.82% (0.23)% 272%
2003 $12.72 37.29% $ 5,740 1.40% 3.64% (0.26)% 245%
2002(2) $ 9.27 (7.30)%+ $ 913 1.45% 6.18% 0.08% 142%
- -------------------------------------------------------------------------------------------------------------------------
Constellation TIP Mid Cap Fund - Class I Shares
- -------------------------------------------------------------------------------------------------------------------------
2005(3)(4) $15.36 18.53%+ $ 842 1.00% 8.23% (0.02)% 120%
2004 $13.29 21.78% $ 410 0.90% 0.90% 0.59% 193%
2003(5) $12.79 40.24%+ $ 337 0.90% 0.90% 0.12% 141%
- -------------------------------------------------------------------------------------------------------------------------
Constellation TIP Financial Services Fund - Class I Shares
- -------------------------------------------------------------------------------------------------------------------------
2005 $15.34 18.27% $ 16,393 1.58% 1.70% 0.36% 131%
2004(1) $13.88 12.31% $ 15,269 1.45% 1.52% (0.24)% 103%
2003 $13.60 35.95% $ 17,309 1.50% 1.82% (0.22)% 139%
2002(6) $10.11 (12.48)%+ $ 12,149 1.40% 2.16% (0.40)% 171%
2001(7)(8) $16.67 (15.64)%+ $ 15,554 2.29% 2.33% (1.19)% 52%
2001 $19.76 18.20% $ 23,341 2.11% 2.11% (0.59)% 110%
- -------------------------------------------------------------------------------------------------------------------------
Constellation TIP Healthcare & Biotechnology Fund - Class II Shares
- -------------------------------------------------------------------------------------------------------------------------
2005 $16.13 21.10% $ 59,742 1.88% 1.88% (1.35)% 169%
2004(1) $13.79 12.12% $ 35,371 1.61% 1.84% (1.10)% 163%
2003 $12.31 25.23% $ 14,853 1.47% 1.63% (1.16)% 274%
2002 $ 9.83 (11.66)% $ 9,288 1.87% 2.33% (1.44)% 202%
2001(9) $11.15 11.50%+ $ 1,192 1.50% 13.70% (0.79)% 95%
- -------------------------------------------------------------------------------------------------------------------------
Constellation International Equity Fund - Class II Shares
- -------------------------------------------------------------------------------------------------------------------------
2005 $ 8.75 24.19% $127,929 1.44% 1.64% 0.80% 53%
2004(1)(10) $ 7.06 11.97%+ $107,001 1.35% 1.60% 0.90% 62%
2003 $ 6.47 24.40% $ 97,817 1.30% 1.60% 1.15% 128%
2002 $ 5.23 (14.68)% $ 83,513 1.32% 1.48% 0.63% 69%
2001 $ 6.19 (32.91)% $108,777 1.25% 1.45% 0.16% 44%
2000(11) $ 9.28 (7.20)%+ $175,029 1.25% 1.53% (0.37)% 10%
- -------------------------------------------------------------------------------------------------------------------------
Constellation Strategic Value and High Income Fund(12) - Class I Shares
- -------------------------------------------------------------------------------------------------------------------------
2005 $14.21 14.22% $ 806 0.25% 4.71% 5.51% 130%
2004(1) $14.01 16.04% $ 706 0.25% 1.36% 3.23% 411%
2003(13) $12.58 28.57%+ $ 443 0.25% 21.93% 3.27% 397%
- ----------
(7) 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 was 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.
(8) 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.
(9) Commenced operations on February 28, 2001. All ratios for the period have
been annualized.
(10) For the eleven-month period ended September 30, 2004. All ratios have been
annualized. The Fund changed its fiscal year end from October 31 to
September 30.
(11) Commenced operations on August 4, 2000. All ratios for the period have been
annualized.
(12) 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.
(13) 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.
Constellation Funds 2005 Annual Report 127
Notes to Financial Statements
- --------------------------------------------------------------------------------
Notes to Financial Statements
September 30, 2005
1. Organization:
The Constellation Funds (the "Trust"), a Delaware statutory trust, is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company with 22 active portfolios. The financial statements included
herein are those of the Constellation Clover Core Value Fund, the Constellation
Clover Small Cap Value Fund, the Constellation Clover Core Fixed Income Fund,
the Constellation Clover Income Plus Fund, the Constellation Chartwell Ultra
Short Duration Fixed Income Fund, the Constellation Chartwell Short Duration
Fixed Income Fund, the Constellation Chartwell High Yield Fund, the
Constellation HLAM Large Cap Quality Stock Fund (formerly the Constellation HLAM
Large Cap Quality Growth Fund), the Constellation Pitcairn Diversified Value
Fund, the Constellation Pitcairn Select Value Fund, the Constellation Pitcairn
Diversified Growth Fund, the Constellation Pitcairn Small Cap Fund, the
Constellation Pitcairn Family Heritage(R) Fund, the Constellation Pitcairn
Taxable Bond Fund, the Constellation Pitcairn Tax-Exempt Bond Fund, the
Constellation Sands Capital Select Growth Fund, the Constellation TIP Small Cap
Value Opportunities Fund, the Constellation TIP Mid Cap Fund, the Constellation
TIP Financial Services Fund, the Constellation TIP Healthcare & Biotechnology
Fund, the Constellation International Equity Fund and the Constellation
Strategic Value and High Income Fund, each a "Fund" and collectively the
"Funds".
Each Fund is registered as a diversified portfolio of the Trust with the
exception of the Constellation HLAM Large Cap Quality Stock Fund, 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 and the Constellation TIP Healthcare & Biotechnology Fund, each of
which is 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.
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
generally accepted accounting principles 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 increases and decreases in net assests from operations
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
128 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 its 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 its 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 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 its 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 its net asset value. If
price movements in a monitored index or security exceed levels established by
the adviser, 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 makes the determination whether a Fair
Value Committee meeting should be called based on the information provided.
The Constellation International Equity Fund also uses a third-party fair
valuation vendor. The vendor provides a fair value for foreign securities held
by the Fund based on certain factors and methodologies (involving, generally,
tracking valuation correlations between the U.S. market and each non-U.S.
security). Values from the fair value vendor are applied in the event that there
is a movement in the U.S. market that exceeds a specific threshold that has been
established by the Fair Value Committee. The Fair Value Committee has also
established a "confidence interval" which is used to determine the level of
historical correlation between the value of a specific foreign security and
movements in the U.S. market before a particular security will be fair valued
when the threshold is exceeded. In the event that the threshold established by
the Fair Value Committee is exceeded on a specifc day, the Fund will value the
non-U.S. securities in its portfolio that exceed the applicable "confidence
interval" based upon the adjusted prices provided by the fair valuation vendor.
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 - As consistent with the Funds' investment objectives, the
Funds may engage in short sales that are "uncovered." Uncovered short sales are
transactions under which the Funds sell a security they do not own. To complete
such a transaction, the Funds must borrow the security to make delivery to the
buyer. The Funds then are obligated to replace the security by purchasing the
security at the market price at the time of the replacement. The price at such
time may be more or less than the price at the time the security was sold by the
Funds. Until the security is replaced, the Funds are required to pay the lender
amounts equal to
Constellation Funds 2005 Annual Report 129
Notes to Financial Statements
- --------------------------------------------------------------------------------
any dividends or interest that accrue during the period of the loan. To borrow
the security, the Funds also may be required to pay a premium, which would
decrease proceeds of the security sold. The proceeds of the short sale will be
held by the broker, to the extent necessary to meet margin requirements, until
the short position is closed out. A gain, limited to the price at which the
Funds sold the security short, or a loss, unlimited in size, will be recognized
upon the close of a short sale.
Until the Funds close their short position or replace the borrowed security, the
Funds will: (a) maintain a segregated account containing cash or liquid
securities at such a level that (i) the amount deposited in the account plus the
amount deposited with the broker as collateral will equal the current value of
the security sold short; and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time the security was sold short, or (b)
otherwise cover the Funds' short positions.
Delayed delivery transactions - The Funds may purchase or sell securities on a
when-issued or delayed delivery basis. These transactions involve a commitment
by the Funds to purchase or sell securities for a predetermined price or yield,
with payment and delivery taking place beyond the customary settlement period.
When delayed delivery purchases are outstanding, the Funds will set aside liquid
assets in an amount sufficient to meet the purchase price. Then purchasing a
security on a delayed delivery basis, the Funds assume the rights and risks of
ownership of the security, including the risk of price and yield fluctuations,
and take such fluctuations into account when determining net asset value. The
Funds may dispose of or renegotiate a delayed delivery transaction after it is
entered into, and may sell when-issued securities before they are delivered,
which may result in a capital gain or loss. When the Funds have sold a security
on a delayed delivery basis, the Funds do not participate in future gains and
losses with respect to the security.
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 income tax purposes.
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 Constellation
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 Mid Cap, Constellation TIP Financial Services,
Constellation TIP Healthcare & Biotechnology, and Constellation International
Equity Funds declare and distribute net investment income, if any, annually, as
a dividend to shareholders. The Constellation Clover Core Value, Constellation
Clover Small Cap Value, Constellation Clover Income Plus, Constellation HLAM
Large Cap Quality Stock, Constellation Pitcairn Diversified Value, Constellation
Pitcairn Select Value, Constellation Pitcairn Diversified Growth, Constellation
Pitcairn Small Cap, Constellation Pitcairn Family Heritage(R),
130 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
Constellation Sands Capital Select Growth 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, Constellation 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 Chartwell Ultra Short
Duration Fixed Income Fund, Constellation Chartwell Short Duration Fixed Income
Fund and Constellation TIP Mid Cap Fund, may charge a redemption fee up to 2% of
redemption proceeds, which will automatically be paid to the Fund. The board has
approved but not implemented the redemption fee policy. There were no redemption
fees collected during the year ended September 30, 2005.
3. Transactions with affiliates:
Certain trustees and officers of the Trust are also officers of Constellation
Investment Management Company, LP ("CIMCO" or the "Adviser"), Constellation
Investment Distribution Company, Inc. ("CIDCO" or the "Distributor") and SEI
Investments Global Funds Services ("SEI"). With the exception of the Chief
Compliance Officer's fees, such officers are paid no fees by the Trust for
serving as officers and trustees of the Trust.
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
the Funds and the Adviser are permitted to operate in a "Manager-of-Managers"
structure.
4. Administration, shareholder servicing, and distribution agreements:
CIMCO provides 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.
Under a separate Sub-Administration Agreement between CIMCO and SEI, SEI
provides sub-administration services to the Trust. For the year ended September
30, 2005, SEI was paid $1,378,453 for its services. Prior to April 15, 2005,
PFPC Inc. provided sub-administration services to the Constellation TIP Mid Cap
Fund.
CIDCO provides distribution services to the Funds under a Distribution
Agreement. CIDCO also provides shareholder servicing services to the Funds under
a shareholder servicing plan and agreement. Prior to November 8, 2004, the HLAM
Large Cap Quality Stock Fund had a distribution fee plan.
The Constellation Clover Income Plus, Constellation HLAM Large Cap Quality
Stock, 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 Mid
Cap, Constellation TIP Healthcare & Biotechnology, 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 eligible 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. No fees are currently being paid for distribution services. Under the
Class II Plan, CIMCO currently receives fees equal to 0.25% of each Fund's Class
II Shares' average daily net assets to provide or procure shareholder services.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent for
the Funds under a transfer agency agreement with the Trust. The following Funds
reimbursed CIMCO for amounts paid to third parties that provide sub-transfer
agency and other administrative services to the Funds:
Amount
(000)
------
Constellation Clover Core Value Fund $ 47
Constellation Clover Small Cap Value Fund 795
Constellation Clover Core Fixed Income Fund 18
Constellation Clover Income Plus Fund --
Constellation Chartwell Ultra Short Duration Fixed Income Fund 410
Constellation Chartwell Short Duration Fixed Income Fund 164
Constellation Chartwell High Yield Fund 4
Constellation HLAM Large Cap Quality Stock Fund --
Constellation Pitcairn Diversified Value Fund 4
Constellation Pitcairn Select Value Fund --
Constellation Pitcairn Diversified Growth Fund 1
Constellation Pitcairn Small Cap Fund 8
Constellation Pitcairn Family Heritage(R) Fund 10
Constellation Pitcairn Taxable Bond Fund --
Constellation Pitcairn Tax-Exempt Bond Fund --
Constellation Sands Capital Select Growth Fund 48
Constellation TIP Small Cap Value Opportunities Fund 87
Constellation TIP Mid Cap Fund --
Constellation TIP Financial Services Fund 10
Constellation TIP Healthcare & Biotechnology Fund 65
Constellation International Equity Fund 3
Constellation Strategic Value and High Income Fund 5
Amounts designated as "--" are either $0 or have been rounded to $0.
Constellation Funds 2005 Annual Report 131
Notes to Financial Statements
- --------------------------------------------------------------------------------
Prior to April 15, 2005, PFPC Inc. served as the transfer agent and dividend
disbursing agent to the Constellation TIP Mid Cap Fund.
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. 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.
CIMCO has agreed to waive all or a portion of its fee and to reimburse expenses
in order to keep certain Fund's "Other Expenses" from exceeding a specified
percentage of the average daily net assets of the Fund on an annualized basis.
"Other
Advisory Expense"
(Fees) Cap
-------- --------
Constellation Clover Core Value Fund 0.74% 0.50%(1)
Constellation Clover Small Cap Value Fund 0.85 0.50(1)
Constellation Clover Core Fixed Income Fund 0.45 0.35(1)
Constellation Clover Income Plus Fund 0.80 0.50(2)
Constellation Chartwell Ultra Short Duration Fixed
Income Fund 0.25 0.43(2)(3)
Constellation Chartwell Short Duration Fixed Income
Fund 0.25 0.43(2)(3)
Constellation Chartwell High Yield Fund 0.55 0.05(2)(4)
Constellation HLAM Large Cap Quality Stock Fund 0.75 0.50(5)
Constellation Pitcairn Diversified Value Fund 0.70 0.40(6)
Constellation Pitcairn Select Value Fund 0.70 0.45(6)
Constellation Pitcairn Diversified Growth Fund 0.70 0.40(6)
Constellation Pitcairn Small Cap Fund 0.70 0.40(6)(7)
Constellation Pitcairn Family Heritage(R) Fund 0.90 0.40(6)
Constellation Pitcairn Taxable Bond Fund 0.40 0.50(6)
Constellation Pitcairn Tax-Exempt Bond Fund 0.30 0.40(6)
Constellation Sands Capital Select Growth Fund -
Class I Shares 0.85 0.25(6)
Constellation Sands Capital Select Growth Fund -
Class II Shares 0.85 0.50(6)
Constellation TIP Small Cap Value Opportunities Fund 0.95 0.50(2)
Constellation TIP Mid Cap Fund 0.80 0.10(8)
Constellation TIP Financial Services Fund 1.00(9) 0.40
Constellation TIP Healthcare & Biotechnology Fund 1.00(9) 0.75
Constellation International Equity Fund 0.95 0.50(6)(7)
Constellation Strategic Value and High Income Fund 0.10 0.15(2)
(1) Represents a voluntary cap.
(2) Represents a contractual cap effective through January 31, 2006.
(3) Effective January 31, 2005, the Board agreed to increase the other expense
cap from 0.24% to 0.43%.
(4) Effective February 1, 2005, the Board agreed to decrease the other expense
cap from 0.35% to 0.05%.
(5) Represents a contractual cap effective through October 1, 2007.
(6) Represents a contractual cap effective through July 31, 2007.
(7) 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.
(8) Represents a contractual cap effective through April 30, 2006.
(9) Represents the base fee which is subject to a performance adjustment
relative to the Fund's performance relative to the performance of the
Fund's benchmark.
For certain 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. The
Fund's base fee is accrued daily and paid monthly, based on the Fund's average
net assets during the current month. The performance comparison is made for a
rolling 12-month period, consisting of the current month for which performance
is available plus the previous 11 months. This comparison is made at the end of
each month, with appropriate performance-based adjustments added to (or
subtracted from) the advisory fee.
The performance adjustment is calculated and paid monthly by comparing the
Fund's performance to that of the Fund's performance benchmark over the
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.
For the year-ended September 30, 2005, the Constellation TIP Financial Services
and Constellation TIP Healthcare & Biotechnology Funds advisory fees were
subject to adjustment, up or down, based on each Fund's performance relative to
the performance of the Fund's benchmark.
The base advisory fee, annual adjustment rate, benchmark, and over/under
performance relative to the benchmark threshold are as follows:
Base Annual
Advisory Adjustment Benchmark
Fee Rate Benchmark Threshold(1)
-------- ---------- ---------- ------------
Constellation S&P 500
TIP Financial Financials
Services Fund 1.00% +/-0.25% Index +/-3.01%
Constellation S&P 500
TIP Healthcare & Healthcare
Biotechnology Fund 1.00 +/-0.25 Index +/-3.01
(1) See the Funds' Prospectus and Statement of Additional Information for more
information regarding the Funds' benchmark performance.
During the year ended September 30, 2005, the following Funds' advisory fees
were adjusted in accordance with the policy described above:
Base Adviser Performance Net Adviser Fee
Fee Adjustment Before Waivers
------------ ----------- ---------------
Constellation
TIP Financial
Services Fund $160,204 $28,154 $188,358
Constellation
TIP Healthcare &
Biotechnology Fund 427,461 62,855 490,316
132 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
Beginning May 1, 2005, the 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 and Constellation Strategic Value and High Income
Funds advisory fees were subject to adjustment, up or down, based on each Fund's
performance relative to the performance of the Fund's benchmark.
The base advisory fee, annual adjustment rate, benchmark, and over/under
performance relative to the benchmark threshold are as follows:
Base Annual
Advisory Adjustment
Fees Rate Benchmark Benchmark Threshold(1)
-------- ---------- -------------------------------- ------------------------------
Constellation Clover Core Value Fund 0.74% +/-0.03125% Russell 3000 Index +/-2.01 to 3.00% = +/-0.03125%
+/-0.0625 +/-3.01 to 4.00% = +/-0.0625%
+/-0.09375 +/-4.01 to 5.00% = +/-0.09375%
+/-0.125 +/-5.01 and above = +/-0.125%
Constellation Clover Small Cap Value 0.85 +/-0.0375 Russell 2000 Value Index +/-2.01 to 3.00% = +/-0.0375%
Fund +/-0.075 +/-3.01 to 4.00% = +/-0.0750%
+/-0.1125 +/-4.01 to 5.00% = +/-0.1125%
+/-0.15 +/-5.01 and above = +/-0.15%
Constellation Clover Core Fixed 0.45 +/-0.02 Lehman Aggregate +/-2.01 to 3.00% = +/-0.02%
Income Fund +/-0.04 Bond Index +/-3.01 to 4.00% = +/-0.04%
+/-0.06 +/-4.01 to 5.00% = +/-0.06%
+/-0.08 +/-5.01 and above = +/-0.08%
Constellation Chartwell Ultra Short 0.25 +/-0.06 Merrill Lynch 3-Month +/-0.76
Duration Fixed Income Fund U.S. Treasury Bill Index
Constellation Chartwell Short 0.25 +/-0.06 Lehman 1-3 Year U.S. +/-1.51
Duration Fixed Income Fund Government Bond Index
Constellation Chartwell High Yield 0.55 +/-0.10 Merrill Lynch High Yield, +/-3.01
Fund Cash Pay Index
Constellation TIP Small Cap Value 0.95 +/-0.15 Russell 2000 Value Index +/-3.01
Opportunities Fund
Constellation Strategic Value and 0.10 +/-0.05 50%/50% blend of the Russell +/-3.01
High Income Fund 2000 Value Index and the Merrill
Lynch High Yield, Cash Pay Index
(1) See the Funds' Prospectus and Statement of Additional Information for more
information regarding the Fund's benchmark performance.
For the period May 1 to September 30, 2005, the following Funds' advisory fees
were adjusted in accordance with the policy described above:
Base Net Adviser
Adviser Performance Fee Before
Fee Adjustment Waivers
---------- ----------- -----------
Constellation Clover Core
Value Fund $ 443,157 $ 32,680 $ 475,837
Constellation Clover Small
Cap Value Fund 1,688,804 (217,280) 1,471,524
Constellation Clover Core
Fixed Income Fund 54,635 -- 54,635
Constellation Chartwell Ultra
Short Duration Fixed
Income Fund 342,824 -- 342,824
Constellation Chartwell Short
Duration Fixed Income Fund 124,595 -- 124,595
Constellation Chartwell High
Yield Fund 15,235 (2,630) 12,605
Constellation TIP Small Cap
Value Opportunities Fund 151,666 3,232 154,898
Constellation Strategic Value
and High Income Fund 345 (38) 307
Constellation Funds 2005 Annual Report 133
Notes to Financial Statements
- --------------------------------------------------------------------------------
Beginning August 1, 2005, 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' advisory fees were subject to adjustment, up or down, based on each
Fund's performance relative to the performance of the Fund's benchmark.
The base advisory fee, annual adjustment rate, benchmark, and over/under
performance relative to the benchmark threshold are as follows:
Base Annual
Advisory Adjustment Benchmark
Fee Rate Benchmark Threshold(1)
-------- ---------- ------------- ------------
Constellation
Pitcairn Diversified Russell 1000
Value Fund 0.70% +/-0.10% Value Index +/-2.00%
Constellation
Pitcairn Select Russell 1000
Value Fund 0.70 +/-0.10 Value Index +/-3.00%
Constellation
Pitcairn Diversified Russell 1000
Growth Fund 0.70 +/-0.10 Growth Index +/-2.00%
Constellation
Pitcairn Small Russell 2000
Cap Fund 0.70 +/-0.10 Index +/-2.50%
Constellation
Pitcairn
Family Heritage(R) Wilshire
Fund 0.90 +/-0.10 5000 Index +/-2.50%
Constellation Lehman U.S.
Pitcairn Taxable Government
Bond Fund 0.40 +/-0.08 Credit Index +/-1.00%
Constellation Lehman
Pitcairn Tax-Exempt Municipal
Bond Fund 0.30 +/-0.06 Bond Index +/-1.00%
Constellation
Sands Capital
Select Growth Russell 1000
Fund 0.85 +/-0.15 Growth Index +/-2.50%
Constellation MSCI All
International Country World
Equity ex-U.S.
Fund 0.95 +/-0.10 Index +/-2.00
(1) See the Funds' Prospectus and Statement of Additional Information for more
information regarding the Funds' benchmark performance.
For the period August 1 to September 30, 2005, the following Funds' advisory
fees were adjusted in accordance with the policy described above:
Base Net Adviser
Adviser Performance Fee Before
Fee Adjustment Waivers
-------- ----------- -----------
Constellation Pitcairn Diversified
Value Fund $195,234 $(13,701) $181,533
Constellation Pitcairn Select
Value Fund 76,033 (5,451) 70,582
Constellation Pitcairn Diversified
Growth Fund 136,045 -- 136,045
Constellation Pitcairn Small
Cap Fund 113,823 (8,148) 105,675
Constellation Pitcairn Family
Heritage(R) Fund 126,337 (6,932) 119,405
Constellation Pitcairn Taxable
Bond Fund 32,160 (3,249) 28,911
Constellation Pitcairn Tax-Exempt
Bond Fund 57,042 (5,871) 51,171
Constellation Sands Capital
Select Growth Fund 322,457 18,604 341,071
Constellation International
Equity Fund 198,848 (9,927) 188,921
Beginning December 1, 2005, January 1, 2006 and May 1, 2006, the Constellation
HLAM Large Cap Quality Stock, Constellation Clover Income Plus and Constellation
TIP Mid Cap Funds, advisory fees will be subject to adjustment, up or down,
based on each Fund's performance relative to the performance of the Fund's
benchmark. See the Funds' Prospectus and Statement of Additional Information for
more information regarding the Funds' benchmark performance.
CIMCO has entered into investment sub-advisory agreements with the following
parties:
Clover Capital Management, Inc.
Constellation Clover Core Value Fund
Constellation Clover Small Cap Value Fund
Constellation Clover Core Fixed Income Fund
Constellation Clover Income Plus 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 Quality Stock 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
134 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
Sands Capital Management, LP.
Constellation Sands Capital Select Growth Fund
Turner Investment Partners, Inc.
Constellation TIP Small Cap Value Opportunities Fund
Constellation TIP Mid Cap Fund
Constellation TIP Financial Services Fund
Constellation TIP Healthcare & Biotechnology 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, Hilliard Lyons Asset Management, Sands Capital Management, LP,
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.
Prior to April 15, 2005, CIMCO received a unified management fee equal to 0.90%
of the assets on an annual basis of the Constellation Institutional Portfolios
TIP Midcap Core Portfolio. Under the unified fee arrangement, CIMCO was
responsible for compensating any third party engaged by CIMCO to provide
services under its supervision, including administrative, accounting, custodial
and transfer agency services. The unified fee did not include the costs of any
interest, taxes, dues, fees or similar costs, brokerage or other transaction
costs, or certain extraordinary expenses.
6. Investment transactions:
The cost of security purchases and the proceeds from security sales and
maturities, other than short-term investments, for the year or period ended
September 30, 2005, were as follows:
Sales and
Purchases Maturities
(000) (000)
--------- ----------
Constellation Clover Core Value Fund $144,969 $ 70,245
Constellation Clover Small Cap
Value Fund 391,791 555,032
Constellation Clover Income Plus Fund 4,661 654
Constellation Chartwell High Yield Fund 11,480 14,437
Constellation HLAM Large Cap
Quality Stock Fund 6,560 10,958
Constellation Pitcairn Diversified
Value Fund 103,598 106,174
Sales and
Purchases Maturities
(000) (000)
--------- ----------
Constellation Pitcairn Select
Value Fund $ 60,465 $ 62,032
Constellation Pitcairn Diversified
Growth Fund 65,955 63,100
Constellation Pitcairn Small Cap Fund 94,965 97,350
Constellation Pitcairn Family
Heritage(R) Fund 21,777 20,141
Constellation Pitcairn Taxable Bond Fund 22,525 17,008
Constellation Pitcairn Tax-Exempt
Bond Fund 41,937 41,551
Constellation Sands Capital Select
Growth Fund 157,859 37,203
Constellation TIP Small Cap Value
Opportunities Fund 107,422 56,731
Constellation TIP Mid Cap Fund 1,098 768
Constellation TIP Financial Services Fund 20,307 21,751
Constellation TIP Healthcare &
Biotechnology Fund 77,297 68,047
Constellation International Equity Fund 59,823 67,127
Constellation Strategic Value and High
Income Fund 1,381 1,154
Sales and
Maturities
Purchases (000) (000)
----------------- ------------------
Gov't Other Gov't Other
-------- ------ -------- -------
Constellation Clover Core
Fixed Income Fund $ 15,001 $4,987 $ 15,210 $ 9,160
Constellation Chartwell
Ultra Short Duration
Fixed Income Fund 132,707 4,977 165,047 --
Constellation Chartwell
Short Duration
Fixed Income Fund 53,585 -- 80,289 11,465
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. The differences are primarily due to wash
sales, net operating losses, REIT adjustments, paydowns, in-kind redemptions and
Constellation Funds 2005 Annual Report 135
Notes to Financial Statements
- --------------------------------------------------------------------------------
adjustments due to investments in passive foreign investment companies. 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.
Accordingly, the following permanent differences have been reclassified to/from
the following accounts (000):
Undistributed Accumulated
net investment net realized Paid-in-
income gain capital
-------------- ------------ --------
Constellation Clover Core Value Fund $ 5 $ (5) $ --
Constellation Clover Small Cap Value Fund 2,461 (205) (2,256)
Constellation Clover Core Fixed Income Fund 59 (59) --
Constellation Clover Income Plus Fund 2 (2) --
Constellation Chartwell Ultra Short Duration Fixed Income Fund 271 (271) --
Constellation Chartwell Short Duration Fixed Income Fund 790 (790) --
Constellation HLAM Large Cap Quality Stock Fund 10 (10) --
Constellation Pitcairn Diversified Value Fund 16 (16) --
Constellation Pitcairn Select Value Fund 2 (2) --
Constellation Pitcairn Diversified Growth Fund 1 (1) --
Constellation Pitcairn Small Cap Fund 261 (22) (239)
Constellation Pitcairn Family Heritage(R) Fund 6 (6) --
Constellation Pitcairn Taxable Bond Fund (3) 3 --
Constellation Sands Capital Select Growth Fund 1,193 -- (1,193)
Constellation TIP Small Cap Value Opportunities Fund 35 (35) --
Constellation TIP Financial Services Fund 3 (3) --
Constellation TIP Healthcare & Biotechnology Fund 577 (577) --
Constellation International Equity Fund 419 (419) --
Constellation Strategic Value and High Income Fund -- (156) 156
The reclassifications have no impact on net assets or net asset value per share.
136 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
The tax character of dividends and distributions declared during the periods
ended September 30, 2005 and September 30, 2004 (unless otherwise noted) were as
follows (000):
Ordinary Long-term Tax exempt Return of
income capital gain income capital Total
-------- ------------ ---------- --------- -------
Constellation Clover Core Value Fund
2005 $ 274 $5,107 $ -- $-- $ 5,381
2004 468 1,442 -- -- 1,910
Constellation Clover Small Cap Value Fund
2005 -- -- -- -- --
2004 652 -- -- -- 652
Constellation Clover Core Fixed Income Fund
2005 1,211 395 -- -- 1,606
2004 1,530 -- -- -- 1,530
Constellation Clover Income Plus Fund
2005(1) 51 -- -- -- 51
Constellation Chartwell Ultra Short Duration Fixed
Income Fund
2005 10,576 -- -- -- 10,576
2004 8,779 -- -- -- 8,779
Constellation Chartwell Short Duration Fixed Income
Fund
2005 5,248 -- -- -- 5,248
2004 5,810 -- -- -- 5,810
Constellation Chartwell High Yield Fund
2005 489 -- -- -- 489
2004 753 -- -- -- 753
Constellation HLAM Large Cap Quality Stock Fund
2005(2) -- 956 -- -- 956
2004(3) -- 3,543 -- -- 3,543
2003(3) 4 5,861 -- -- 5,865
Constellation Pitcairn Diversified Value Fund
2005 1,707 -- -- -- 1,707
2004(4) 1,559 -- -- -- 1,559
2003(5) 1,782 -- -- -- 1,782
Constellation Pitcairn Select Value Fund
2005 409 882 -- -- 1,291
2004(4) 492 902 -- -- 1,394
2003(5) 509 -- -- -- 509
Constellation Pitcairn Diversified Growth Fund
2005 536 -- -- -- 536
2004(4) 46 -- -- -- 46
2003(5) -- -- -- -- --
Constellation Pitcairn Small Cap Fund
2005 -- 732 -- -- 732
2004(4) -- 3 -- -- 3
2003(5) 17 -- -- -- 17
Constellation Pitcairn Family Heritage(R) Fund
2005 418 -- -- -- 418
2004(4) 38 -- -- 2 40
2003(5) -- -- -- -- --
Constellation Pitcairn Taxable Bond Fund
2005 1,946 -- -- -- 1,946
2004(4) 1,725 -- -- -- 1,725
2003(5) 1,858 -- -- -- 1,858
Constellation Pitcairn Tax-Exempt Bond Fund
2005 27 716 4,376 -- 5,119
2004(4) 41 432 4,034 -- 4,507
2003(5) 12 294 4,611 -- 4,917
Constellation TIP Small Cap Value Opportunities Fund
2005 1,664 326 -- -- 1,990
2004 223 -- -- -- 223
Constellation TIP Mid Cap Fund
2005 16 5 -- -- 21
2004(2) 32 28 -- -- 60
2003(3) -- 29 -- -- 29
Constellation TIP Financial Services Fund
2005 754 348 -- -- 1,102
2004 1,642 111 -- -- 1,753
Constellation TIP Healthcare & Biotechnology Fund
2005 162 1,072 -- -- 1,234
2004 5 9 -- -- 14
Constellation International Equity Fund
2005 238 -- -- -- 238
2004(4) 2,621 -- -- -- 2,621
2003(5) 459 -- -- -- 459
Constellation Strategic Value and High Income Fund
2005 112 2 -- -- 114
2004 125 -- -- -- 125
(1) Commenced operations February 28, 2005.
(2) From the period January 1, 2005 through September 30, 2005. The Fund
changed its fiscal year end from December 31 to September 30.
(3) For the year ended December 31.
(4) From the period November 1, 2003 through September 30, 2004. The Fund
changed its fiscal year end from October 31 to September 30.
(5) For the year ended October 31.
Constellation Funds 2005 Annual Report 137
Notes to Financial Statements
- --------------------------------------------------------------------------------
As of September 30, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows (000):
Capital Post-
Ordinary Long-term Tax-exempt loss October
(income) capital gain income carry forward losses
-------- ------------ ---------- ------------- -------
Constellation Clover Core
Value Fund $1,767 $ 9,269 $ -- $ -- $ --
Constellation Clover Small
Cap Value Fund -- 60,167 -- -- --
Constellation Clover Core
Fixed Income Fund 174 521 -- -- --
Constellation Clover
Income Plus Fund 21 -- -- -- (61)
Constellation Chartwell
Ultra Short Duration
Fixed Income Fund 910 -- -- (6,706) (342)
Constellation Chartwell
Short Duration Fixed
Income Fund 363 -- -- (2,090) (986)
Constellation Chartwell
High Yield Fund 39 -- -- (15,071) --
Constellation HLAM Large
Cap Quality Stock Fund 101 3,593 -- -- --
Constellation Pitcairn
Diversified Value Fund 3,704 10,085 -- -- --
Constellation Pitcairn
Select Value Fund 1,911 4,224 -- -- --
Constellation Pitcairn
Diversified Growth Fund 10 -- -- (71,911) (241)
Constellation Pitcairn Small
Cap Fund -- 12,655 -- -- --
Constellation Pitcairn Family
Heritage(R) Fund 1 -- -- (14,860) --
Constellation Pitcairn
Taxable Bond Fund 153 -- -- (473) (126)
Constellation Pitcairn
Tax-Exempt Bond Fund -- 1,241 358 -- --
Constellation Sands Capital
Select Growth Fund -- -- -- (26,131) (3,469)
Constellation TIP Small Cap
Value Opportunities Fund 628 1,141 -- -- --
Constellation TIP Mid
Cap Fund 38 24 -- -- --
Constellation TIP
Financial Services Fund 819 1,645 -- -- --
Constellation TIP Healthcare &
Biotechnology Fund 955 830 -- -- --
Constellation International
Equity Fund 1,724 -- -- (24,106) --
Constellation Strategic Value
and High Income Fund 8 1 -- -- --
Total
Post- distributable
October Unrealized Other earnings
Currency appreciation temporary (accumulated)
losses (depreciation) differences (losses)
-------- -------------- ----------- -------------
Constellation Clover Core
Value Fund $ -- $20,165 $ (2) $ 31,199
Constellation Clover Small
Cap Value Fund -- 73,509 -- 133,676
Constellation Clover Core
Fixed Income Fund -- (79) (87) 529
Constellation Clover
Income Plus Fund -- 98 (21) 37
Constellation Chartwell
Ultra Short Duration
Fixed Income Fund -- 1,036 (910) (6,012)
Constellation Chartwell
Short Duration Fixed
Income Fund -- (885) (367) (3,965)
Constellation Chartwell
High Yield Fund -- (195) (37) (15,264)
Constellation HLAM Large
Cap Quality Stock Fund -- 3,755 -- 7,449
Constellation Pitcairn
Diversified Value Fund -- 22,417 (310) 35,896
Constellation Pitcairn
Select Value Fund -- 6,431 (86) 12,480
Constellation Pitcairn
Diversified Growth Fund -- (138) (10) (72,290)
Constellation Pitcairn Small
Cap Fund -- 10,987 -- 23,642
Constellation Pitcairn Family
Heritage(R) Fund -- 14,553 -- (306)
Constellation Pitcairn
Taxable Bond Fund -- 1,292 (150) 696
Constellation Pitcairn
Tax-Exempt Bond Fund -- 5,818 (354) 7,063
Constellation Sands Capital
Select Growth Fund -- 33,317 -- 3,717
Constellation TIP Small Cap
Value Opportunities Fund -- 5,111 -- 6,880
Constellation TIP Mid
Cap Fund -- 116 -- 178
Constellation TIP
Financial Services Fund -- 2,025 -- 4,489
Constellation TIP Healthcare &
Biotechnology Fund -- 7,105 -- 8,890
Constellation International
Equity Fund (217) 22,242 -- (357)
Constellation Strategic Value
and High Income Fund -- 135 (3) 141
Post-October losses represent losses realized on investment transactions from
November 1, 2004 through September 30, 2005 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 carry forwards
may be carried forward and applied against future capital gains.
138 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 2005, the following 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 2013 Total
---- ------ ------- ------- ------- ------ ------ -------
Constellation Chartwell Ultra Short
Duration Fixed Income Fund $ -- $ -- $ -- $ -- $ -- $6,706 $ -- $ 6,706
Constellation Chartwell Short
Duration Fixed Income Fund -- -- -- -- -- 1,994 96 2,090
Constellation Chartwell High
Yield Fund 481 2,916 2,590 4,591 4,493 -- -- 15,071
Constellation Pitcairn Diversified
Growth Fund -- -- 23,304 35,399 11,331 -- 1,877 71,911
Constellation Pitcairn Family
Heritage(R) Fund -- 1,614 3,678 2,799 4,941 -- 1,828 14,860
Constellation Pitcairn Taxable
Bond Fund -- -- -- 473 -- -- -- 473
Constellation Sands Capital
Select Growth Fund -- -- 8,045 12,366 5,720 -- -- 26,131
Constellation International
Equity Fund -- -- -- 15,580 8,526 -- -- 24,106
During the year ended September 30, 2005, the following Funds utilized capital
loss carryforwards to offset capital gains (000):
Amount
-------
Constellation Clover Small Cap
Value Fund $11,559
Constellation Chartwell Ultra Short
Duration Fixed Income Fund 13
Constellation Chartwell High
Yield Fund 84
Constellation Pitcairn Diversified
Value Fund 172
Constellation Pitcairn Taxable
Bond Fund 17
Constellation Sands Capital Select
Growth Fund 135
Constellation International
Equity Fund 12,975
Constellation Funds 2005 Annual Report 139
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 2005, the total cost of investments and securities sold short
for Federal income tax purposes and the aggregate gross unrealized appreciation
and depreciation for the investments and securities sold short held by the Funds
were as follows (000):
Net unrealized
Federal Unrealized Unrealized appreciation
tax cost appreciation depreciation (depreciation)
-------- ------------ ------------ --------------
Constellation Clover Core
Value Fund $164,754 $22,410 $ (2,245) $20,165
Constellation Clover Small
Cap Value Fund 406,930 86,544 (13,035) 73,509
Constellation Clover Core
Fixed Income Fund 26,073 199 (278) (79)
Constellation Clover Income
Plus Fund 3,243 318 (220) 98
Constellation Chartwell Ultra Short
Duration Fixed Income Fund 304,816 1,680 (644) 1,036
Constellation Chartwell Short
Duration Fixed Income Fund 129,653 385 (1,270) (885)
Constellation Chartwell
High Yield Fund 6,830 21 (216) (195)
Constellation HLAM Large Cap
Quality Stock Fund 16,505 4,236 (481) 3,755
Constellation Pitcairn Diversified
Value Fund 187,299 26,326 (3,909) 22,417
Constellation Pitcairn Select
Value Fund 73,368 7,903 (1,472) 6,431
Constellation Pitcairn Diversified
Growth Fund 142,159 14,668 (14,806) (138)
Constellation Pitcairn Small
Cap Fund 98,268 14,019 (3,032) 10,987
Constellation Pitcairn Family
Heritage(R) Fund 90,965 22,008 (7,455) 14,553
Constellation Pitcairn Taxable
Bond Fund 50,459 1,626 (334) 1,292
Constellation Pitcairn Tax-Exempt
Bond Fund 104,501 5,919 (101) 5,818
Constellation Sands Capital Select
Growth Fund 273,665 39,781 (6,464) 33,317
Constellation TIP Small Cap Value
Opportunities Fund 75,968 6,387 (1,276) 5,111
Constellation TIP Mid Cap Fund 724 122 (6) 116
Constellation TIP Financial
Services Fund 18,173 2,207 (182) 2,025
Constellation TIP Healthcare &
Biotechnology Fund 59,713 7,873 (768) 7,105
Constellation International
Equity Fund 105,764 23,922 (1,681) 22,241
Constellation Strategic Value
and High Income Fund 680 137 (2) 135
140 Constellation Funds 2005 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:
Effective February 1, 2005, the Funds may lend securities in their portfolio
pursuant to a securities lending agreement ("Lending Agreement") with PFPC, Inc.
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 BlackRock Institutional Money
Market Trust. The Funds bear the risk of incurring a loss from the investment of
cash collateral due to either credit or market factors.
Prior to February 1, 2005, the 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.
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 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
Constellation Funds 2005 Annual Report 141
Notes to Financial Statements
- --------------------------------------------------------------------------------
same investment objectives and policies, and substantially the same risks,
policies, restrictions and limitations, as a Pitcairn Fund.
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 Aquiring 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 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
Pitcairn International Equity Fund Constellation International Equity Fund
Turner Strategic Value and High Income Fund Constellation Strategic Value and High Income Fund
The shareholders of the Hilliard Lyons Growth Fund, Inc. approved the
reorganization of the Hilliard Lyons Growth Fund, Inc. with and into the
Constellation HLAM Large Cap Quality Stock Fund, a newly-formed series of the
Constellation Funds in a tax-free reorganization effective November 8, 2004.
Each shareholder of the Hilliard Lyons Growth Fund, Inc. Investor A Shares
received a number of shares of the Constellation HLAM Large Cap Quality Stock
Fund equal in dollar value and in number of shares of the Hilliard Lyons Growth
Fund, Inc. as of November 5, 2004. Each shareholder of the Hilliard Lyons Growth
Fund, Inc. Investor B Shares received a number of shares of the Constellation
HLAM Large Cap Quality Stock Fund equal in dollar value to Hilliard Lyons Growth
Fund, Inc. The Constellation HLAM Large Cap Quality Stock Fund has the same
investment objective and policies, and substantially the same risks, policies,
restrictions and limitations, as the Hilliard Lyons Growth Fund, Inc. Prior to
November 8, 2004, the Fund offered Investor A and Investor B Shares. On November
8, 2004, the Fund converted the Investor A Shares into Class II Shares.
Subsequently, the Investor B Shares were fully liquidated and exchanged for
Class II Shares. Investor A Shares were the accounting survivor in this
transaction.
Prior to January 28, 2005, the Constellation Chartwell Ultra Short Duration
Fixed Income and Constellation Chartwell Short Duration Fixed Income Funds
offered Class I and Class II Shares. On January 28, 2005, the Funds merged Class
II Shares into Class I Shares.
Effective April 15, 2005, the Constellation Institutional Portfolios TIP Midcap
Core Portfolio was reorganized as a seperate series of the Constellation Funds
in a tax-free reorganization and was renamed the Constellation TIP Mid Cap Fund.
Each shareholder received a number a shares equal in dollar value and in the
number of shares of the Constellation Institutional Portfolios TIP Midcap Core
Portfolio. The Constellation TIP Mid Cap Fund has the same investment objective
and policies and substantially the same risks, policies, restrictions and
limitations as the Constellation Institutional Portfolios TIP Midcap Core
Portfolio.
11. Subsequent Events
On November 18, 2005, CIMCO entered into an agreement to sell substantially all
of its assets to Touchstone Advisors, Inc., a subsidiary of the Western &
Southern Financial Group (Touchstone). On November 22, 2005, the Board of
Trustees of the Trust finalized its approval of new advisory and subadvisory
agreements with Touchstone that are substantially similar to agreements
currently in place with CIMCO, and directed the Trust's officers to submit the
agreements to shareholders of the Funds for their approval. No changes to the
Funds' portfolio management teams and/or investment strategies are expected to
occur. The Board of Trustees has called a meeting of the Funds' shareholders for
February 10, 2006
142 Constellation Funds 2005 Annual Report
Notes to Financial Statements
- --------------------------------------------------------------------------------
to vote on these and other related matters. Shareholders of record as of
December 1, 2005 will be eligible to vote at the meeting.
On November 29, 2005, the Board of Trustees of the Funds met for the purpose of,
among other things, considering closing 3 of the 22 Funds: Constellation TIP
Financial Services Fund, Constellation Chartwell High Yield Fund and
Constellation Clover Income Plus Fund. It is anticipated that these funds will
close no later than January 2006.
Constellation Funds 2005 Annual Report 143
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Constellation Funds:
We have audited the accompanying statements of net assets of the 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,
(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(R) 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"), the Constellation HLAM Large Cap
Quality Stock Fund and Constellation TIP Mid Cap Fund, and the statements of
assets and liabilities, including the schedules of investments, of the
Constellation Clover Core Value Fund and the Constellation Strategic Value and
High Income Fund (two former Turner Funds) and the Constellation Clover Income
Plus Fund, the twenty-two funds constituting Constellation Funds (collectively,
the "Constellation Funds") as of September 30, 2005, the related statements of
operations for the year or period then ended, the statements of changes in net
assets and financial highlights of the Former Turner Funds and Constellation
Clover Income Plus Fund for each of the years or periods in the two-year period
then ended, the statements of changes in net assets and financial highlights of
the Former Pitcairn Funds for the year ended September 30, 2005 and the eleven
month period ended September 30, 2004, and the statement of changes in net
assets and financial highlights of the Constellation TIP Mid Cap Fund and the
Constellation HLAM Large Cap Quality Stock Fund for the nine-month period ended
September 30, 2005 and the year ended December 31, 2004. These financial
statements and financial highlights are the responsibility of Constellation
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The 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 report 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. The financial statements and financial highlights of the HLAM Large Cap
Quality Stock Fund for periods presented through December 31, 2003 were audited
by other auditors. Those auditors expressed an unqualified opinion on those
financial statements and financial highlights in their report dated February 11,
2004. The financial statements and financial highlights of the Constellation TIP
Mid Cap Fund for the period from January 2, 2003 through December 31, 2003 were
audited by other auditors. Those auditors expressed an unqualified opinion on
those financial statements and financial highlights in their report dated
January 30, 2004.
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, 2005, by correspondence with the custodian
and brokers. As to securities purchased or sold but not yet received or
delivered, we performed other appropriate auditing procedures. 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, 2005, the results of their operations
for the year or period then ended, the changes in net assets and financial
highlights of the Former Turner Funds and Constellation Clover Income Plus Fund
for each of the years or periods in the two-year period then ended, the
statements of changes in net assets and financial highlights of the Former
Pitcairn Funds for the year ended September 30, 2005 and the eleven month period
ended September 30, 2004, and the statements of changes in net assets and
financial highlights of the Constellation TIP Mid Cap Fund and Constellation
HLAM Large Cap Quality Stock Fund for the nine-month period ended September 30,
2005 and the year ended December 31, 2004 in conformity with U.S. generally
accepted accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
November 29, 2005
144 Constellation Funds 2005 Annual Report
Notice to Shareholders (Unaudited)
- --------------------------------------------------------------------------------
For shareholders that do not have a September 30, 2005 tax year end, this notice
is for informational purposes only. For shareholders with a September 30, 2005
year end, please consult your tax advisor as to the pertinence of this notice.
For the fiscal year ended September 30, 2005, each Fund is designating the
following items with regard to distributions paid during the year.
Dividends
qualifying
Long-term for
(15% rate) corporate
capital Ordinary Tax- dividends Qualifying U.S.
gain income exempt Total receivable dividend Government
distributions distributions interest distributions deduction(1) income(2) interest(3)
------------- ------------- -------- ------------- ------------ ---------- -----------
Constellation Clover Core Value Fund 94.15% 5.85% 0.00% 100.00% 55.36% 53.93% 0.00%
Constellation Clover Small Cap
Value Fund 0.00% 0.00% 0.00% 00.00% 0.00% 0.00% 0.00%
Constellation Clover Large Cap
Value Fund 0.00% 100.00% 0.00% 100.00% 90.03% 87.18% 0.00%
Constellation Clover Core Fixed
Income Fund 24.24% 75.76% 0.00% 100.00% 0.00% 0.00% 11.49%
Constellation Clover Income Plus Fund 0.00% 100.00% 0.00% 100.00% 100.00% 97.70% 0.00%
Constellation Chartwell Ultra Short
Duration Fixed Income Fund 0.00% 100.00% 0.00% 100.00% 0.00% 0.00% 4.95%
Constellation Chartwell Short Duration
Fixed Income Fund 0.00% 100.00% 0.00% 100.00% 0.00% 0.00% 7.55%
Constellation Chartwell High Yield
Fund 0.00% 100.00% 0.00% 100.00% 1.10% 1.10% 0.00%
Constellation HLAM Large Cap
Quality Stock Fund 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 0.00%
Constellation Pitcairn Diversified
Value Fund 0.00% 100.00% 0.00% 100.00% 62.21% 62.11% 0.00%
Constellation Pitcairn Select Value
Fund 67.45% 32.55% 0.00% 100.00% 53.65% 53.12% 0.00%
Constellation Pitcairn Diversified
Growth Fund 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 0.00%
Constellation Pitcairn Small Cap Fund 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 0.00%
Constellation Pitcairn Family
Heritage(R) Fund 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 0.00%
Constellation Pitcairn Taxable
Bond Fund 0.00% 100.00% 0.00% 100.00% 0.00% 0.00% 23.44%
Constellation Pitcairn Tax-Exempt
Bond Fund 14.00% 0.54% 85.46% 100.00% 0.00% 0.00% 0.00%
Constellation Sands Capital Select
Growth Fund 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Constellation TIP Small Cap Value
Opportunities Fund 16.37% 83.63% 0.00% 100.00% 10.14% 9.15% 0.00%
Constellation TIP Mid Cap Fund 25.66% 74.34% 0.00% 100.00% 15.26% 8.82% 0.00%
Constellation TIP Financial
Services Fund 31.58% 68.42% 0.00% 100.00% 14.57% 14.54% 0.00%
Constellation TIP Healthcare &
Biotechnology Fund 86.83% 13.17% 0.00% 100.00% 62.86% 62.71% 0.00%
Constellation International Equity
Fund(4) 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00%
Constellation Strategic Value
and High Income Fund 1.37% 98.63% 0.00% 100.00% 10.69% 9.81% 1.46%
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected as 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) U.S. Government Interest represents the amount of interest that was derived
from direct U.S. Government obligations and distributed during the fiscal
year. This amount is reflected as a percentage of total ordinary income
distributions (the total of short-term capital gain and net investment
income distributions). Generally, interest from direct U.S. Government
obligations is exempt from state income tax.
(4) The Fund intends to pass through a foreign tax credit to shareholders. For
the fiscal year ended September 30, 2005, the total amount of foreign
source income is $2,524,527. The total amount of foreign taxes paid is
$263,849. 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, 2005. Complete information will be computed and reported in conjunction with
your 2005 Form 1099-DIV.
Constellation Funds 2005 Annual Report 145
Trustees and Officers of the Trust (Unaudited)
- --------------------------------------------------------------------------------
Interested Trustee*
John H. Grady
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
Executive Vice President & Secretary of the Trust (2001-2004) -- CEO and Chief
Compliance Officer of CIMCO (2004-present); President and Chief Compliace
Officer of CIDCO (2001-present). Previously, Chief Operating Officer of Turner
Investment Partners (2001-2003); and Partner, Morgan, Lewis & Bockius LLP (law
firm) (October 1995 - January 2001).
Number of Portfolios in
Complex Overseen by Trustee 22
* Mr. Grady is deemed to be an "Interested Trustee" by virtue of his
relationship with Constellation Investment Management Company, LP.
Independent Trustees
Ronald Filante
Address c/o Constellation Investment Management Company,
LP, Berywn, PA 19312
Date of Birth 11/19/45
Position held with Fund Trustee since 1996
Principal occupation(s) during past 5 years
Associate Professor of Finance, Pace University, since 1987.
Number of Portfolios in
Complex Overseen by Trustee 22
Alfred C. Salvato
Address c/o Constellation Investment Management Company,
LP, Berywn, PA 19312
Date of Birth 1/9/58
Position held with Fund Trustee since 1998
Principal occupation(s) during past 5 years
Associate Vice President and Treasurer, Thomas Jefferson University, since
1995.
Number of Portfolios in
Complex Overseen by Trustee 22
Janet F. Sansone
Address c/o Constellation Investment Management Company,
LP, Berywn, PA 19312
Date of Birth 8/11/45
Position held with Fund Trustee since 2004
Principal occupation(s) during past 5 years
Executive Director, JFS Consulting since 1999.
Number of Portfolios in
Complex Overseen by Trustee 22
146 Constellation Funds 2005 Annual Report
Trustees and Officers of the Trust (Unaudited)
- --------------------------------------------------------------------------------
Executive Officers
John J. Canning
Address Constellation Investment Management Company, LP,
Berwyn, PA 19312
Date of Birth 11/15/70
Positions held with Fund Vice President since 2004, Chief Compliance
Officer from 2004 to September 30, 2005
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).
Amy D. Duling
Address Constellation Investment Management Company, LP,
Berwyn, PA 19312
Date of Birth 7/5/67
Positions held with Fund Vice President since 2004
Principal occupation(s) during past 5 years
Employed by CIMCO as Executive Vice President of Marketing and Product
Management since 2004. Previously, National Account Director for Turner
Investment Partners, Inc. (investment management company) (1999-2004).
Jocelyn Fulmor
Address Constellation Investment Management Company, LP,
Berwyn, PA 19312
Date of Birth 3/20/75
Positions held with Fund Vice President, Secretary and Chief Compliance
Officer since October 1, 2005
Principal occupation(s) during past 5 years
Employed by CIMCO as Vice President and Director of Administrative Services
since 2005. Previously, Manager of Regulatory Administration at PFPC Inc.
(mutual fund administrator) (July 2002-March 2005) and Investment Management
Paralegal at Morgan, Lewis & Bockius LLP (law firm) (September 1997-June 2002).
Eric Kleinschmidt
Address SEI Investments, Oaks PA, 19456
Date of Birth 6/16/68
Positions held with Fund Controller and Chief Financial Officer since 2005
Principal occupation(s) during past 5 years
Employed by SEI Investments (investment management company) since July 1999.
Francis J. McAleer, Jr.
Address Constellation Investment Management Company, LP,
Berwyn, PA 19312
Date of Birth 8/13/58
Positions held with Fund Vice President since 2004
Principal occupation(s) during past 5 years
Employed by CIMCO as Executive Vice President of Distribution since 2004.
Previously, Senior Vice President, Head of Distribution for Pilgrim Baxter &
Associates (2002-2004) and Director, Head of Third Party Distribution at Merrill
Lynch Investment Managers (1999-2002).
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.
Constellation Funds 2005 Annual Report 147
Shareholder Voting Results (Unaudited)
- --------------------------------------------------------------------------------
There was a special meeting of shareholders held on August 19, 2005, at which
the shareholders of the Constellation Sands Capital Select Growth Fund were
asked to consider several proposals:
1. To approve an amendment to the fee schedule to the investment advisory
agreement between the Trust, on behalf of the Fund, and Constellation
Investment Management Company, LP to change the performance hurdle rate
from 3.50% to 2.50%.
Number of % of Outstanding % of Shares
Shares Shares Voted
---------- ---------------- -----------
Affirmative 18,629,654 82.6% 98.4%
Against 203,615 0.9% 1.1%
Abstain 96,557 0.4% 0.5%
18,929,826 83.9% 100.0%
2. To approve an amendment to the fee schedule to the sub-advisory agreement
between Constellation Investment Management Company, LP and Sands Capital
Management, Inc. to change the performance fee hurdle rate from 3.50% to
2.50%.
Number of % of Outstanding % of Shares
Shares Shares Voted
---------- ---------------- -----------
Affirmative 18,638,359 82.7% 98.5%
Against 214,989 1.0% 1.1%
Abstain 76,478 0.3% 0.4%
18,929,826 84.0% 100.0%
148 Constellation Funds 2005 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 shareholders 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.
The Trust files each Fund's 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
Funds' Forms N-Q are 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 each 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 without charge, upon
request, (i) via the Funds' website, www.constellationfundsgroup.com; and (ii)
on the Commission's website at http://www.sec.gov.
Constellation Funds Group
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.
Fees billed by KPMG LLP Related to the Trust
KPMG LLP billed the Trust aggregate fees for services rendered to the Trust for
the last two fiscal years as follows:
- ------------------ ----------------------------------------------------- -----------------------------------------------------
2005 2004
- ------------------ ----------------------------------------------------- -----------------------------------------------------
All fees and All fees and All other fees All fees and All fees and All other fees
services to the services to and services to services to the services to and services to
Trust that were service service Trust that were service service
pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that
were did not require were did not require
pre-approved pre-approval pre-approved pre-approval
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(a) Audit $367,500 $0 $0 $389,500 $0 $0
Fees(1)
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(b) Audit- $3,500 $0 $0 $0 $0 $0
Related
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(c) Tax Fees $0 $0 $0 $48,000 $0 $0
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(d) All $0 $0 $0 $0 $0 $0
Other
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Notes:
(1) 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.
(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 provided by the Registrant's audit
firm. The policies and procedures require pre-approving all audit and
permitted non-audit services the independent auditor provides to the
Registrant, and all services that the independent auditor provides to
the Registrant's investment adviser(s) and advisory affiliates (whether
or not directly related to the Registrant'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 Registrant, its investment adviser, and advisory affiliates that
provide ongoing services to the Registrant for services otherwise
requiring audit committee pre-approval during the fiscal year in which
the non-audit service was provided; (b) the Registrant 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:
---------------------------- ----------------- ----------------
2005 2004
---------------------------- ----------------- ----------------
Audit-Related Fees 0% 0%
---------------------------- ----------------- ----------------
Tax Fees 0% 0%
---------------------------- ----------------- ----------------
All Other Fees 0% 0%
---------------------------- ----------------- ----------------
(f) Not applicable.
(g) The aggregate non-audit fees and services billed by KPMG LLP for the last
two fiscal years were $0 and $0 for 2005 and 2004, respectively.
(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.
Not applicable
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 & Chief
Executive Officer
Date 12/07/05
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 & Chief
Executive Officer
Date 12/07/05
By (Signature and Title)* \s\ Eric Kleinschmidt
-------------------------------------
Eric Kleinschmidt, Controller & Chief
Financial Officer
Date 12/07/05
* Print the name and title of each signing officer under his or her signature.