-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vm3uD7DyAYLt66SHMuEqJyVUfzso1JtJDaAjILZdo8oRsYB30d7Ju/crMrGDElZJ fxqR88yTpSq+tPyj/SJFUg== 0000950116-05-003764.txt : 20051209 0000950116-05-003764.hdr.sgml : 20051209 20051209160452 ACCESSION NUMBER: 0000950116-05-003764 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051209 DATE AS OF CHANGE: 20051209 EFFECTIVENESS DATE: 20051209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSTELLATION FUNDS CENTRAL INDEX KEY: 0000914243 IRS NUMBER: 680325521 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08104 FILM NUMBER: 051255665 BUSINESS ADDRESS: STREET 1: 1205 WESTLAKES DRIVE STREET 2: STE 280 CITY: BERWYN STATE: PA ZIP: 19312 BUSINESS PHONE: 4843292800 MAIL ADDRESS: STREET 1: 1205 WESTLAKES DRIVE STREET 2: STE 280 CITY: BERWYN STATE: PA ZIP: 19312 FORMER COMPANY: FORMER CONFORMED NAME: ALPHA SELECT FUNDS DATE OF NAME CHANGE: 19981216 FORMER COMPANY: FORMER CONFORMED NAME: TIP INSTITUTIONAL FUNDS DATE OF NAME CHANGE: 19971205 FORMER COMPANY: FORMER CONFORMED NAME: SOLON FUNDS/DE/ DATE OF NAME CHANGE: 19970424 N-CSR 1 n-csr.txt FORM N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------- FORM N-CSR -------- CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES INVESTMENT COMPANY ACT FILE NUMBER 811-08104 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 - --------------------------------------------------------------------------------
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 - -------------------------------------------------------------------------------- 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. EX-10 2 ex10.txt EXHIBIT 10 CONSTELLATION FUNDS FINANCIAL OFFICER CODE OF ETHICS PURPOSES OF THE CODE The reputation and integrity of Constellation Funds (the "Fund") are valuable assets that are vital to the Fund's success. Each officer and employee of the Fund, including each of the Fund's senior financial officers ("SFOs"), is responsible for conducting the Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. SFOs include the principal executive officer, the principal financial officer, comptroller (or principal accounting officer), and any person who performs a similar function. The Fund has adopted a Code of Ethics under Rule 17j-l under the Investment Company Act of 1940. The Fund's Rule 17j-l Code is designed to prevent certain conflicts of interest that may arise when officers, employees, or directors know about present or future Fund transactions, have the power to influence those transactions; and engage in securities transactions in their personal account(s). The Fund has chosen to adopt a financial officer code of ethics to encourage its SFOs to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Fund's financial disclosures are complete, accurate, and understandable. This Code of Ethics should be read in conjunction with the Fund's other policy statements, including its Rule 17j-l Code and its Disclosure Controls and Procedures. PRINCIPLES FOR THE HANDLING OF FINANCIAL INFORMATION The Fund has adopted the following principles to govern the manner in which SF Os perform their duties. Persons subject to these guidelines include the principal executive officer, the principal financial officer, comptroller (or principal accounting officer), and any Fund officer or employee who performs a similar function or who participates in the preparation of any part of the Fund's financial statements. Specifically, persons subject to this Code shall: o Act with honesty and integrity o Avoid actual or apparent conflicts of interest with the Fund in personal and professional relationships o Provide information to the Fund's employees and service providers (adviser, administrator, outside auditor, outside counsel, custodian, etc.) that is accurate, complete, objective, relevant, timely, and understandable o Endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports o Comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code o Act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or subordinating independent judgment to another end o Respect the confidentiality of information acquired in the course of their work, except where disclosure is expressly permitted or is otherwise legally mandated o Record (or participate in the recording of) entries in the Fund's books and records that are accurate o Refrain from using confidential information for personal advantage VIOLATIONS OF THE CODE Any action that directly or indirectly contravenes one or more of the Principles outlined above shall be treated as a violation of this Code unless good cause for such apparent contravention is found to exist. Dishonest or unethical conduct or conduct that is illegal will constitute a per se violation of this Code, regardless of whether this Code refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. The Fund must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report as appropriate, non-criminal violations. ENFORCEMENT OF THE CODE VIOLATIONS All persons subject to this Code who observe, learn of, or, in good faith, suspect a current or threatened violation of the Code must immediately report the violation in writing to the Compliance Officer, another member of the Fund's senior management, or to the Audit Committee of the Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning. DISCLOSURES All persons subject to this Code shall file a letter (a "Disclosure Letter") regarding any transaction or relationship that reasonably appears to involve an actual or apparent conflict of interest with the Fund within ten days of becoming aware of such transaction or relationship. A Disclosure Letter should be prepared regarding these transactions or relationships whether you are involved or have only observed the transaction or relationship. All Disclosure Letters shall be submitted to the Compliance Officer, or if it is not possible to disclose the matter to the Compliance Officer, then the Disclosure Letter shall be submitted to another member of the Fund's senior management or to the Audit Committee of the Board. An executive officer of the Fund or the Audit Committee will review all Disclosure Letters and determine whether further action is warranted. All determinations will be documented in writing and will be maintained by the Compliance Officer or other appropriate officers of the Fund. OUTSIDE SERVICE PROVIDERS Because service providers to the Fund, such as the Administrator, Sub-Administrator, outside accounting firm, and custodian, provide much of the work relating to the Fund's financial statements, you should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. You should report these actions to the Compliance Officer even if you know, or think, that the service provider has its own code of ethics covering persons who are Fund SFOs or employees. NON-RETALIATION POLICY SFOs who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible. ANNUAL CERTIFICATION SFOs will receive training on the contents and importance of this Code and related policies and the manner in which violations must be reported and how Disclosure Letters must be submitted. Each SFO will be asked to certify on an annual basis that he/she is in full compliance with the Code and any related policy statements. QUESTIONS ABOUT THE CODE The Fund's Board of Trustees has designated John Canning to be the Compliance Officer for purposes of implementing and administering this Code. Any questions about this Code should be directed to the Compliance Officer. Adopted as of: March 24, 2004 EX-31 3 ex31-1.txt EXHIBIT 31.1 CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, John H. Grady, Jr., certify that: 1. I have reviewed this report on Form N-CSR of the Constellation Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 7, 2005 \s\ John H. Grady, Jr. - ---------------------- John H. Grady, Jr. President & Chief Executive Officer EX-31 4 ex31-2.txt EXHIBIT 31.2 CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Eric Kleinschmidt, certify that: 1. I have reviewed this report on Form N-CSR of the Constellation Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 7, 2005 \s\ Eric Kleinschmidt Eric Kleinschmidt Controller & Chief Financial Officer EX-32 5 ex32-1.txt EXHIBIT 32.1 CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the PRESIDENT AND CHIEF EXECUTIVE OFFICER of the CONSTELLATION FUNDS (the "Fund"), with respect to the Fund's Form N-CSR for the period ended SEPTEMBER 30, 2005 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: December 7, 2005 \s\ John H. Grady, Jr. ----------------------- John H. Grady, Jr. EX-32 6 ex32-2.txt EXHIBIT 32.2 CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the CONTROLLER AND CHIEF FINANCIAL OFFICER of the CONSTELLATION FUNDS (the "Fund"), with respect to the Fund's Form N-CSR for the period ended SEPTEMBER 30, 2005 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: December 7, 2005 \s\ Eric Kleinschmidt --------------------- Eric Kleinschmidt -----END PRIVACY-ENHANCED MESSAGE-----