When last year's Bachelorette Meredith Phillips professed her love to suitor Ian McKee, who then dropped to his knee with a surprise proposal—and a 3.25-carat diamond ring—fans were shocked by the unexpected match. Now the couple have another surprise: They've broken off their one-year engagement. "Our relationship began with great expectations for a happy ending," the two said in a Feb. 1 statement to Extra. "Unfortunately things didn't work out as we had hoped. What we experienced together was incredible and we are both sad to see it end."

Phillips, 31, chose McKee, a 30-year-old equities researcher, over southern charmer Matthew Hickl—the favored candidate among viewers—last February, in the second installment of The Bachelorette. Within weeks of their televised engagement, McKee quit his job in New York City to move into a Marina del Rey, Calif., apartment with Phillips. But after reality sank in, "they realized they weren't the right ones for each other," says Phillips's pal T.J. McHugh. "It happened gradually. Along the way they realized they're [just] great friends." Phillips, a model from Oregon, dreamt of a small wedding, but McKee may have had hesitations moving forward. "I don't conform to the idea of what a perfect life would be, getting married and having two kids," he told PEOPLE last February. "I don't know if that's how I see things."

For the moment Phillips and McKee, who remain on good terms and still talk on the phone, are taking time to let things settle down. McKee flew to Brazil to be with friends and family shortly after the split, and Phillips is concentrating on finding a career in cooking. "It's hard to go through a breakup," says McHugh, "but they're dealing with it. They do love each other very much."

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