MONARCH FUNDS
INVESTOR CLASS DISTRIBUTION PLAN
as of February __, 2003
This Distribution Plan (the "Plan") is adopted by Monarch Funds (the
"Trust") with respect to the Investor Class of shares of beneficial interest of
each of the Funds identified in Appendix A (individually a "Fund" and
collectively the "Funds") in accordance with the provisions of Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "Act").
SECTION 1. DISTRIBUTOR
The Trust has entered into a Distribution Agreement (the "Agreement") with
Forum Fund Services, LLC ("Forum") whereby Forum acts as principal underwriter
of the Funds.
SECTION 2. PAYMENTS
(a) As compensation for Forum's distribution and service activities with
respect to the Investor Class of each Fund, the Trust shall pay Forum a fee at
an annual rate of 0.25% of the average daily net assets of the Investor Class of
each Fund (the "Payments"). The Payments shall be accrued daily and paid monthly
or at such other interval as the Trust's Board of Trustees ("Board") shall
determine.
(b) On behalf of the Trust, as principal underwriter of each Fund, Forum
may spend such amounts and incur such expenses as it deems appropriate or
necessary on any activities primarily intended to result in the sale of the
shares of the Investor Class of each Fund (distribution activities) or for the
servicing and maintenance of shareholder accounts of the Investor Class of each
Fund (service activities); provided, however that: (i) any agreement entered
into pursuant to Section 4 hereof shall apportion the payments made under the
agreement between distribution and service activities and (ii) the Investor
Class of each Fund shall not directly or indirectly pay any amounts, whether
Payments or otherwise, that exceed any applicable limits imposed by law or the
National Association of Securities Dealers, Inc. ("NASD").
(c) For purposes of the Plan, service activities shall mean any activities
covered by the definition of "service fee" contained in the NASD's Rules of Fair
Practice, as amended from time to time, and distribution activities shall mean
any activities in connection with Forum's performance of its obligations under
the Plan or the Agreement that are not deemed service activities.
SECTION 3. DISTRIBUTION AND SERVICE ACTIVITIES
Distribution and service activities include: (i) any sales, marketing and
other activities primarily intended to result in the sale of Investor Class
shares and (ii) responding to Investor
Class shareholder inquiries regarding the Funds' investment objectives, policies
and other operational features. Expenses for such activities include
compensation to employees, and expenses, including overhead and telephone and
other communication expenses, of Forum and various financial institutions or
other persons who engage in or support the distribution of Investor Class
shares, or who respond to Investor Class shareholder inquiries regarding the
Funds' operations; the incremental costs of printing (excluding typesetting) and
distributing prospectuses, statements of additional information, annual reports
and other periodic reports for use in connection with the offering or sale of
Investor Class shares to any prospective investors; and the costs of preparing,
printing and distributing sales literature and advertising materials used by
Forum or others in connection with the offering of Investor Class shares for
sale to the public.
SECTION 4. MARKETING AND SERVICE AGREEMENTS
Pursuant to agreements the form of which shall be approved by the Board
("Agreements"), Forum may pay any or all amounts of the Payments to other
persons ("Service Providers") for any distribution or service activity. Each
Agreement shall contain a representation by the Service Provider that any
compensation payable to the Service Provider in connection with the investment
in the Investor class of a Fund of the assets of its customers: (i) will be
disclosed by the Service Provider to its customers; (ii) will be authorized by
its customers; and (iii) will not result in an excessive fee to the Service
Provider. Each Agreement shall provide that, in the event an issue pertaining to
the Plan is submitted for shareholder approval, the Service Provider will vote
any shares held for its own account in the same proportion as the vote of those
shares held for the accounts of the Service Provider's customers.
SECTION 5. REVIEW AND RECORDS
(a) Forum shall prepare and furnish to the Board, and the Board shall
review at least quarterly, written reports setting forth all amounts expended
under the Plan by the Trust and Forum and identifying the activities for which
the expenditures were made.
(b) The Trust shall preserve copies of the Plan, each agreement related to
the Plan and each report prepared and furnished pursuant to this Section in
accordance with Rule 12b-1 under the Act.
SECTION 6. EFFECTIVENESS; DURATION; AND TERMINATION
With respect to the Investor Class of a Fund:
(a) The Plan shall become effective upon approval by: (i) a vote of at
least a majority of the outstanding voting securities of the Investor Class of
the Fund and (ii) the Board, including a majority of the trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan
(the "Qualified Trustees"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on approval of the Plan.
-2-
(b) The Plan shall remain in effect for a period of one year from the date
of its effectiveness, unless earlier terminated in accordance with this Section,
and thereafter shall continue in effect for successive twelve-month periods,
provided that such continuance is specifically approved at least annually by the
Board and a majority of the Qualified Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on continuance of the Plan.
(c) The Plan may be terminated without penalty at any time by a vote of:
(i) a majority of the Qualified Trustees or (ii) a vote of a majority of the
outstanding voting securities of the Investor Class of the Fund.
SECTION 7. AMENDMENT
The Plan may be amended at any time by the Board, provided that: (i) any
material amendments to the Plan shall be effective only upon approval of the
Board and a majority of the Qualified Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on the amendment to the Plan and
(ii) any amendment which increases materially the amount which may be spent by
the Trust pursuant to the Plan with respect to the Investor Class of a Fund
shall be effective only upon the additional approval a majority of the
outstanding voting securities of the Investor Class of that Fund.
SECTION 8. NOMINATION OF DISINTERESTED TRUSTEES
While the Plan is in effect, the trustees of the Trust who are not
interested persons of the Trust shall select and nominate any such disinterested
trustee.
SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or of the Funds under the Plan, and the
Distributor agrees that, in asserting any rights or claims under this Plan, it
shall look only to the assets and property of the Trust or the Fund to which the
Distributor's rights or claims relate in settlement of such rights or claims,
and not to the Trustees of the Trust or the shareholders of the Funds.
SECTION 10. MISCELLANEOUS
(a) The terms "majority of the outstanding voting securities" and
"interested person" shall have the meanings ascribed thereto in the Act.
(b) If any provision of the Plan shall be held invalid by a court decision,
statute, rule or otherwise, the remainder of the Plan shall not be affected
thereby.
-3-
MONARCH FUNDS
INVESTOR CLASS DISTRIBUTION PLAN
APPENDIX A
Daily Assets Treasury Cash Fund
Daily Assets Government Cash Fund
Daily Assets Government Fund
Daily Assets Cash Fund