As filed with the Securities and Exchange Commission on May 1, 2007
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 811-6742
MONARCH FUNDS
Two Portland Square
Portland, Maine 04101
207-879-1900
Jack J. Singer
Monarch Investment Advisors, LLC
950 Coronado Drive
Arcadia, CA 91007
626-447-4717
Date of fiscal year end: August 31
Date of reporting period: September 1, 2006 - February 28, 2007
ITEM 1. REPORT TO STOCKHOLDERS.
FEBRUARY 28, 2007 (UNAUDITED)
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
SEMI-ANNUAL REPORT
MONARCH FUNDS
[GRAPHIC]
MONARCH FUNDS
- --------------------------------------------------------------------------------
A MESSAGE TO OUR SHAREHOLDERS
February 28, 2007
Dear Shareholders:
Since our August 31, 2006 annual report, Federal Reserve monetary policy has
remained unchanged. Based on the perception that the current level of short
term interest rates has reached an approximate neutral level related to
economic growth and inflation, the Federal Reserve has held the Fed Funds rate
at 5 1/4% over the past several months. Currently, based on economic conditions
and inflation expectations, it does not appear the central bankers will be
changing the Fed Funds rate anytime soon. In light of this, our Portfolio
Management team has maintained the slightly longer average life for our
portfolios that we established in August of last year. We believe this stance
is consistent with our view that short term rates will be stable through the
first half of this year.
We are pleased to report that Monarch's Daily Assets Government Fund, our
oldest fund, and our Daily Assets Cash Fund continued to exhibit relatively
strong performance for the six months ended February 28, 2007. For the one-year
and three-year periods ended as of February 28, 2007, the Daily Assets
Government Fund's Preferred Shares held the number 1 spot out of 150 and the
number 1 spot out of 124 funds within the Lipper Institutional U.S. Government
Money Market category. During the same time frames, the Daily Assets Cash
Fund's Preferred Shares held the 13 spot out of 358 funds and the number 12
spot out of 295 funds within the Lipper Institutional Money Market category.*
Since inception of the Monarch Funds fifteen years ago, we have remained
committed to maintaining your $1.00 per share price and providing competitive
returns through the skilled and prudent portfolio management our shareholders
have come to expect. We thank all of our investors and the financial
intermediaries we serve for their continued support. Please feel free to call
us with your questions or comments at (800) 754-8757.
Monarch Funds
*PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. PREFERRED SHARES OF DAILY ASSETS GOVERNMENT FUND, RANKED 1 OUT
OF 151 AND 1 OUT OF 126 WITHIN THE INSTITUTIONAL U.S. GOVERNMENT MONEY MARKET
FUNDS CATEGORY FOR THE 1- AND 3-YEAR PERIODS AS OF MARCH 31, 2007. PREFERRED
SHARES OF DAILY ASSETS CASH FUND RANKED 12 OUT OF 359 AND 15 OUT OF 297 WITHIN
THE INSTITUTIONAL MONEY MARKET FUNDS CATEGORY FOR THE 1- AND 3-YEAR PERIODS AS
OF MARCH 31, 2007. RANKINGS ARE BASED ON TOTAL RETURN AND WILL VARY FOR OTHER
SHARE CLASSES. FORESIDE FUND SERVICES, LLC, DISTRIBUTOR.
ALTHOUGH MONEY MARKET FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THEM. AN
INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY, AND IS NOT
ENDORSED OR GUARANTEED BY ANY BANK OR ANY AFFILIATE OF A BANK.
1
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS TREASURY FUND
February 28, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- -----------
U.S. TREASURY BILLS # - 72.1%
$50,000,000 U.S. Treasury Bill 5.07% 03/08/07 $49,950,951
-----------
REPURCHASE AGREEMENTS - 28.0%
7,385,000 Bank of America Securities, dated 02/28/07, to be repurchased at
$7,386,063; collateralized by various U.S. Treasury Obligations 5.18 03/01/07 7,385,000
12,000,000 Deutsche Bank Securities, Inc. dated 02/28/07, to be repurchased at
$12,001,757; collateralized by various U.S. Treasury Obligations 5.27 03/01/07 12,000,000
-----------
Total Repurchase Agreements 19,385,000
-----------
Total Investments at Amortized Cost* - 100.1% $69,335,951
Other Assets and Liabilities, Net - (0.1%) (57,913)
-----------
NET ASSETS - 100.0% $69,278,038
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Treasury Bill 72.0%
Repurchase Agreements 28.0%
# Rates shown are annualized yields at time of purchase.
* Cost for federal income tax purposes is the same as for financial statement purposes.
See Notes to Financial Statements.
2
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
February 28, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- -----------
U.S. GOVERNMENT SECURITY - 94.0%
FEDERAL HOME LOAN BANK - DISCOUNT NOTE # - 94.0%
$18,040,000 FHLB 5.17% 03/14/07 $18,006,451
-----------
Total U.S. Government Securities 18,006,451
-----------
SHARES
- -----------
MONEY MARKET FUND - 6.1%
1,170,000 Dreyfus Treasury Prime Cash Management Fund 4.84 1,170,000
-----------
Total Investments at Amortized Cost* - 100.1% $19,176,451
Other Assets and Liabilities, Net - (0.1%) (25,509)
-----------
NET ASSETS - 100.0% $19,150,942
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Security 93.9%
Money Market Fund 6.1%
# Rates shown are annualized yields at time of purchase.
* Cost for federal income tax purposes is the same as for financial statement purposes.
See Notes to Financial Statements.
3
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT FUND
February 28, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ------------ -------------------------------------------------------------------------- ---- -------- ------------
U.S. GOVERNMENT SECURITIES - (6.2%)
SMALL BUSINESS ADMINISTRATION (+/-) - (6.2%)
$ 1,100,866 Pool #502150 6.25% 02/25/18 $ 1,106,189
1,337,694 Pool #503152 5.88 11/25/20 1,337,694
880,211 Pool #503461 6.00 09/25/21 880,601
1,056,712 Pool #503553 5.88 11/25/21 1,057,389
985,396 Pool #503909 5.75 10/25/22 985,114
4,745,378 Pool #504366 5.63 02/25/24 4,735,785
2,617,905 Pool #504719 5.88 07/25/24 2,617,905
1,192,743 Pool #504727 5.88 09/25/24 1,192,743
874,952 Pool #504765 5.88 10/25/09 874,205
1,066,758 Pool #504769 5.88 10/25/24 1,066,758
53,966 Pool #505205 6.06 09/25/07 53,965
------------
Total Small Business Administration 15,908,348
------------
Total U.S. Government Securities 15,908,348
------------
REPURCHASE AGREEMENTS - (93.4%)
3,326,000 Bank of America Securities, dated 02/28/07, to be repurchased at
$3,326,485; collateralized by various U.S. Government Agency Obligations 5.25 03/01/07 3,326,000
115,000,000 Bear Stearns & Co., Inc., dated 02/28/07, to be repurchased at
$115,033,733; collaterized by various U.S. Government Agency Obligations
(+/-) 5.28 03/02/07 115,000,000
120,000,000 Deutsche Bank Securities, Inc., dated 02/05/07, to be repurchased at
$120,438,333; collaterized by various U.S. Government Agency Obligations
(+/-) 5.26 03/02/07 120,000,000
------------
Total Repurchase Agreements 238,326,000
------------
Total Investments at Amortized Cost* - 99.6% $254,234,348
Other Assets and Liabilities, Net - 0.4% 1,004,675
------------
NET ASSETS - 100.0% $255,239,023
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Repurchase Agreements 93.7%
U.S. Government Securities 6.3%
(+/-)Certain securities are deemed to have a maturity remaining until the next adjustment of the
interest rate, or the longer of the demand period or time to next readjustment. The interest
rates shown reflect the rate in effect on February 28, 2007.
* Cost for federal income tax purposes is the same as for financial statement purposes.
See Notes to Financial Statements.
4
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS CASH FUND
February 28, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- ------------
COMMERCIAL PAPER # - (24.1%)
$25,000,000 Citigroup Funding, Inc. 5.29% 03/08/07 $ 24,974,455
25,000,000 CRC Funding, LLC^ 5.28 03/19/07 24,934,375
25,000,000 Govco, Inc.^ 5.28 03/15/07 24,948,958
25,000,000 Klio III Funding Corp.^ 5.29 03/19/07 24,934,188
25,000,000 UBS Finance Delaware, LLC 5.28 03/09/07 24,970,861
------------
Total Commercial Paper 124,762,837
------------
CORPORATE NOTES (+/-) - (37.2%)
17,980,000 AllState Life Global Funding Trust 5.42 05/25/07 17,984,175
15,000,000 American General Finance 5.47 08/16/07 15,010,236
4,200,000 American General Finance 5.41 03/23/07 4,200,196
25,000,000 American Honda Finance Corp.^ 5.39 11/15/07 25,010,483
6,000,000 ASIF Global Financing^ 5.40 05/03/07 6,000,953
20,000,000 Bank of America NA 5.32 05/15/07 20,000,000
25,000,000 Bear Stearns & Co., Inc. 5.47 08/17/07 25,016,941
6,391,000 CIT Group, Inc. 5.58 05/18/07 6,393,896
5,000,000 CIT Group, Inc. 5.43 08/24/07 5,002,295
20,000,000 Goldman Sachs Group LP 5.44 03/23/07 20,001,350
10,000,000 Merrill Lynch & Co., Inc. 5.48 10/19/07 10,010,428
5,000,000 Merrill Lynch & Co., Inc. 5.47 08/27/07 5,002,900
5,000,000 Merrill Lynch & Co., Inc. 5.34 07/27/07 5,000,000
20,000,000 Morgan Stanley 5.49 07/27/07 20,011,683
7,393,000 Wells Fargo & Co. 5.42 09/28/07 7,397,542
------------
Total Corporate Notes 192,043,078
------------
CERTIFICATE OF DEPOSIT (+/-) - (3.9%)
20,000,000 Credit Suisse New York 5.36 04/24/07 20,001,021
------------
REPURCHASE AGREEMENTS - (30.8%)
24,443,000 Bank of America Securities, dated 02/28/07, to be repurchased at
$24,446,565; collateralized by various U.S. Government Agency Obligations 5.25 03/01/07 24,443,000
45,000,000 Bear Stearns & Co., Inc., dated 02/05/07, to be repurchased at
$45,165,000; collateralized by various U.S. Government Agency Obligations
(+/-) 5.28 03/02/07 45,000,000
30,000,000 Bear Stearns & Co., Inc., dated 02/28/07, to be repurchased at
$30,004,442; collateralized by various U.S. Government Agency Obligations 5.33 03/01/07 30,000,000
30,000,000 Deutsche Bank Securities, Inc., dated 02/28/07, to be repurchased at
$30,004,442; collateralized by various U.S. Government Agency Obligations 5.33 03/01/07 30,000,000
29,870,000 Merrill Lynch & Co., Inc. dated 02/28/07, to be repurchased at
$29,874,406; collateralized by various U.S. Government Agency Obligations 5.31 03/01/07 29,870,000
------------
Total Repurchase Agreements 159,313,000
------------
Total Investments at Amortized Cost* - (96.0%) $496,119,936
Other Assets and Liabilities, Net - (4.0%) 20,522,384
------------
NET ASSETS - 100.0% $516,642,320
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Corporate Notes 38.7%
Repurchase Agreements 32.1%
Commercial Paper 25.2%
Certificate of Deposit 4.0%
# Rates shown are annualized yields at time of purchase.
(+/-)Certain securities are deemed to have a maturity remaining until the next adjustment of the
interest rate, or the longer of the demand period or time to next readjustment. The interest
rates shown reflect the rate in effect on February 28, 2007.
^ Security exempt from registration under Rule 144A under the Securities Act of 1933. At the period
end, the value of these securities amounted to $105,828,957 or 20.5% of net assets.
* Cost for federal income tax purposes is the same as for financial statement purposes.
See Notes to Financial Statements.
5
MONARCH FUNDS
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STATEMENTS OF ASSETS AND LIABILITIES
February 28, 2007
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Assets
Investments:
Securities at amortized cost $49,950,951 $19,176,451 $ 15,908,348 $336,806,936
Repurchase agreements 19,385,000 -- 238,326,000 159,313,000
Cash 40,287 54,104 40,187 41,135
Receivables:
Dividends -- 3,389 -- --
Interest 2,820 -- 600,909 1,140,841
Investment securities sold -- -- 553,505 20,003,410
Other receivables 6,903 -- 2,216 10,405
Prepaid expenses and other assets 2,655 6,583 24,635 56,979
----------- ----------- ------------ ------------
Total Assets 69,388,616 19,240,527 255,455,800 517,372,706
----------- ----------- ------------ ------------
Liabilities
Payables:
Dividends 22,011 71,708 31,660 415,900
Accrued expenses:
Payable to adviser 2,075 -- 4,712 14,973
Other expenses and other liabilities 86,492 17,877 180,405 299,513
----------- ----------- ------------ ------------
Total Liabilities 110,578 89,585 216,777 730,386
----------- ----------- ------------ ------------
Net Assets $69,278,038 $19,150,942 $255,239,023 $516,642,320
=========== =========== ============ ============
Components of Net Assets
Paid in capital $69,277,934 $19,155,757 $255,267,807 $516,655,370
Undistributed (distributions in excess of) net investment
income 12 408 (31,686) 1,501
Accumulated net realized gain (loss) 92 (5,223) 2,902 (14,551)
----------- ----------- ------------ ------------
Net Assets $69,278,038 $19,150,942 $255,239,023 $516,642,320
=========== =========== ============ ============
Net Assets by Class of Shares
Preferred Shares $ -- $ -- $ 25,881,398 $104,370,449
Universal Shares -- 19,150,942 34,759,050 51,121,835
Institutional Service Shares 16,844,267 -- 22,446,425 69,035,011
Institutional Shares -- -- 72,965,263 101,085,104
Investor Shares 52,433,771 -- 99,186,887 189,890,790
B Shares -- -- -- 262,732
C Shares -- -- -- 876,399
----------- ----------- ------------ ------------
Net Assets $69,278,038 $19,150,942 $255,239,023 $516,642,320
=========== =========== ============ ============
Shares of Beneficial Interest for each Class of Shares
Preferred Shares -- -- 25,881,505 104,370,219
Universal Shares -- 19,174,989 34,798,338 51,126,123
Institutional Service Shares 16,839,972 -- 22,446,452 69,034,894
Institutional Shares -- -- 72,960,040 101,087,262
Investor Shares 52,437,971 -- 99,181,484 189,897,788
B Shares -- -- -- 262,731
C Shares -- -- -- 876,388
Net Asset Value Per Share
(Offering and Redemption Price per Share)
for each Class of Shares $ 1.00 $ 1.00 $ 1.00 $ 1.00
See Notes to Financial Statements.
6
MONARCH FUNDS
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STATEMENTS OF OPERATIONS
Six Months Ended February 28, 2007
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Investment Income:
Interest income $2,157,391 $464,624 $10,566,658 $16,004,881
Dividend income 1,359 14,916 -- --
---------- -------- ----------- -----------
Total Investment Income 2,158,750 479,540 10,566,658 16,004,881
---------- -------- ----------- -----------
Expenses:
Investment adviser fees 15,439 4,602 71,447 111,896
Administrator fees
Preferred Shares -- -- 92,552 95,577
Universal Shares -- 10,125 22,450 36,433
Institutional Service Shares 8,841 -- 16,404 30,593
Institutional Shares -- -- 41,609 49,518
Investor Shares 36,468 -- 43,810 114,911
B Shares -- -- -- 11,253
C Shares -- -- -- 11,481
Shareholder service fees
Institutional Service Shares 16,074 -- 29,826 55,625
Institutional Shares -- -- 75,653 90,034
Investor Shares 66,305 -- 79,655 208,931
B Shares -- -- -- 266
C Shares -- -- -- 783
Distribution fees
Investor Shares 82,881 -- 99,568 261,161
B Shares -- -- -- 797
C Shares -- -- -- 2,350
Compliance Services fees 7,053 3,231 7,085 20,278
Transfer agency fees
Preferred Shares -- -- 13,178 23,883
Universal Shares -- 12,412 26,660 26,796
Institutional Service Shares 16,816 -- 22,452 38,395
Institutional Shares -- -- 92,492 102,224
Investor Shares 80,288 -- 107,374 223,439
B Shares -- -- -- 7,719
C Shares -- -- -- 8,145
Custodian fees 4,475 996 22,173 32,135
Professional fees 22,053 16,599 10,610 26,434
Accountant fees 30,922 20,663 25,015 79,024
Registration fees 4,403 955 13,159 24,694
Trustees' fees and expenses 3,255 742 11,409 24,223
Miscellaneous expenses 14,427 2,476 27,955 37,567
---------- -------- ----------- -----------
Total Expenses 409,700 72,801 952,536 1,756,565
Expenses reimbursed and fees waived (93,405) (54,025) (185,718) (307,977)
---------- -------- ----------- -----------
Net Expenses 316,295 18,776 766,818 1,448,588
---------- -------- ----------- -----------
Net Investment Income (Loss) 1,842,455 460,764 9,799,840 14,556,293
---------- -------- ----------- -----------
Net Realized Gain (Loss) on Investments 92 (2) 2,900 (279)
---------- -------- ----------- -----------
Increase (Decrease) in Net Assets from Operations $1,842,547 $460,762 $ 9,802,740 $14,556,014
========== ======== =========== ===========
See Notes to Financial Statements.
7
MONARCH FUNDS
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STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS DAILY ASSETS
TREASURY FUND GOVERNMENT OBLIGATIONS FUND
--------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006 FEBRUARY 28, 2007 AUGUST 31, 2006
----------------- --------------- ----------------- ---------------
Operations
Net investment income (loss) $ 1,842,455 $ 2,619,720 $ 460,764 $ 763,875
Net realized gain (loss) on investments 92 -- (2) --
------------- --------------- ----------- ------------
Increase (Decrease) in Net Assets from Operations 1,842,547 2,619,720 460,762 763,875
------------- --------------- ----------- ------------
Distributions to Shareholders from
Net investment income--Universal Shares -- -- (460,764) (763,875)
Net investment income--Institutional Service Shares (384,616) (511,144) -- --
Net investment income--Investor Shares (1,457,840) (2,108,577) -- --
Net realized gain--Preferred Shares -- -- -- --
Net realized gain--Universal Shares -- -- -- --
Net realized gain--Institutional Service Shares -- -- -- --
Net realized gain--Institutional Shares -- -- -- --
Net realized gain--Investor Shares -- -- -- --
------------- --------------- ----------- ------------
Total Distributions to Shareholders (1,842,456) (2,619,721) (460,764) (763,875)
------------- --------------- ----------- ------------
Capital Share Transactions
Sale of shares--Universal Shares -- -- 8,807,896 17,890,345
Sale of shares--Institutional Service Shares 31,768,517 56,995,099 -- --
Sale of shares--Investor Shares 529,787,666 1,027,908,338 -- --
Reinvestment of distributions--Universal Shares -- -- 5,784 10,377
Reinvestment of distributions--Institutional Service
Shares 315,527 426,729 -- --
Reinvestment of distributions--Investor Shares 1,459,264 2,107,066 -- --
Redemption of shares--Universal Shares -- -- (8,506,303) (16,479,139)
Redemption of shares--Institutional Service Shares (30,371,197) (54,166,582) -- --
Redemption of shares--Investor Shares (537,624,404) (1,018,150,465) -- --
------------- --------------- ----------- ------------
Increase (Decrease) from Capital Transactions (4,664,627) 15,120,185 307,377 1,421,583
------------- --------------- ----------- ------------
Increase (Decrease) in Net Assets (4,664,536) 15,120,184 307,375 1,421,583
------------- --------------- ----------- ------------
Net Assets
Beginning of Period 73,942,574 58,822,390 18,843,567 17,421,984
------------- --------------- ----------- ------------
End of Period $ 69,278,038 $ 73,942,574 $19,150,942 $ 18,843,567
============= =============== =========== ============
Share Transactions
Sale of shares--Universal Shares -- -- 8,807,895 17,890,345
Sale of shares--Institutional Service Shares 31,768,516 56,995,099 -- --
Sale of shares--Investor Shares 529,787,666 1,027,908,338 -- --
Reinvestment of distributions--Universal Shares -- -- 5,784 10,378
Reinvestment of distributions--Institutional Service
Shares 315,527 426,729 -- --
Reinvestment of distributions--Investor Shares 1,459,264 2,107,066 -- --
Redemption of shares--Universal Shares -- -- (8,506,303) (16,479,139)
Redemption of shares--Institutional Service Shares (30,371,197) (54,166,582) -- --
Redemption of shares--Investor Shares (537,624,404) (1,018,150,465) -- --
------------- --------------- ----------- ------------
Increase (Decrease) in Shares (4,664,628) 15,120,185 307,376 1,421,584
============= =============== =========== ============
Undistributed (distributions in excess of)
Net Investment Income $ 12 $ 13 $ 408 $ 408
------------- --------------- ----------- ------------
See Notes to Financial Statements.
8
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS DAILY ASSETS
GOVERNMENT FUND CASH FUND
---------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006 FEBRUARY 28, 2007 AUGUST 31, 2006
----------------- ---------------- ----------------- ---------------
Operations
Net investment income (loss) $ 9,799,840 $ 56,933,808 $ 14,556,293 $ 17,852,956
Net realized gain (loss) on investments 2,900 -- (279) (687)
--------------- ---------------- --------------- ---------------
Increase (Decrease) in Net Assets from Operations 9,802,740 56,933,808 14,556,014 17,852,269
--------------- ---------------- --------------- ---------------
Distributions to Shareholders from
Net investment income--Preferred Shares (4,403,844) (46,380,538) (4,562,186) (2,675,457)
Net investment income--Universal Shares (1,053,546) (1,758,977) (1,712,822) (2,592,894)
Net investment income--Institutional Service Shares (732,404) (2,557,679) (1,368,341) (1,365,993)
Net investment income--Institutional Shares (1,812,259) (3,863,892) (2,161,454) (2,748,374)
Net investment income--Investor Shares (1,801,048) (2,372,632) (4,734,105) (8,454,554)
Net investment income--B Shares -- -- (3,963) (3,648)
Net investment income--C Shares -- -- (11,675) (11,722)
Net realized gain--Universal Shares -- -- -- --
--------------- ---------------- --------------- ---------------
Total Distributions to Shareholders (9,803,101) (56,933,718) (14,554,546) (17,852,642)
--------------- ---------------- --------------- ---------------
Capital Share Transactions
Sale of shares--Preferred Shares 1,010,647,724 13,961,573,134 729,744,243 690,893,357
Sale of shares--Universal Shares 218,316,172 261,380,787 232,102,963 739,799,611
Sale of shares--Institutional Service Shares 102,037,863 406,813,980 196,351,374 352,393,100
Sale of shares--Institutional Shares 408,288,586 1,101,577,846 504,928,792 899,609,574
Sale of shares--Investor Shares 547,958,964 1,183,921,865 1,462,106,922 3,944,036,139
Sale of shares--B Shares -- -- 154,743 414,954
Sale of shares--C Shares -- -- 624,969 1,663,874
Reinvestment of distributions--Preferred Shares 3,904,155 46,189,852 1,914,365 364,322
Reinvestment of distributions--Universal Shares 1,053,545 1,761,741 1,515,575 2,331,253
Reinvestment of distributions--Institutional Service
Shares 727,858 2,557,455 1,366,088 1,355,076
Reinvestment of distributions--Institutional Shares 1,591,325 3,318,919 2,062,951 2,507,112
Reinvestment of distributions--Investor Shares 1,794,513 2,359,987 4,450,241 7,735,675
Reinvestment of distributions--B Shares -- -- 3,963 3,647
Reinvestment of distributions--C Shares -- -- 11,675 11,735
Redemption of shares--Preferred Shares (1,100,590,306) (13,917,158,610) (728,792,538) (629,499,253)
Redemption of shares--Universal Shares (227,134,178) (245,398,091) (261,195,562) (702,705,553)
Redemption of shares--Institutional Service Shares (127,192,190) (417,918,604) (183,448,925) (326,119,193)
Redemption of shares--Institutional Shares (410,757,884) (1,087,896,148) (505,228,339) (859,445,718)
Redemption of shares--Investor Shares (518,313,500) (1,181,095,338) (1,484,124,168) (3,981,055,792)
Redemption of shares--B Shares -- -- (219,117) (125,545)
Redemption of shares--C Shares -- -- (627,909) (844,167)
--------------- ---------------- --------------- ---------------
Increase (Decrease) Decrease from Capital Transactions (87,667,353) 121,988,775 (26,297,694) 143,324,208
--------------- ---------------- --------------- ---------------
Increase (Decrease) in Net Assets (87,667,714) 121,988,865 (26,296,226) 143,323,835
--------------- ---------------- --------------- ---------------
Net Assets
Beginning of Period 342,906,737 220,917,872 542,938,546 399,614,711
--------------- ---------------- --------------- ---------------
End of Period $ 255,239,023 $ 342,906,737 $ 516,642,320 $ 542,938,546
=============== ================ =============== ===============
Undistributed (distributions in excess of)
Net Investment Income $ (31,686) $ (28,425) $ 1,501 $ (246)
--------------- ---------------- --------------- ---------------
See Notes to Financial Statements.
9
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS DAILY ASSETS
GOVERNMENT FUND CASH FUND
--------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006 FEBRUARY 28, 2007 AUGUST 31, 2006
----------------- --------------- ----------------- ---------------
Share Transactions
Sale of shares--Preferred Shares 1,010,647,724 13,961,573,135 729,744,244 690,893,357
Sale of shares--Universal Shares 218,316,172 261,380,786 232,102,963 739,799,611
Sale of shares--Institutional Service Shares 102,037,863 406,813,980 196,351,372 352,393,101
Sale of shares--Institutional Shares 408,288,586 1,101,577,845 504,928,791 899,609,575
Sale of shares--Investor Shares 547,958,963 1,183,921,866 1,462,106,923 3,944,036,139
Sale of shares--B Shares -- -- 154,743 414,955
Sale of shares--C Shares -- -- 624,969 1,663,874
Reinvestment of distributions--Preferred Shares 3,904,155 46,189,852 1,914,365 364,322
Reinvestment of distributions--Universal Shares 1,053,545 1,761,741 1,515,575 2,331,253
Reinvestment of distributions--Institutional Service
Shares 727,858 2,557,455 1,366,088 1,355,076
Reinvestment of distributions--Institutional Shares 1,591,325 3,318,919 2,062,951 2,507,112
Reinvestment of distributions--Investor Shares 1,794,513 2,359,987 4,450,241 7,735,675
Reinvestment of distributions--B Shares -- -- 3,964 3,647
Reinvestment of distributions--C Shares -- -- 11,675 11,735
Redemption of shares--Preferred Shares (1,100,590,306) (13,917,158,610) (728,792,538) (629,499,253)
Redemption of shares--Universal Shares (227,134,178) (245,398,091) (261,195,562) (702,705,553)
Redemption of shares--Institutional Service Shares (127,192,190) (417,918,604) (183,448,925) (326,119,193)
Redemption of shares--Institutional Shares (410,757,884) (1,087,896,148) (505,228,339) (859,445,718)
Redemption of shares--Investor Shares (518,313,500) (1,181,095,338) (1,484,124,168) (3,981,055,792)
Redemption of shares--B Shares -- -- (219,117) (125,545)
Redemption of shares--C Shares -- -- (627,909) (844,167)
-------------- --------------- -------------- --------------
Increase (Decrease) in Shares (87,667,354) 121,988,775 (26,297,694) 143,324,211
============== =============== ============== ==============
See Notes to Financial Statements.
10
MONARCH FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These financial highlights reflect selected data for an outstanding share of
each class of each Fund during the periods indicated.
SELECTED DATA FOR A SINGLE SHARE Net
------------------------------------------------------------------------- Assets at
Beginning Net Distributions Distributions Ending End of
Year Ended Net Asset Net Realized from Net from Net Net Asset Period
August 31, Value Per Investment Gain on Investment Realized Value Total (000's
(except as noted) Share Income Investments Income Gains Per Share Return/(b)/ Omitted)
- ----------------- --------- ---------- ----------- ------------- ------------- --------- ---------- ---------
- - - - - - - - - -
DAILY ASSETS TREASURY FUND
Institutional Service Shares/(d)/
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 $1.00 $0.02/(e)/ --/(f)/ $(0.02) -- $1.00 2.40% $ 16,844
2006 1.00 0.04/(e)/ -- (0.04) -- 1.00 4.06% 15,131
2005 1.00 0.02/(e)/ --/(f)/ (0.02) -- 1.00 2.03% 11,876
2004 1.00 0.01 -- (0.01) -- 1.00 0.59% 15,552
2003 1.00 0.01 -- (0.01) -- 1.00 0.84% 35,074
2002 1.00 0.02 --/(f)/ (0.02) --/(f)/ 1.00 1.57% 20,068
Investor Shares
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(e)/ --/(f)/ (0.02) -- 1.00 2.20% 52,434
2006 1.00 0.04/(e)/ -- (0.04) -- 1.00 3.65% 58,811
2005 1.00 0.02/(e)/ --/(f)/ (0.02) -- 1.00 1.64% 46,946
2004 1.00 --/(f)/ -- --/(f)/ -- 1.00 0.20% 56,217
2003 1.00 --/(f)/ -- --/(f)/ -- 1.00 0.45% 96,827
2002 1.00 0.01 --/(f)/ (0.01) --/(f)/ 1.00 1.17% 133,758
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Universal Shares/(g)/
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(e)/ --/(f)/ (0.02) -- 1.00 2.51% 19,151
2006 1.00 0.04/(e)/ -- (0.04) -- 1.00 4.30% 18,844
2005 1.00 0.02/(e)/ -- (0.02) -- 1.00 2.27% 17,422
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.91% 20,383
2003 1.00 0.01 -- (0.01) -- 1.00 1.18% 24,752
2002 1.00 0.02 -- (0.02) -- 1.00 1.97% 25,760
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratios to Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.45% 0.78% 4.79%
0.45% 0.82% 4.01%
0.45% 0.69% 1.92%
0.45% 0.56% 0.57%
0.45% 0.67% 0.84%
0.45% 0.62% 1.68%
- ----------------------------------
0.84% 1.05% 4.40%
0.84% 1.02% 3.61%
0.84% 0.97% 1.61%
0.84% 0.89% 0.18%
0.84% 0.90% 0.45%
0.85% 0.87% 1.22%
- ----------------------------------
0.20% 0.79% 5.01%
0.20% 0.81% 4.24%
0.20% 0.75% 2.22%
0.20% 0.70% 0.86%
0.20% 0.48% 1.14%
0.20% 0.71% 1.97%
(a)Annualized for periods less than one year.
(b)Not annualized for periods less than one year.
(c)Reflects the expense ratio excluding any waivers and/or reimbursements.
(d)On April 23, 2003, Institutional Shares were renamed Institutional Service
Shares.
(e)Calculated based on average shares outstanding during the period.
(f)Less than $0.01 per share.
(g)On July 22, 2003, Institutional Shares were redesignated as Universal Shares.
See Notes to Financial Statements.
11
MONARCH FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These financial highlights reflect selected data for an outstanding share of
each class of each Fund during the periods indicated.
SELECTED DATA FOR A SINGLE SHARE Net
------------------------------------------------------------------------- Assets at
Beginning Net Distributions Distributions Ending End of
Year Ended Net Asset Net Realized from Net from Net Net Asset Period
August 31, Value Per Investment Gain on Investment Realized Value Total (000's
(except as noted) Share Income Investments Income Gains Per Share Return/(b)/ Omitted)
- ----------------- --------- ---------- ----------- ------------- ------------- --------- ---------- ---------
- - - - - - - - - -
DAILY ASSETS GOVERNMENT FUND
Preferred Shares
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 $1.00 $0.03/(d)/ --/(f)/ $(0.03) -- $1.00 2.63% $ 25,881
2006 1.00 0.04/(d)/ -- (0.04) -- 1.00 4.57% 111,921
2005 1.00 0.02/(d)/ -- (0.02) -- 1.00 2.52% 21,316
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 1.04% 23,386
2003 1.00 0.01 -- (0.01) -- 1.00 1.40% 11,549
2002 1.00 0.02 --/(f)/ (0.02) --/(f)/ 1.00 2.25% 12,041
Universal Shares
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.03/(d)/ --/(f)/ (0.03) -- 1.00 2.58% 34,759
2006 1.00 0.04/(d)/ -- (0.04) -- 1.00 4.49% 42,523
2005 1.00 0.02/(d)/ -- (0.02) -- 1.00 2.43% 24,779
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.96% 113,881
2003 1.00 0.01 -- (0.01) -- 1.00 1.29% 114,173
2002 1.00 0.02 --/(f)/ (0.02) --/(f)/ 1.00 2.17% 81,426
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.46% 22,446
2006 1.00 0.04/(d)/ -- (0.04) -- 1.00 4.23% 46,873
2005 1.00 0.02/(d)/ -- (0.02) -- 1.00 2.18% 55,420
2004 1.00 --/(f)/ --/(f)/ --/(f)/ -- 1.00 0.71% 55,142
2003/(e)/ 1.00 --/(f)/ -- --/(f)/ -- 1.00 0.16% 76,273
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.40% 72,965
2006 1.00 0.04/(d)/ -- (0.04) -- 1.00 4.11% 73,843
2005 1.00 0.02/(d)/ -- (0.02) -- 1.00 2.06% 56,843
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.59% 73,575
2003 1.00 0.01 -- (0.01) -- 1.00 0.91% 90,740
2002 1.00 0.02 --/(f)/ (0.02) --/(f)/ 1.00 1.80% 117,476
Investor Shares
- -------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.26% 99,187
2006 1.00 0.04/(d)/ -- (0.04) -- 1.00 3.83% 67,747
2005 1.00 0.02/(d)/ -- (0.02) -- 1.00 1.78% 62,560
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.32% 64,028
2003 1.00 0.01 -- (0.01) -- 1.00 0.64% 47,383
2002 1.00 0.02 --/(f)/ (0.02) --/(f)/ 1.00 1.52% 58,397
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratios to Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.12% 0.21% 5.23%
0.12% 0.18% 4.34%
0.12% 0.18% 2.56%
0.12% 0.18% 1.06%
0.11% 0.25% 1.05%
0.12% 0.22% 2.19%
- ----------------------------------
0.20% 0.35% 5.16%
0.20% 0.30% 4.36%
0.20% 0.25% 2.12%
0.20% 0.26% 0.95%
0.20% 0.28% 1.26%
0.21% 0.25% 2.17%
- ----------------------------------
0.45% 0.57% 4.91%
0.45% 0.51% 4.20%
0.45% 0.50% 2.10%
0.45% 0.51% 0.69%
0.45% 0.58% 0.70%
- ----------------------------------
0.57% 0.66% 4.79%
0.57% 0.61% 4.03%
0.57% 0.61% 2.05%
0.57% 0.62% 0.58%
0.57% 0.63% 0.92%
0.57% 0.59% 2.05%
- ----------------------------------
0.84% 0.93% 4.52%
0.84% 0.88% 3.80%
0.84% 0.87% 1.74%
0.84% 0.86% 0.32%
0.84% 0.89% 0.63%
0.85% 0.85% 1.43%
See Notes to Financial Statements.
12
MONARCH FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SINGLE SHARE Net
--------------------------------------------------------------------------- Assets at
Beginning Net Distributions Distributions Ending End of
Year Ended Net Asset Net Realized from Net from Net Net Asset Period
August 31, Value Per Investment Gain on Investment Realized Value Total (000's
(except as noted) Share Income Investments Income Gains Per Share Return/(b)/ Omitted)
- ----------------- --------- ---------- ----------- ------------- ------------- --------- ---------- ---------
- - - - - - - - - -
DAILY ASSETS CASH FUND
Preferred Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 $1.00 $0.03/(d)/ --/(f)/ $(0.03) -- $1.00 2.63% $104,370
2006 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 4.56% 101,504
2005 1.00 0.03/(d)/ (0.01) (0.02) -- 1.00 2.49% 39,746
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 1.04% 19,166
2003 1.00 0.01 -- (0.01) -- 1.00 1.37% 2,979
2002 1.00 0.02 -- (0.02) -- 1.00 2.21% 13,095
Universal Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.03/(d)/ --/(f)/ (0.03) -- 1.00 2.59% 51,122
2006 1.00 0.04/(d)/ --/(f)/ (0.04) -- 1.00 4.48% 78,698
2005 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.41% 39,274
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.96% 35,892
2003 1.00 0.01 -- (0.01) -- 1.00 1.29% 104,842
2002 1.00 0.02 -- (0.02) -- 1.00 2.12% 46,833
Institutional Service Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.47% 69,035
2006 1.00 0.04/(d)/ --/(f)/ (0.04) -- 1.00 4.22% 54,766
2005 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.15% 27,137
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.71% 26,423
2003/(e)/ 1.00 --/(f)/ -- --/(f)/ -- 1.00 0.18% 36,876
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.40% 101,085
2006 1.00 0.04/(d)/ --/(f)/ (0.04) -- 1.00 4.10% 99,321
2005 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.03% 56,650
2004 1.00 0.01 --/(f)/ (0.01) -- 1.00 0.59% 95,985
2003 1.00 0.01 -- (0.01) -- 1.00 0.92% 92,186
2002 1.00 0.02 -- (0.02) -- 1.00 1.75% 347,469
Investor Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 2.27% 189,891
2006 1.00 0.04/(d)/ --/(f)/ (0.04) -- 1.00 3.82% 207,458
2005 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 1.76% 236,742
2004 1.00 --/(f)/ --/(f)/ --/(f)/ -- 1.00 0.32% 394,665
2003 1.00 0.01 -- (0.01) -- 1.00 0.64% 303,389
2002 1.00 0.01 -- (0.01) -- 1.00 1.48% 646,285
B Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 1.86% 263
2006 1.00 0.03/(d)/ --/(f)/ (0.03) -- 1.00 2.99% 323
2005/(e)/ 1.00 0.01/(d)/ --/(f)/ (0.01) -- 1.00 0.92% 30
C Shares
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
February 28, 2007 1.00 0.02/(d)/ --/(f)/ (0.02) -- 1.00 1.86% 876
2006 1.00 0.03/(d)/ --/(f)/ (0.03) -- 1.00 2.99% 868
2005/(e)/ 1.00 0.01/(d)/ --/(f)/ (0.01) -- 1.00 0.93% 36
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratios to Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.12% 0.26% 5.25%
0.12% 0.23% 4.61%
0.12% 0.32% 2.64%
0.12% 0.31% 1.06%
0.12% 0.30% 1.39%
0.12% 0.20% 1.88%
- ----------------------------------
0.20% 0.31% 5.17%
0.20% 0.29% 4.41%
0.20% 0.34% 2.32%
0.20% 0.27% 0.94%
0.20% 0.28% 1.24%
0.21% 0.25% 2.03%
- ----------------------------------
0.45% 0.57% 4.92%
0.45% 0.56% 4.27%
0.45% 0.60% 2.04%
0.45% 0.54% 0.71%
0.45% 0.58% 0.76%
- ----------------------------------
0.57% 0.66% 4.80%
0.57% 0.65% 4.16%
0.57% 0.68% 1.97%
0.57% 0.63% 0.59%
0.57% 0.61% 1.01%
0.57% 0.58% 1.84%
- ----------------------------------
0.84% 0.89% 4.53%
0.84% 0.88% 3.76%
0.84% 0.91% 1.71%
0.84% 0.87% 0.32%
0.84% 0.86% 0.68%
0.83% 0.83% 1.51%
- ----------------------------------
1.65% 21.71% 3.73%
1.65% 48.98% 3.39%
1.65% 161.82% 1.20%
- ----------------------------------
1.65% 8.26% 3.73%
1.65% 15.85% 3.50%
1.64% 158.38% 1.23%
(a)Annualized for periods less than one year.
(b)Not annualized for periods less than one year.
(c)Reflects the expense ratio excluding any waivers and/or reimbursements.
(d)Calculated based on average shares outstanding during the period.
(e)See Note 1 for dates of commencement of operations.
(f)Less than $0.01 per share.
See Notes to Financial Statements.
13
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
February 28, 2007
NOTE 1. SUMMARY OF ORGANIZATION
Monarch Funds (the "Trust") is a Massachusetts business trust registered as an
open-end management investment company under the Investment Company Act of
1940, as amended (the "Act"). The Trust consists of four diversified investment
portfolios listed below (each a "Fund" and collectively the "Funds"). The Funds
are authorized under the Trust's Trust Instrument to issue an unlimited number
of shares of beneficial interest without par value. The Funds and classes
offered as of February 28, 2007, and the dates on which they commenced
operations were as follows:
COMMENCEMENT OF
FUND SHARE CLASS OPERATIONS
------------------------ ------------------------ ------------------------
Daily Assets Treasury Institutional Service
Fund Shares July 12, 1993
Investor Shares October 25, 1995
Daily Assets Government
Obligations Universal Shares July 1, 1998
Daily Assets Government
Fund Preferred Shares August 10, 2001
Universal Shares October 29, 1992
Institutional Service
Shares June 9, 2003
Institutional Shares July 15, 1993
Investor Shares December 30, 1999
Daily Assets Cash Fund Preferred Shares August 10, 2001
Universal Shares December 1, 1992
Institutional Service
Shares June 9, 2003
Institutional Shares July 15, 1993
Investor Shares June 16, 1995
B Shares November 22, 2004
C Shares November 17, 2004
Daily Assets Treasury Fund Universal Shares ceased operations on February 24,
2005.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in net
assets during the fiscal period. Actual results could differ from those
estimates. The following summarizes the significant accounting policies of the
Funds:
SECURITY VALUATION Generally, each Fund determines its net asset value per
share as of 4:00 p.m., Eastern time, on each Fund business day, utilizing the
amortized cost method pursuant to Rule 2a-7 under the Act. Under this method,
all investments purchased at a discount or premium are valued by accreting or
amortizing, respectively, the difference between the original purchase price
and the maturity value of the investment over the period to the investment's
maturity.
REPURCHASE AGREEMENTS Each Fund may invest in repurchase agreements. Each Fund,
through its custodian, receives delivery of the underlying collateral, whose
market value always exceeds or equals the repurchase price plus expected
transaction costs. In the case of a tri-party agreement, the collateral is held
by an agent bank. The Funds' investment adviser is responsible for determining
the value of the underlying collateral. In the event of default, a Fund may
have difficulties with the disposition of any such securities held as
collateral.
EXPENSE ALLOCATION The Trust is comprised of four active series, and it
accounts separately for the assets, liabilities and operations of each series.
Expenses that are directly attributable to more than one series are allocated
among the respective series in proportion to each series' average daily net
assets. Each share of each class of a Fund represents an undivided,
proportionate interest in the Fund. The Funds' class-specific expenses include
administration fees, transfer agency fees and certain expenses determined by
the Trust's Board. Institutional Service Shares, Institutional Shares, Investor
Shares, B Shares and C Shares incur shareholder servicing fees and Investor
Shares, B Shares and C Shares incur distribution fees. In addition, there are
differences between the classes of shares with respect to the minimum
investment required.
SECURITIES TRANSACTIONS, INTEREST INCOME AND REALIZED GAIN AND LOSS Securities
transactions are recorded on trade date. Interest income is accrued as earned
and realized gain and loss on investments sold are recorded on the basis of
identified cost.
14
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
February 28, 2007
FEDERAL TAXES Each Fund intends to continue to qualify each year as a regulated
investment company and distribute all its net investment income. In addition,
by distributing in each calendar year substantially all its net investment
income, capital gain and certain other amounts, each Fund will not be subject
to a federal excise tax. Therefore, no federal income or excise tax provision
is required.
DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders of net investment
income are declared daily and paid monthly. Net capital gain, if any, is
distributed to shareholders at least annually. Distributions are based on
amounts calculated in accordance with applicable income tax regulations, which
may differ from accounting principles generally accepted in the United States.
These differences are due primarily to differing treatments of income and gain
on various investment securities held by each Fund, timing differences and
differing characterizations of distributions made by the Fund.
RESTRICTED SECURITIES The Fund may invest in securities that are subject to
legal or contractual restrictions on resale ("restricted securities").
Restricted securities may be resold in transactions that are exempt from
registration under the Federal securities laws or if the securities are
registered to the public. The sale or other disposition of these securities may
involve additional expenses and the prompt sale of these securities at an
acceptable price may be difficult. Information regarding restricted securities
held by the Fund is included in the Schedule of Investments.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER Monarch Investment Advisors, LLC, formerly known as Forum
Investment Advisors, LLC (the "Adviser"), is the investment adviser of each
Fund. The Adviser receives an advisory fee from Daily Assets Treasury Fund,
Daily Assets Government Fund, and Daily Assets Cash Fund based upon the total
average daily net assets of the combined Funds ("Total Fund Assets") that is
calculated on a cumulative basis at the following annual rates: 0.06% for the
first $200 million of Total Fund Assets, 0.04% of the next $300 million of
Total Fund Assets and 0.03% of the remaining Total Fund Assets. The Adviser
receives an advisory fee from Daily Assets Government Obligations Fund at an
annual rate of 0.05% of the average daily net assets of the Fund.
ADMINISTRATION AND OTHER SERVICES Citigroup Fund Services, LLC ("Citigroup"),
provides certain administration, portfolio accounting and transfer agency
services to the Fund.
SHAREHOLDER SERVICES The Funds pay (other than Daily Assets Government
Obligations Fund) a shareholder servicing fee at an annual rate of 0.20% of the
average daily net assets attributable to Institutional Service Shares,
Institutional Shares and Investor Shares of each Fund and 0.25% of the average
daily net assets attributable to B Shares and C Shares of Daily Assets Cash
Fund. These fees are paid to various financial institutions that provide
shareholder services.
DISTRIBUTOR Foreside Fund Services, LLC is the Trust's distributor (the
"Distributor"). Under a Distribution Plan adopted pursuant to Rule 12b-1 under
the Act, the Trust pays the Distributor a distribution fee at an annual rate of
0.25% of the average daily net assets of Investor Shares of each Fund and 0.75%
of the average daily net assets of B Shares and C Shares of Daily Assets Cash
Fund. The Distributor pays some or all of these fees to various financial
institutions that provide distribution services for Investor Shares. The plan
obligates the Funds to pay the Distributor as compensation for its services.
The Distributor is not affiliated with Citigroup or its affiliated companies.
Under a Compliance Services Agreement with the Trust, the Distributor provides
a Chief Compliance Officer to the Trust as well as certain additional
compliance support functions.
TRUSTEES AND OFFICERS Certain officers of the Trust are directors, officers or
employees of the aforementioned companies.
15
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
February 28, 2007
NOTE 4. WAIVER OF FEES/REIMBURSEMENT OF EXPENSES
The Adviser and Citigroup voluntarily waived a portion of their fees and
assumed certain expenses of the Funds. For the six months ended February 28,
2007, fees waived and expenses reimbursed for each of the Funds were as follows:
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY FUND OBLIGATIONS FUND GOVERNMENT FUND CASH FUND
------------- ---------------- --------------- ------------
Advisory $ -- $ 4,602 $ -- $ --
Administration 45,308 10,125 163,853 239,405
Custody 356 75 2,459 2,360
Shareholder Service -- -- 1,092 5,112
Transfer Agency 427 5,159 17,229 --
Portfolio Accounting 1,875 524 -- --
Reimbursed Expenses by
Citigroup 45,439 33,540 1,085 61,100
------- ------- -------- --------
Total $93,405 $54,025 $185,718 $307,977
======= ======= ======== ========
NOTE 5. FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
As of August 31, 2006, distributable earnings (accumulated losses) on a tax
basis were as follows:
UNDISTRIBUTED CAPITAL AND
ORDINARY INCOME OTHER LOSSES TOTAL
--------------- ------------ --------
Daily Assets Treasury Fund $ 9,185 $ -- $ 9,185
Daily Assets Government Obligations Fund 77,245 (5,222) 72,023
Daily Assets Government Fund 133,320 -- 133,320
Daily Assets Cash Fund 457,156 (14,272) 442,884
The capital loss carryovers available to offset future gains, as of August 31,
2006, were as follows:
Daily Assets Government Obligations Fund Expiring August 2007 $ 986
Expiring August 2008 3,602
Expiring August 2009 632
Expiring August 2011 2
Daily Assets Cash Fund Expiring August 2010 232
Expiring August 2011 9,421
Expiring August 2012 1,655
Expiring August 2013 333
Expiring August 2014 2,631
16
MONARCH FUNDS
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ADDITIONAL INFORMATION
February 28, 2007
PROXY VOTING GUIDELINES - A description of the policies and procedures the
Funds use to determine how to vote as a shareholder of the companies whose
securities are held in the Funds' portfolio is available, without charge and
upon request, by calling 800-754-8757. This information is also available from
the EDGAR database on the SEC's website at www.sec.gov. For the twelve months
ended June 30, the Funds did not own any securities for which a shareholder
meeting was called and voted on.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE - The Funds file their complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The Funds' Form N-Q are available on the SEC's
website at WWW.SEC.GOV or may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 800-SEC-0330.
INVESTMENT ADVISORY AGREEMENT APPROVAL
At the December 15, 2006 Board meeting, the Board, including the Independent
Trustees, considered the approval of the continuance of the investment advisory
agreement pertaining to the Funds (the "Advisory Agreement"). In evaluating the
Advisory Agreement for the Funds, the Board reviewed materials furnished by the
Adviser and the Administrator, including information regarding the Adviser, its
personnel, operations and financial condition. Specifically, the Board
considered, among other matters: (1) the nature, extent and quality of the
services to be provided to the Funds by the Adviser, including information on
the investment performance of the Adviser; (2) the costs of the services to be
provided and profitability to the Adviser with respect to its relationship with
the Funds; (3) the advisory fee and total expense ratio of the Funds compared
to relevant peer groups of funds; (4) the extent to which economies of scale
would be realized as the Funds grow and whether the advisory fee would enable
the Funds' investors to share in the benefits of economies of scale; and
(5) other benefits received by the Adviser from its relationship with the
Funds. In their deliberations, the Board did not identify any particular
information that was all-important or controlling, and the Board attributed
different weights to the various factors. In particular, the Board focused on
the factors discussed below.
NATURE, EXTENT AND QUALITY OF THE SERVICES
The Board met with representatives of the Adviser and discussed the Adviser's
personnel, operations and financial condition. Specifically, the Board
discussed with the Adviser the adequacy of its resources and quality of
services provided by the Adviser under the Advisory Agreement. The Board
concluded that it was satisfied with the nature, extent and quality of services
provided to the Funds by the Adviser. The Board then reviewed the Adviser's
financial stability. The Adviser reviewed its financial condition through the
period ended September 30, 2006, noting that it is financially stable. The
Board considered the Adviser's representation that its capital meets or exceeds
its current insurance deductible. Based on the foregoing, the Board concluded
that the Adviser was financially able to provide investment advisory services
to the Funds.
COSTS OF SERVICES AND PROFITABILITY
The Board then considered information provided by the Adviser regarding its
costs of services and profitability with respect to the Funds. The Board
considered the Adviser's resources devoted to the Funds as well as an
assessment of costs and profitability provided by the Adviser. The Board
concluded that the level of the Adviser's profits attributable to management of
the Funds was not excessive in light of the services provided by the Adviser on
behalf of the Funds.
COMPENSATION
The Board also considered the Adviser's compensation for providing advisory
services to the Funds and analyzed comparative information on fees, expenses,
and performance of similar mutual funds.
DAILY ASSETS TREASURY FUND - The Board noted that the contractual investment
advisory fee rate of the Fund was lower than the mean and median advisory fee
rate of its Lipper Inc. peer group. The Board also noted that the total gross
and net expenses for the Institutional Shares and Investor Shares of the Fund
were higher than the mean and median total expenses of their Lipper Inc. peer
group.
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND - The Board noted that the contractual
investment advisory fee rate and the total net expenses of the Fund were lower
than the mean and median advisory fee rates and total expenses of its
Lipper Inc. peer group.
17
MONARCH FUNDS
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ADDITIONAL INFORMATION
February 28, 2007
DAILY ASSETS GOVERNMENT FUND - The Board noted that the contractual investment
advisory fee rate of the Fund was lower than the mean and median advisory fee
rate of its Lipper Inc. peer group. The Board also considered the total net
expenses of each share class, noting that the Universal Shares and Preferred
Shares were lower than the mean and median total expenses of its Lipper Inc.
peer group, while the Institutional Shares, Institutional Service Shares and
Investor Shares were higher than the mean and median total expenses of its
Lipper Inc. peer group.
DAILY ASSETS CASH FUND - The Board noted that the contractual investment
advisory fee rate of the Fund was lower than the mean and median advisory fee
rate of its Lipper Inc. peer group. The Board also considered the total net
expenses of each share class, noting that the Universal Shares and Preferred
Shares were lower than the mean and median total expenses of its Lipper Inc.
peer group, while the Institutional Shares, Institutional Service Shares and
Investor Shares were higher than the mean and median total expenses of its
Lipper Inc. peer group.
PERFORMANCE
The Adviser discussed its approach to managing the Funds as well as the Funds'
performance. The Board considered the Funds' performance for the period ended
September 30, 2006 and since each Fund's inception.
DAILY ASSETS TREASURY FUND - The Board also considered that the Fund's
Institutional Service Shares outperformed their Lipper Inc. index for the 3-
and 6-month and 1-, 3- and 5-year periods, while the Fund's Investor Shares
outperformed its Lipper Inc. index for the 3- month and 1-year periods. The
Board noted that no significant changes to the investment strategies adopted by
the Adviser are anticipated in the near future.
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND - The Board also considered that the
Fund's Universal Shares outperformed their Lipper Inc. index for the 3- and
6-month and 1-, 3- and 5-year periods.
DAILY ASSETS GOVERNMENT FUND - The Board also considered that the Fund's
Preferred, Universal, Institutional Service, Institutional and Investor Shares
outperformed their Lipper Inc. index for the 3- and 6-month and 1-, 3- and
5-year periods.
DAILY ASSETS CASH FUND - The Board also considered that the Fund's Preferred,
Universal, Institutional Service, Institutional and Investor Shares
outperformed their Lipper Inc. index for the 3- and 6-month and 1-, 3- and
5-year periods.
ECONOMIES OF SCALE
The Board then considered whether the Funds would benefit from any economies of
scale. The Board considered the size of the Funds, noting that the breakpoints
in investment advisory fees for the Funds were appropriate to share benefits
from any economies of scale with the shareholders.
OTHER BENEFITS
The Board noted the Adviser's representation that it does not receive other
benefits from its relationship with the Funds. Based on the foregoing, the
Board concluded that other benefits received by the Adviser from its
relationship with the Funds were not a material factor to consider in approving
the continuation of the Advisory Agreement.
CONCLUSION
Prior to voting, the Board reviewed a memorandum from Fund Counsel discussing
the legal standards applicable to its consideration of the Advisory Agreement.
The Board also discussed the proposed approval of the continuance of the
Advisory Agreement. Based upon its review, the Board concluded that the overall
arrangements between the Funds and the Adviser, as provided in the Advisory
Agreement, were fair and reasonable in light of the services performed,
expenses incurred and other such matters as the Board considered relevant in
the exercise of its reasonable judgment.
SHAREHOLDER EXPENSES EXAMPLE - As a shareholder of a Fund, you incur two types
of costs: (1) transactions costs, including contingent deferred sales charges
(loads); and (2) ongoing costs, including management fees; distribution (12b-1)
fees; and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in a Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The following example is based on $1,000 invested at the beginning of the
period and held for the entire period from September 1, 2006 through
February 28, 2007.
18
MONARCH FUNDS
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ADDITIONAL INFORMATION
February 28, 2007
ACTUAL EXPENSES - The first line of the table below provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During Period" to estimate the expenses you
paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The second line of the table
below provides information about hypothetical account values and hypothetical
expenses based on a Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not a Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in a Fund and other funds.
To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
contingent deferred sales charges (loads). Therefore, the second line of the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
SEPTEMBER 1, 2006 FEBRUARY 28, 2007 PERIOD* RATIO
----------------- ----------------- ----------- ----------
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,023.97 $2.26 0.45%
Hypothetical Return $1,000.00 $1,022.56 $2.26 0.45%
INVESTOR SHARES
Actual Return $1,000.00 $1,021.99 $4.21 0.84%
Hypothetical Return $1,000.00 $1,020.63 $4.21 0.84%
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
UNIVERSAL SHARES
Actual Return $1,000.00 $1,025.05 $1.00 0.20%
Hypothetical Return $1,000.00 $1,023.80 $1.00 0.20%
DAILY ASSETS GOVERNMENT FUND
PREFERRED SHARES
Actual Return $1,000.00 $1,026.28 $0.60 0.12%
Hypothetical Return $1,000.00 $1,024.20 $0.60 0.12%
UNIVERSAL SHARES
Actual Return $1,000.00 $1,025.84 $1.00 0.20%
Hypothetical Return $1,000.00 $1,023.80 $1.00 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,024.60 $2.26 0.45%
Hypothetical Return $1,000.00 $1,022.56 $2.26 0.45%
INSTITUTIONAL SHARES
Actual Return $1,000.00 $1,024.00 $2.86 0.57%
Hypothetical Return $1,000.00 $1,021.97 $2.86 0.57%
INVESTOR SHARES
Actual Return $1,000.00 $1,022.64 $4.21 0.84%
Hypothetical Return $1,000.00 $1,020.63 $4.21 0.84%
19
MONARCH FUNDS
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ADDITIONAL INFORMATION
February 28, 2007
BEGINNING ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
SEPTEMBER 1, 2006 FEBRUARY 28, 2007 PERIOD* RATIO
----------------- ----------------- ----------- ----------
DAILY ASSETS CASH FUND
PREFERRED SHARES
Actual Return $1,000.00 $1,026.33 $0.60 0.12%
Hypothetical Return $1,000.00 $1,024.20 $0.60 0.12%
UNIVERSAL SHARES
Actual Return $1,000.00 $1,025.92 $1.00 0.20%
Hypothetical Return $1,000.00 $1,023.80 $1.00 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,024.65 $2.26 0.45%
Hypothetical Return $1,000.00 $1,022.56 $2.26 0.45%
INSTITUTIONAL SHARES
Actual Return $1,000.00 $1,024.04 $2.86 0.57%
Hypothetical Return $1,000.00 $1,021.97 $2.86 0.57%
INVESTOR SHARES
Actual Return $1,000.00 $1,022.69 $4.21 0.84%
Hypothetical Return $1,000.00 $1,020.63 $4.21 0.84%
B SHARES
Actual Return $1,000.00 $1,018.62 $8.26 1.65%
Hypothetical Return $1,000.00 $1,016.61 $8.25 1.65%
C SHARES
Actual Return $1,000.00 $1,018.62 $8.26 1.65%
Hypothetical Return $1,000.00 $1,016.61 $8.25 1.65%
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
most recent fiscal half-year divided by 365 to reflect the half-year period.
20
MONARCH FUNDS
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
MONARCH FUNDS
P.O. Box 446
Portland, Maine 04112
(800) 754-8757
FOR MORE INFORMATION
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus, which includes information
regarding the Funds' risks, objectives, fees and expenses, experience of its
management, and other information.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included as part of report to shareholders under Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant does not accept nominees to the board of directors from
shareholders.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) are effective, based on
their evaluation of these disclosure controls and procedures required by Rule
30a-3(b) as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) that occurred during the
registrant's last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) of the Investment Company Act
of 1940 as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (Exhibit
filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) of the Investment Company Act of
1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit
filed herewith).
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 Monarch Funds
By /s/ Anthony R. Fischer
--------------------------------
Anthony R. Fischer, Principal
Executive Officer
Date April 27, 2007
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 /s/ Anthony R. Fischer
--------------------------------
Anthony R. Fischer, Principal
Executive Officer
Date April 27, 2007
By /s/ Jack J. Singer
--------------------------------
Jack J. Singer, Principal
Financial Officer
Date April 27, 2007