AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 2007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 - August 31, 2007
ITEM 1. REPORT TO STOCKHOLDERS.
AUGUST 31, 2007
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
ANNUAL REPORT
MONARCH FUNDS
[GRAPHIC]
MONARCH FUNDS
- --------------------------------------------------------------------------------
A MESSAGE TO OUR SHAREHOLDERS
August 31, 2007
Dear Shareholders:
Since our February, 2007 semi-annual report, Federal Reserve monetary policy
has changed considerably. The Federal Reserve has gone from holding the Fed
Funds rate stable at 5 1/4% to lowering the rate to 4 3/4% as of
September 18th. This action was taken due to concerns that the domestic economy
may be impacted due to the collapse of the sub-prime mortgage market and the
wide ranging financial dislocations this may have. We view this as a positive
for the domestic economy and that over the coming months the initial effects of
the mortgage market dislocations will dissipate.
Our investment approach throughout the recent volatile fixed income market time
period has been and will continue to be focused on seeking to maintain the
highest credit quality in our portfolios consistent with providing our
investors with a competitive return. Since the inception of the Monarch Funds
fifteen years ago, we have remained committed to maintaining a $1.00 Net Asset
Value per share, providing daily liquidity and 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
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. FORESIDE FUND
SERVICES, LLC, DISTRIBUTOR.
1
MONARCH FUNDS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders
Monarch Funds:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Daily Assets Treasury Fund,
Daily Assets Government Obligations Fund, Daily Assets Government Fund, and
Daily Assets Cash Fund (collectively, the "Funds"), each a series of the
Monarch Funds, as of August 31, 2007, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
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 August 31, 2007, by
correspondence with custodians. 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
Daily Assets Treasury Fund, Daily Assets Government Obligations Fund, Daily
Assets Government Fund, and Daily Assets Cash Fund as of August 31, 2007, and
the results of their operations for the year then ended, the changes in their
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended,
in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
October 25, 2007
2
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS TREASURY FUND
August 31, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ------------ -------- -----------
U.S. TREASURY BILLS # - 36.0%
$21,000,000 U.S. Treasury Bills 3.09% - 3.91% 09/20/07 $20,960,607
6,000,000 U.S. Treasury Bill 3.35 11/01/07 5,966,145
-----------
26,926,752
-----------
REPURCHASE AGREEMENTS - 64.1%
14,872,000 Bank of America Securities, dated 08/31/07, to be repurchased at
$14,880,180; collateralized by various U.S. Treasury Obligations 4.95 09/04/07 14,872,000
11,000,000 Citigroup, dated 08/31/07, to be repurchased at $11,005,806;
collateralized by various U.S. Treasury Obligations 4.75 09/04/07 11,000,000
11,000,000 Deutsche Bank Securities, Inc., dated 08/31/07, to be repurchased at
$11,006,233; collateralized by various U.S. Treasury Obligations 5.10 09/04/07 11,000,000
11,000,000 Merrill Lynch, dated 08/31/07, to be repurchased at $11,005,989;
collateralized by various U.S. Treasury Obligations 4.90 09/04/07 11,000,000
-----------
Total Repurchase Agreements 47,872,000
-----------
Total Investments at Amortized Cost* - 100.1% $74,798,752
Other Assets and Liabilities, Net - (0.1%) (44,245)
-----------
NET ASSETS - 100.0% $74,754,507
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Repurchase Agreements 64.0%
U.S. Treasury Bills 36.0%
# 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.
3
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
August 31, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- -----------
U.S. GOVERNMENT SECURITY - 92.5%
GOVERNMENT BOND # - 92.5%
$ 2,000,000 Federal Home Loan Bank - Discount Note 5.17% 09/05/07 $ 1,998,856
15,000,000 Federal Home Loan Bank - Discount Note 4.82 11/21/07 14,839,350
-----------
Total U.S. Government Securities 16,838,206
-----------
SHARES
- -----------
MONEY MARKET FUND - 7.2%
1,300,000 Dreyfus Treasury Prime Cash Management Fund 3.52 1,300,000
-----------
Total Investments at Amortized Cost* - 99.7% $18,138,206
Other Assets and Liabilities, Net - 0.3% 57,677
-----------
NET ASSETS - 100.0% $18,195,883
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Security 92.8%
Money Market Fund 7.2%
# 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.
4
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT FUND
August 31, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ------------ -------------------------------------------------------------------------- ---- -------- ------------
U.S. GOVERNMENT SECURITIES - 68.5%
GOVERNMENT BOND # - 65.3%
$100,000,000 Federal Home Loan Bank - Discount Note 4.50% 09/04/07 $ 99,962,500
150,000,000 Federal Home Loan Bank - Discount Note 4.90 09/06/07 149,897,917
------------
Total Government Bond 249,860,417
------------
SMALL BUSINESS ADMINISTRATION (+/-) - 3.2%
598,018 Pool #502150 6.25 02/25/18 600,777
1,172,318 Pool #503152 5.88 11/25/20 1,172,318
860,859 Pool #503461 6.00 09/25/21 861,228
1,033,643 Pool #503553 5.88 11/25/21 1,034,282
860,646 Pool #503909 5.75 10/25/22 860,408
3,202,812 Pool #504366 5.63 02/25/24 3,196,529
2,234,546 Pool #504719 5.88 07/25/24 2,234,546
787,429 Pool #504727 5.88 09/25/24 787,429
605,244 Pool #504765 5.88 10/25/09 604,825
796,609 Pool #504769 5.88 10/25/24 796,609
------------
Total Small Business Administration 12,148,951
------------
Total U.S. Government Securities 262,009,368
------------
REPURCHASE AGREEMENTS - 31.3%
19,770,000 Bank of America Securities, dated 08/31/07, to be repurchased at
$19,781,423; collateralized by various U.S. Government Agency Obligations 5.20 09/04/07 19,770,000
50,000,000 Citigroup, dated 08/31/07, to be repurchased at $50,029,167; collaterized
by various U.S. Government Agency Obligations 5.25 09/04/07 50,000,000
50,000,000 Deutsche Bank Securities, Inc., dated 8/31/07, to be repurchased at
$50,030,000; collaterized by various U.S. Government Agency Obligations 5.40 09/04/07 50,000,000
------------
Total Repurchase Agreements 119,770,000
------------
Total Investments at Amortized Cost* - 99.8% $381,779,368
Other Assets and Liabilities, Net - 0.2% 576,451
------------
NET ASSETS - 100.0% $382,355,819
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Securities 68.6%
Repurchase Agreements 31.4%
# 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 August 31, 2007.
* 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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SCHEDULE OF INVESTMENTS - DAILY ASSETS CASH FUND
August 31, 2007
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- ------------
COMMERCIAL PAPER # - 17.5%
$25,000,000 Citigroup Funding, Inc. 5.38% 10/01/07 $ 24,888,542
25,000,000 International Lease Finance Corp. 5.27 09/07/07 24,978,167
25,000,000 Proctor & Gamble International Finance 5.29 10/19/07 24,825,666
25,000,000 UBS Finance Delaware, LLC 5.30 09/04/07 24,989,010
------------
Total Commercial Paper 99,681,385
------------
CORPORATE NOTES (+/-) - 38.5%
25,000,000 AllState Life Global Funding Trust^ 5.44 04/14/08 25,016,563
15,000,000 American Express Credit Co. 5.62 01/15/08 15,002,175
25,000,000 American Honda Finance Corp.^ 5.59 11/15/07 25,003,036
24,750,000 ASIF Global Financing XXI^ 5.71 03/14/08 24,800,172
8,450,000 CIT Group, Inc. 5.59 09/20/07 8,451,081
8,000,000 CIT Group, Inc. 5.57 02/21/08 7,998,855
20,000,000 Deutsche Bank of New York 5.36 06/19/08 20,006,018
25,000,000 General Electric Capital Corp. 5.42 01/03/08 25,008,356
25,000,000 JP Morgan Chase & Co. 5.43 01/25/08 25,009,653
6,050,000 Lehman Brothers Holdings, Inc. 5.54 05/29/08 6,052,164
10,000,000 Merrill Lynch & Co., Inc. 5.49 10/19/07 10,002,158
8,085,000 Morgan Stanley 5.41 03/07/08 8,088,250
12,000,000 Royal Bank of Scotland Plc^ 5.37 04/11/08 12,003,079
7,393,000 Wells Fargo & Co. 5.42 09/28/07 7,393,581
------------
Total Corporate Notes 219,835,141
------------
GOVERNMENT BONDS # - 17.3%
40,000,000 Federal Farm Credit - Discount Note 4.90 09/05/07 39,978,222
20,000,000 Federal Farm Credit - Discount Note 4.90 09/06/07 19,986,389
38,658,000 Federal Home Loan Bank - Discount Note 4.50 09/04/07 38,643,503
------------
Total Government Bonds 98,608,114
------------
REPURCHASE AGREEMENTS - 26.5%
45,500,000 Bank of America Securities, dated 08/31/07, to be repurchased at
$45,526,289; collateralized by various U.S. Government Agency Obligations 5.20 09/04/07 45,500,000
55,740,000 Citigroup, dated 08/31/07, to be repurchased at $55,772,515;
collateralized by various U.S. Government Agency Obligations 5.25 09/04/07 55,740,000
50,000,000 Deutsche Bank Securities, Inc., dated 08/31/07, to be repurchased at
$50,030,000; collateralized by various U.S. Government Agency Obligations 5.40 09/04/07 50,000,000
------------
Total Repurchase Agreements 151,240,000
------------
Total Investments at Amortized Cost* - 99.8% $569,364,640
Other Assets and Liabilities, Net - 0.2% 1,224,879
------------
NET ASSETS - 100.0% $570,589,519
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Corporate Notes 38.6%
Repurchase Agreements 26.6%
Commercial Paper 17.5%
Government Bonds 17.3%
# 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 August 31, 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 $86,822,850 or 15.2% of net assets.
* Cost for federal income tax purposes is the same as for financial statement purposes.
See Notes to Financial Statements.
6
MONARCH FUNDS
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STATEMENTS OF ASSETS AND LIABILITIES
August 31, 2007
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Assets
Investments:
Securities at amortized cost $26,926,752 $18,138,206 $262,009,368 $418,124,640
Repurchase agreements 47,872,000 -- 119,770,000 151,240,000
Cash 40,150 147,544 98,514 98,525
Receivables:
Dividends -- 3,033 -- --
Interest 6,551 -- 138,590 1,654,216
Investment securities sold -- -- 613,970 --
Other receivables 7,890 -- -- 8,723
Prepaid expenses and other assets 5,841 7,814 25,655 73,245
----------- ----------- ------------ ------------
Total Assets 74,859,184 18,296,597 382,656,097 571,199,349
----------- ----------- ------------ ------------
Liabilities
Payables:
Dividends 26,644 74,765 51,410 298,607
Accrued expenses:
Payable to adviser 2,823 778 13,685 19,333
Other expenses and other liabilities 75,210 25,171 235,183 291,890
----------- ----------- ------------ ------------
Total Liabilities 104,677 100,714 300,278 609,830
----------- ----------- ------------ ------------
Net Assets $74,754,507 $18,195,883 $382,355,819 $570,589,519
=========== =========== ============ ============
Components of Net Assets
Paid-in capital $74,746,000 $18,196,905 $382,373,388 $570,588,588
Undistributed (distributions in excess of) net investment
income 11 409 (31,721) 1,501
Accumulated net realized gain (loss) 8,496 (1,431) 14,152 (570)
----------- ----------- ------------ ------------
Net Assets $74,754,507 $18,195,883 $382,355,819 $570,589,519
=========== =========== ============ ============
Net Assets by Class of Shares
Preferred Shares $ -- $ -- $140,173,371 $ 69,354,332
Universal Shares -- 18,195,883 29,134,194 102,838,108
Institutional Service Shares 8,767,514 -- 37,480,386 54,799,333
Institutional Shares -- -- 74,905,354 104,420,329
Investor Shares 65,986,993 -- 100,662,514 236,992,777
B Shares -- -- -- 490,201
C Shares -- -- -- 1,694,439
----------- ----------- ------------ ------------
Net Assets $74,754,507 $18,195,883 $382,355,819 $570,589,519
=========== =========== ============ ============
Shares of Beneficial Interest for each Class of Shares
Preferred Shares -- -- 140,169,045 69,351,641
Universal Shares -- 18,216,138 29,172,353 102,839,768
Institutional Service Shares 8,762,113 -- 37,479,308 54,797,940
Institutional Shares -- -- 74,898,244 104,419,994
Investor Shares 65,983,896 -- 100,654,451 236,994,712
B Shares -- -- -- 490,188
C Shares -- -- -- 1,694,380
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.
7
MONARCH FUNDS
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STATEMENTS OF OPERATIONS
Year Ended August 31, 2007
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Investment Income:
Interest income $4,153,155 $ 938,913 $20,606,211 $31,316,835
Dividend income 12,153 33,581 -- --
---------- --------- ----------- -----------
Total Investment Income 4,165,308 972,494 20,606,211 31,316,835
---------- --------- ----------- -----------
Expenses:
Investment adviser fees 31,390 9,360 148,264 226,022
Administrator fees
Preferred Shares -- -- 129,135 171,903
Universal Shares -- 20,591 79,502 79,603
Institutional Service Shares 16,452 -- 35,573 62,820
Institutional Shares -- -- 82,099 105,965
Investor Shares 72,528 -- 97,595 220,404
B Shares -- -- -- 23,986
C Shares -- -- -- 24,718
Shareholder service fees
Institutional Service Shares 29,912 -- 64,680 114,219
Institutional Shares -- -- 149,271 192,665
Investor Shares 131,870 -- 177,447 400,738
B Shares -- -- -- 564
C Shares -- -- -- 2,226
Distribution fees
Investor Shares 164,836 -- 221,806 500,917
B Shares -- -- -- 1,692
C Shares -- -- -- 6,677
Compliance services fees 10,283 6,879 11,055 3,652
Transfer agency fees
Preferred Shares -- -- 14,840 21,320
Universal Shares -- 24,118 51,165 53,621
Institutional Service Shares 27,929 -- 46,800 73,297
Institutional Shares -- -- 171,150 211,115
Investor Shares 154,177 -- 201,681 426,907
B Shares -- -- -- 15,551
C Shares -- -- -- 16,899
Custodian fees 8,446 1,947 41,000 60,722
Professional fees 40,635 35,817 34,850 45,867
Accountant fees 51,142 38,847 99,989 123,737
Registration fees 5,811 6,016 35,173 60,244
Trustees' fees and expenses 7,262 1,962 47,769 60,831
Miscellaneous expenses 24,089 1,317 49,101 66,353
---------- --------- ----------- -----------
Total Expenses 776,762 146,854 1,989,945 3,375,235
Expenses reimbursed and fees waived (152,372) (108,669) (373,005) (512,078)
---------- --------- ----------- -----------
Net Expenses 624,390 38,185 1,616,940 2,863,157
---------- --------- ----------- -----------
Net Investment Income 3,540,918 934,309 18,989,271 28,453,678
---------- --------- ----------- -----------
Net Realized Gain on Investments 8,496 3,790 14,150 13,702
---------- --------- ----------- -----------
Increase in Net Assets from Operations $3,549,414 $ 938,099 $19,003,421 $28,467,380
========== ========= =========== ===========
See Notes to Financial Statements.
8
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS DAILY ASSETS
TREASURY FUND GOVERNMENT OBLIGATIONS FUND
-------------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2007 AUGUST 31, 2006 AUGUST 31, 2007 AUGUST 31, 2006
--------------- --------------- --------------- ---------------
Operations
Net investment income $ 3,540,918 $ 2,619,720 $ 934,309 $ 763,875
Net realized gain on investments 8,496 -- 3,790 --
--------------- --------------- ------------ ------------
Increase in Net Assets from Operations 3,549,414 2,619,720 938,099 763,875
--------------- --------------- ------------ ------------
Distributions to Shareholders from
Net investment income--Universal Shares -- -- (934,308) (763,875)
Net investment income--Institutional Service Shares (704,968) (511,144) -- --
Net investment income--Investor Shares (2,835,952) (2,108,577) -- --
--------------- --------------- ------------ ------------
Total Distributions to Shareholders (3,540,920) (2,619,721) (934,308) (763,875)
--------------- --------------- ------------ ------------
Capital Share Transactions (in dollars and shares)
Sale of shares--Universal Shares -- -- 16,200,785 17,890,345
Sale of shares--Institutional Service Shares 59,251,693 56,995,099 -- --
Sale of shares--Investor Shares 1,099,309,749 1,027,908,338 -- --
Reinvestment of distributions--Universal Shares -- -- 10,616 10,377
Reinvestment of distributions--Institutional Service Shares 543,453 426,729 -- --
Reinvestment of distributions--Investor Shares 2,818,966 2,107,066 -- --
Redemption of shares--Universal Shares -- -- (16,862,876) (16,479,139)
Redemption of shares--Institutional Service Shares (66,160,159) (54,166,582) -- --
Redemption of shares--Investor Shares (1,094,960,263) (1,018,150,465) -- --
--------------- --------------- ------------ ------------
Increase (Decrease) from Capital Transactions 803,439 15,120,185 (651,475) 1,421,583
--------------- --------------- ------------ ------------
Increase (Decrease) in Net Assets 811,933 15,120,184 (647,684) 1,421,583
--------------- --------------- ------------ ------------
Net Assets
Beginning of Period 73,942,574 58,822,390 18,843,567 17,421,984
--------------- --------------- ------------ ------------
End of Period $ 74,754,507 $ 73,942,574 $ 18,195,883 $ 18,843,567
=============== =============== ============ ============
Undistributed (distributions in excess of)
Net Investment Income $ 11 $ 13 $ 409 $ 408
=============== =============== ============ ============
See Notes to Financial Statements.
9
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS
GOVERNMENT FUND
---------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2007 AUGUST 31, 2006
--------------- ----------------
Operations
Net investment income (loss) $ 18,989,271 $ 56,933,808
Net realized gain (loss) on investments 14,150 --
--------------- ----------------
Increase (Decrease) in Net Assets from Operations 19,003,421 56,933,808
--------------- ----------------
Distributions to Shareholders from
Net investment income--Preferred Shares (6,134,632) (46,380,538)
Net investment income--Universal Shares (3,713,783) (1,758,977)
Net investment income--Institutional Service Shares (1,582,715) (2,557,679)
Net investment income--Institutional Shares (3,564,712) (3,863,892)
Net investment income--Investor Shares (3,996,725) (2,372,632)
Net investment income--B Shares -- --
Net investment income--C Shares -- --
--------------- ----------------
Total Distributions to Shareholders (18,992,567) (56,933,718)
--------------- ----------------
Capital Share Transactions (in dollars and shares)
Sale of shares--Preferred Shares 1,242,343,346 13,961,573,134
Sale of shares--Universal Shares 463,703,586 261,380,787
Sale of shares--Institutional Service Shares 223,481,697 406,813,980
Sale of shares--Institutional Shares 742,566,876 1,101,577,846
Sale of shares--Investor Shares 1,233,465,393 1,183,921,865
Sale of shares--B Shares -- --
Sale of shares--C Shares -- --
Reinvestment of distributions--Preferred Shares 5,634,900 46,189,852
Reinvestment of distributions--Universal Shares 3,699,021 1,761,741
Reinvestment of distributions--Institutional Service Shares 1,575,394 2,557,455
Reinvestment of distributions--Institutional Shares 3,162,004 3,318,919
Reinvestment of distributions--Investor Shares 3,984,410 2,359,987
Reinvestment of distributions--B Shares -- --
Reinvestment of distributions--C Shares -- --
Redemption of shares--Preferred Shares (1,219,729,132) (13,917,158,610)
Redemption of shares--Universal Shares (480,793,053) (245,398,091)
Redemption of shares--Institutional Service Shares (234,450,705) (417,918,604)
Redemption of shares--Institutional Shares (744,668,649) (1,087,896,148)
Redemption of shares--Investor Shares (1,204,536,860) (1,181,095,338)
Redemption of shares--B Shares -- --
Redemption of shares--C Shares -- --
--------------- ----------------
Increase (Decrease) from Capital Transactions 39,438,228 121,988,775
--------------- ----------------
Increase (Decrease) in Net Assets 39,449,082 121,988,865
--------------- ----------------
Net Assets
Beginning of Period 342,906,737 220,917,872
--------------- ----------------
End of Period $ 382,355,819 $ 342,906,737
=============== ================
Undistributed (distributions in excess of)
Net Investment Income $ (31,721) $ (28,425)
=============== ================
DAILY ASSETS
CASH FUND
--------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2007 AUGUST 31, 2006
--------------- ---------------
Operations
Net investment income (loss) $ 28,453,678 $ 17,852,956
Net realized gain (loss) on investments 13,702 (687)
--------------- ---------------
Increase (Decrease) in Net Assets from Operations 28,467,380 17,852,269
--------------- ---------------
Distributions to Shareholders from
Net investment income--Preferred Shares (8,193,071) (2,675,457)
Net investment income--Universal Shares (3,734,857) (2,592,894)
Net investment income--Institutional Service Shares (2,804,839) (1,365,993)
Net investment income--Institutional Shares (4,615,665) (2,748,374)
Net investment income--Investor Shares (9,062,066) (8,454,554)
Net investment income--B Shares (8,381) (3,648)
Net investment income--C Shares (33,052) (11,722)
--------------- ---------------
Total Distributions to Shareholders (28,451,931) (17,852,642)
--------------- ---------------
Capital Share Transactions (in dollars and shares)
Sale of shares--Preferred Shares 1,479,999,002 690,893,357
Sale of shares--Universal Shares 711,452,056 739,799,611
Sale of shares--Institutional Service Shares 367,725,335 352,393,100
Sale of shares--Institutional Shares 1,049,036,474 899,609,574
Sale of shares--Investor Shares 2,852,482,706 3,944,036,139
Sale of shares--B Shares 499,657 414,954
Sale of shares--C Shares 2,505,898 1,663,874
Reinvestment of distributions--Preferred Shares 4,167,357 364,322
Reinvestment of distributions--Universal Shares 3,352,850 2,331,253
Reinvestment of distributions--Institutional Service Shares 2,797,725 1,355,076
Reinvestment of distributions--Institutional Shares 4,427,997 2,507,112
Reinvestment of distributions--Investor Shares 8,420,806 7,735,675
Reinvestment of distributions--B Shares 8,381 3,647
Reinvestment of distributions--C Shares 33,051 11,735
Redemption of shares--Preferred Shares (1,516,318,866) (629,499,253)
Redemption of shares--Universal Shares (690,668,285) (702,705,553)
Redemption of shares--Institutional Service Shares (370,491,479) (326,119,193)
Redemption of shares--Institutional Shares (1,048,368,336) (859,445,718)
Redemption of shares--Investor Shares (2,831,373,592) (3,981,055,792)
Redemption of shares--B Shares (340,991) (125,545)
Redemption of shares--C Shares (1,712,222) (844,167)
--------------- ---------------
Increase (Decrease) from Capital Transactions 27,635,524 143,324,208
--------------- ---------------
Increase (Decrease) in Net Assets 27,650,973 143,323,835
--------------- ---------------
Net Assets
Beginning of Period 542,938,546 399,614,711
--------------- ---------------
End of Period $ 570,589,519 $ 542,938,546
=============== ===============
Undistributed (distributions in excess of)
Net Investment Income $ 1,501 $ (246)
=============== ===============
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 Omitted)
- ----------------- --------- ---------- ----------- ------------- ------------- --------- ------ ---------
- - - - - - - - - -
DAILY ASSETS TREASURY FUND
Institutional Service Shares/(b)/
- ------------------------------------------------------------------------------------------------------------
2007 $1.00 $0.05/(c)/ --/(d)/ $(0.05) -- $1.00 4.79% $ 8,768
2006 1.00 0.04/(c)/ -- (0.04) -- 1.00 4.06% 15,131
2005 1.00 0.02/(c)/ --/(d)/ (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
Investor Shares
- ------------------------------------------------------------------------------------------------------------
2007 1.00 0.04/(c)/ --/(d)/ (0.04) -- 1.00 4.39% 65,987
2006 1.00 0.04/(c)/ -- (0.04) -- 1.00 3.65% 58,811
2005 1.00 0.02/(c)/ --/(d)/ (0.02) -- 1.00 1.64% 46,946
2004 1.00 --/(d)/ -- --/(d)/ -- 1.00 0.20% 56,217
2003 1.00 --/(d)/ -- --/(d)/ -- 1.00 0.45% 96,827
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Universal Shares/(e)/
- ------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(c)/ --/(d)/ (0.05) -- 1.00 5.10% 18,196
2006 1.00 0.04/(c)/ -- (0.04) -- 1.00 4.30% 18,844
2005 1.00 0.02/(c)/ -- (0.02) -- 1.00 2.27% 17,422
2004 1.00 0.01 --/(d)/ (0.01) -- 1.00 0.91% 20,383
2003 1.00 0.01 -- (0.01) -- 1.00 1.18% 24,752
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratios to Average Net Assets
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(a)/ Income
- ---------------------------------
- ----------------------------------
0.45% 0.71% 4.71%
0.45% 0.82% 4.01%
0.45% 0.69% 1.92%
0.45% 0.56% 0.57%
0.45% 0.67% 0.84%
- ----------------------------------
0.84% 1.02% 4.30%
0.84% 1.02% 3.61%
0.84% 0.97% 1.61%
0.84% 0.89% 0.18%
0.84% 0.90% 0.45%
- ----------------------------------
0.20% 0.78% 4.99%
0.20% 0.81% 4.24%
0.20% 0.75% 2.22%
0.20% 0.70% 0.86%
0.20% 0.48% 1.14%
(a)Reflects the expense ratio excluding any waivers and/or reimbursements.
(b)On April 23, 2003, Institutional Shares were renamed Institutional Service
Shares.
(c)Calculated based on average shares outstanding during the period.
(d)Less than $0.01 per share.
(e)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
- -----------------------------------------------------------------------------------------------------------------
2007 $1.00 $0.05/(d)/ --/(f)/ $(0.05) -- $1.00 5.35% $140,173
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
Universal Shares
- -----------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 5.26% 29,134
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
Institutional Service Shares
- -----------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 5.01% 37,480
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
- -----------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 4.88% 74,905
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
Investor Shares
- -----------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 4.60% 100,663
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
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratios to Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.12% 0.23% 5.22%
0.12% 0.18% 4.34%
0.12% 0.18% 2.56%
0.12% 0.18% 1.06%
0.11% 0.25% 1.05%
- ----------------------------------
0.20% 0.31% 5.14%
0.20% 0.30% 4.36%
0.20% 0.25% 2.12%
0.20% 0.26% 0.95%
0.20% 0.28% 1.26%
- ----------------------------------
0.45% 0.57% 4.89%
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% 0.67% 4.78%
0.57% 0.61% 4.03%
0.57% 0.61% 2.05%
0.57% 0.62% 0.58%
0.57% 0.63% 0.92%
- ----------------------------------
0.84% 0.91% 4.50%
0.84% 0.88% 3.80%
0.84% 0.87% 1.74%
0.84% 0.86% 0.32%
0.84% 0.89% 0.63%
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
- -------------------------------------------------------------------------------------------------------------------
2007 $1.00 $0.05/(d)/ --/(f)/ $(0.05) -- $1.00 5.37% $ 69,354
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
Universal Shares
- -------------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 5.29% 102,838
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
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 5.02% 54,799
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
- -------------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 4.90% 104,420
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
Investor Shares
- -------------------------------------------------------------------------------------------------------------------
2007 1.00 0.05/(d)/ --/(f)/ (0.05) -- 1.00 4.62% 236,993
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
B Shares
- -------------------------------------------------------------------------------------------------------------------
2007 1.00 0.04/(d)/ --/(f)/ (0.04) -- 1.00 3.78% 490
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
- -------------------------------------------------------------------------------------------------------------------
2007 1.00 0.04/(d)/ --/(f)/ (0.04) -- 1.00 3.78% 1,694
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% 0.23% 5.24%
0.12% 0.23% 4.61%
0.12% 0.32% 2.64%
0.12% 0.31% 1.06%
0.12% 0.30% 1.39%
- ----------------------------------
0.20% 0.30% 5.16%
0.20% 0.29% 4.41%
0.20% 0.34% 2.32%
0.20% 0.27% 0.94%
0.20% 0.28% 1.24%
- ----------------------------------
0.45% 0.54% 4.91%
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% 0.63% 4.79%
0.57% 0.65% 4.16%
0.57% 0.68% 1.97%
0.57% 0.63% 0.59%
0.57% 0.61% 1.01%
- ----------------------------------
0.84% 0.89% 4.52%
0.84% 0.88% 3.76%
0.84% 0.91% 1.71%
0.84% 0.87% 0.32%
0.84% 0.86% 0.68%
- ----------------------------------
1.65% 21.75% 3.72%
1.65% 48.98% 3.39%
1.65% 161.82% 1.20%
- ----------------------------------
1.65% 6.59% 3.71%
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
August 31, 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 August 31, 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
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with U.S. generally
accepted accounting principles, 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, DIVIDEND AND INTEREST INCOME AND REALIZED GAIN AND
LOSS Securities transactions are recorded on trade date. Dividend income is
recorded on the ex-dividend 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
August 31, 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 U.S. generally accepted accounting principles. 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 each Fund.
NEW ACCOUNTING PRONOUNCEMENTS In June 2006, the Financial Accounting Standards
Board ("FASB") issued Financial Interpretation No. 48, "ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES" ("FIN48") which is effective for fiscal years
beginning after December 15, 2006, and is to be applied to all open tax years
no later than June 30, 2007. FIN48 prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Fund
management has determined that the Funds have not taken any tax positions in
the current or prior reporting periods that would require reporting under FIN
48.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 "FAIR VALUE MEASUREMENTS" ("SFAS 157") which is effective for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal
years. SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures
about fair value measurements. Management has recently begun to evaluate the
application of SFAS 157, and has not at this time determined the impact, if
any, resulting from its adoption on the Funds' future financial statements.
RESTRICTED SECURITIES The Funds 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 Funds is included in the Schedule of Investments.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER Monarch 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 these share classes. 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.
15
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
August 31, 2007
TRUSTEES AND OFFICERS Certain officers of the Trust are directors, officers or
employees of the aforementioned companies.
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 year ended August 31, 2007, fees
waived and expenses reimbursed for each Fund were as follows:
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY FUND OBLIGATIONS FUND GOVERNMENT FUND CASH FUND
------------- ---------------- --------------- ------------
Advisory $ -- $ 9,360 $ -- $ --
Administration 78,556 19,998 286,878 392,153
Custody 207 74 4,068 2,506
Shareholder Service -- -- 14,546 6,080
Transfer Agency 427 12,311 44,440 --
Portfolio Accounting 6,998 8,616 -- --
Reimbursed Expenses by Citigroup 66,184 58,310 23,073 111,339
-------- -------- -------- --------
Total $152,372 $108,669 $373,005 $512,078
======== ======== ======== ========
NOTE 5. FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
As of August 31, 2007, distributable earnings (accumulated losses) on a tax
basis were as follows:
UNDISTRIBUTED
UNDISTRIBUTED LONG-TERM CAPITAL AND
ORDINARY INCOME GAIN OTHER LOSSES TOTAL
--------------- ------------- ------------ --------
Daily Assets Treasury Fund $ 35,151 $ -- $ -- $ 35,151
Daily Assets Government Obligations Fund 75,173 -- (1,432) 73,741
Daily Assets Government Fund 30,940 2,900 -- 33,840
Daily Assets Cash Fund 300,108 -- (570) 299,538
The tax character of distributions paid during 2007 and 2006 were as follows:
ORDINARY INCOME
-----------------------
2007 2006
----------- -----------
Daily Assets Treasury Fund $ 3,540,920 $ 2,619,721
Daily Assets Government Obligations Fund 934,308 763,875
Daily Assets Government Fund 18,992,567 56,933,718
Daily Assets Cash Fund 28,451,931 17,852,642
The capital loss carryovers available to offset future gains, as of August 31,
2007, were as follows:
Daily Assets Government Obligations Fund
Expiring August 2008 $798
Expiring August 2009 632
Expiring August 2011 2
Daily Assets Cash Fund Expiring August 2014 570
16
MONARCH FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
August 31, 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.
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
For Federal income tax purposes, all of the income dividends paid by each Fund
for the tax year ended August 31, 2007 were ordinary income for federal income
tax purposes. The percentage of ordinary income distributions designated as
Qualifying Interest Income exempt from U.S. tax for foreign shareholders
("QII") is presented below.
QII
------
Daily Assets Treasury Fund 100.00%
Daily Assets Government Obligations Fund 96.48
Daily Assets Government Fund 99.41
Daily Assets Cash Fund 99.46
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 March 1, 2007 through August 31,
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.
17
MONARCH FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
August 31, 2007
BEGINNING ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
MARCH 1, 2007 AUGUST 31, 2007 PERIOD* RATIO
------------- --------------- ----------- ----------
DAILY ASSETS TREASURY FUND
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,023.41 $2.30 0.45%
Hypothetical Return $1,000.00 $1,022.94 $2.29 0.45%
INVESTOR SHARES
Actual Return $1,000.00 $1,021.39 $4.28 0.84%
Hypothetical Return $1,000.00 $1,020.97 $4.28 0.84%
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
UNIVERSAL SHARES
Actual Return $1,000.00 $1,025.32 $1.02 0.20%
Hypothetical Return $1,000.00 $1,024.20 $1.02 0.20%
DAILY ASSETS GOVERNMENT FUND
PREFERRED SHARES
Actual Return $1,000.00 $1,026.56 $0.61 0.12%
Hypothetical Return $1,000.00 $1,024.60 $0.61 0.12%
UNIVERSAL SHARES
Actual Return $1,000.00 $1,026.13 $1.02 0.20%
Hypothetical Return $1,000.00 $1,024.20 $1.02 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,024.86 $2.30 0.45%
Hypothetical Return $1,000.00 $1,022.94 $2.29 0.45%
INSTITUTIONAL SHARES
Actual Return $1,000.00 $1,024.24 $2.91 0.57%
Hypothetical Return $1,000.00 $1,022.33 $2.91 0.57%
INVESTOR SHARES
Actual Return $1,000.00 $1,022.85 $4.28 0.84%
Hypothetical Return $1,000.00 $1,020.97 $4.28 0.84%
DAILY ASSETS CASH FUND
PREFERRED SHARES
Actual Return $1,000.00 $1,026.67 $0.61 0.12%
Hypothetical Return $1,000.00 $1,024.60 $0.61 0.12%
UNIVERSAL SHARES
Actual Return $1,000.00 $1,026.26 $1.02 0.20%
Hypothetical Return $1,000.00 $1,024.20 $1.02 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,024.97 $2.30 0.45%
Hypothetical Return $1,000.00 $1,022.94 $2.29 0.45%
INSTITUTIONAL SHARES
Actual Return $1,000.00 $1,024.36 $2.91 0.57%
Hypothetical Return $1,000.00 $1,022.33 $2.91 0.57%
INVESTOR SHARES
Actual Return $1,000.00 $1,022.97 $4.28 0.84%
Hypothetical Return $1,000.00 $1,020.97 $4.28 0.84%
B SHARES
Actual Return $1,000.00 $1,018.83 $8.40 1.65%
Hypothetical Return $1,000.00 $1,016.89 $8.39 1.65%
C SHARES
Actual Return $1,000.00 $1,018.83 $8.40 1.65%
Hypothetical Return $1,000.00 $1,016.89 $8.39 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.
18
MONARCH FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
August 31, 2007
TRUSTEES AND OFFICERS OF THE TRUST
The Board is responsible for oversight of the management of the Trust's
business affairs and exercising all the Trust's powers except those reserved
for shareholders. The following table gives information about each Board member
and certain officers of the Trust. The fund complex includes the Trust and
Forum Funds, another registered investment company (collectively, "fund
complex"), which hold themselves out to investors as related companies for
purposes of investment and investor services. The Trustees and officers listed
below also serve in the same capacities noted below for Forum Funds with the
exception of Mr. Fischer and Mr. Singer who do not serve as officers of Forum
Funds. Mr. Keffer is considered an Interested Trustee due to his affiliation
with a Trust adviser and the Distributor within the past two years. Each
Trustee and officer holds office until the person resigns, is removed, or
replaced. Unless otherwise noted, the persons have held their principal
occupations for more than five years. The addresses for all Trustees and
officers is Two Portland Square, Portland, Maine 04101, unless otherwise
indicated. Each Trustee oversees thirty-one portfolios in the fund complex.
Each Independent Trustee is also an Independent Trustee of Forum Funds. John Y.
Keffer is an Interested Trustee/Director of Forum Funds and Wintergreen Fund,
Inc., another registered open-end investment company. The Fund's Statement of
Additional Information includes additional information about the Trustees and
is available, without charge and upon request, by calling (800) 754-8757.
NAME POSITION WITH LENGTH OF PRINCIPAL OCCUPATION(S)
AND BIRTH DATE THE TRUST TIME SERVED DURING PAST 5 YEARS
- -------------------- ---------------------- ------------- -------------------------------------------------
INDEPENDENT TRUSTEES
J. Michael Parish Chairman of the Board; Trustee since Retired; Partner, Wolf, Block, Schorr and Solis-
Born: 1943 Trustee; Chairman, 1989 Cohen, LLP (law firm) 2002-2003; Partner,
Compliance Committee, (Chairman Thelen Reid & Priest LLP (law firm) 1995-2002.
Nominating Committee since 2004)
and Qualified Legal
Compliance Committee
Costas Azariadis Trustee Trustee since Professor of Economics, Washington University
Born: 1943 Chairman, Valuation 1989 (effective 2006); Professor of Economics,
Committee University of California-Los Angeles 1992-2006.
James C. Cheng Trustee Trustee since President, Technology Marketing Associates
Born: 1942 Chairman, Audit 1989 (marketing company for small-and medium-sized
Committee businesses in New England).
- -----------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
John Y. Keffer Trustee Trustee since President, Forum Foundation (a charitable
Born: 1942 Chairman, Contracts 1989 organization) since 2005; President, Forum Trust,
Committee LLC (a non-depository trust company) since
1997; President, Citigroup Fund Services, LLC
("Citigroup") 2003-2005; President, Forum
Financial Group, LLC ("Forum") (a fund services
company acquired by Citibank, N.A. in 2003).
- -----------------------------------------------------------------------------------------------------------
OFFICERS
Anthony R. Fischer President; Principal Since 2006 Co-Chairman and President, Monarch Investment
Born: 1948 Executive Officer Advisors, LLC since 2006; President, Castle
Asset Management, Inc. since 1992.
Jack J. Singer Treasurer; Principal Since 2006 Co-Chairman and Chief Executive Officer,
Born: 1944 Financial Officer Monarch Investment Advisors, LLC since 2006;
Executive Director, Forum Investment Advisors,
LLC 2005-2006; Senior Managing Director,
Comerica Securities, Inc. 2001-2005.
Beth P. Hanson Vice President; Since 2003 Relationship Manager, Citigroup since 2003;
Born: 1966 Assistant Secretary Relationship Manager, Forum 1999 - 2003.
Scott Hagwood Vice President Since 2007 Director and Relationship Manager, Citigroup
Born: 1968 since 2007; Relationship Manager, SEI
Investments, 1999-2006
Brian Eng Secretary Since 2007 Vice President and Counsel, Citigroup since
Born: 1972 2007; Associate, Goodwin Proctor LLP 2005-
2007; Law Clerk, Goodwin Proctor LLP 2003-
2005; Vice President and Portfolio Strategist,
Dion Money Management 2001-2002.
- -----------------------------------------------------------------------------------------------------------
19
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
110-AT-0907
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.
A code of ethics has not been adopted for the registrant's principal officers,
as it is not required by Rule 17j-1 of the 1940 Act.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees determined that no member of the Audit Committee is an
"audit committee financial expert" as that term is defined under applicable
regulatory guidelines. In addition, the Board recognized that the experience of
the Trustees that are members of the Audit Committee is sufficient for them to
perform the services required of Audit Committee members.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Monarch Daily Assets Government Fund
Monarch Daily Assets Cash Fund
Monarch Daily Assets Treasury Fund
Monarch Daily Assets Government Obligations Fund
(a) Audit Fees - The aggregate fees billed for each of the last two fiscal
years (the "Reporting Periods") for professional services rendered by the
Registrant's principal accountant for the audit of the Registrant's annual
financial statements, or services that are normally provided by the principal
accountant in connection with the statutory and regulatory filings or
engagements for the Reporting Periods, were $74,500 in 2006 and $78,000 in 2007.
(b) Audit-Related Fees - The aggregate fees billed in the Reporting Periods for
assurance and related services rendered by the principal accountant that were
reasonably related to the performance of the audit of the Registrant's
financial statements and are not reported under paragraph (a) of this Item 4
were $0 in 2006 and $0 in 2007.
(c) Tax Fees - The aggregate fees billed in the Reporting Periods for
professional services rendered by the principal accountant to the Registrant
for tax compliance, tax advice and tax planning were $12,400 in 2006 and
$13,200 in 2007. These services consisted of review and/or preparation of U.S.
federal, state, local and excise tax returns.
(d) Other Fees - The aggregate fees billed in the Reporting Periods for
products and services provided by the principal accountant to the Registrant,
other than services reported in paragraphs (a) through (c) of this Item were
$6,970 in 2006 and $3,650 in 2007. These services consisted of registration
statement filing review.
(e) (1) The Registrant's Audit Committee pre-approves all audit and permissible
non-audit services rendered to the Registrant in accordance with paragraph
(c)(7)(i) (c) of Rule 2-01 of Regulation S-K.
(e) (2) 100.00%
(f) Not applicable.
(g) The aggregate non-audit fees billed by the principal accountant for
services rendered to the Registrant for the Reporting Periods were $19,370 in
2006 and $16,850 in 2007. There were no fees billed in each of the Reporting
Periods for non-audit services rendered by the principal accountant to the
investment adviser.
(h) If the Registrant's investment adviser has engaged the Registrant's auditor
for non-audit services and the engagement relates directly to the operations
and financial reporting of the Registrant, the Audit Committee does consider
such engagement in evaluating the independence of the Registrant's auditor.
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 Principal Executive Officer and Principal Financial
Officer 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
second fiscal quarter of the period covered by this report 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 10/24/07
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 10/24/07
By /s/ Jack J. Singer
---------------------------
Jack J. Singer,
Principal Financial Officer
Date 10/24/07