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, 2007 - February 29, 2008
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is
not required to respond to the collection of information contained in Form
N-CSR unless the Form displays a currently valid Office of Management and
Budget ("OMB") control number. Please direct comments concerning the accuracy
of the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. (S) 3507.
Item 1. Reports to Stockholders.
FEBRUARY 29, 2008 (UNAUDITED)
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
SEMI-ANNUAL REPORT
MONARCH FUNDS
LOGO
MONARCH FUNDS
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A MESSAGE TO OUR SHAREHOLDERS
February 29, 2008
Dear Shareholders:
During the time period since our annual report dated August 31, 2007, the U.S.
financial system has encountered unprecedented problems associated with various
segments of the fixed income markets. From sub-prime mortgage related
securities to asset backed commercial paper and auction rate securities, market
participants have encountered a significant reduction of liquidity as well as
loss of principal value in their investments. Along with these financial
disruptions the domestic economy has slowed measurably and many think has
recently entered a recession. To mitigate the impact of these events the
Federal Reserve has aggressively lowered interest rates and put in place
extraordinary measures to add liquidity to the credit markets to keep them
functioning. As a result of these Federal Reserve actions the Fed Funds rate
has declined from 5 1/4% in August of 2007 to a current level of 2 1/4%.
In reaction to these events our portfolio management team took early action to
evaluate whether the credit quality of the securities we invest in and the
counterparties we transact business with are of the highest quality. Since
August of 2007 we have not invested in any securities that contained any
sub-prime mortgages or asset backed commercial paper issues that contained any
mortgage related bonds or residential mortgages as part of their holdings. We
also increased our liquidity by shortening the maturities of our holdings.
These actions reduced the returns on our Funds somewhat, but in light of the
disruptions in the fixed income markets, we believe this was the right course
of action. We will continue to pursue a very cautious approach to which
securities we invest in and will maintain relatively short average life
portfolios along with maintaining a high liquidity position until we feel the
fixed income markets have stabilized.
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
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.
BEFORE INVESTING YOU SHOULD CAREFULLY CONSIDER THE FUND'S INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. THIS AND OTHER INFORMATION IS IN THE
PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED BY CALLING (800) 754-8757 OR
VISITING THE FUND'S WEBSITE AT WWW.MONARCHADVISORS.COM. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
1
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS TREASURY FUND
February 29, 2008
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- -----------
REPURCHASE AGREEMENTS - 95.6%
$12,793,000 Bank of America Securities, dated 02/29/08, to be repurchased at
$12,796,358; collaterized by various U.S. Treasury Obligations 3.15% 03/03/08 $12,793,000
22,000,000 Bear Stearns & Co., Inc., dated 02/29/08, to be repurchased at
$22,003,025; collaterized by various U.S. Treasury Obligations 1.65 03/03/08 22,000,000
19,000,000 Citigroup Securities, dated 02/29/08, to be repurchased at $19,001,583;
collaterized by various U.S. Treasury Obligations 1.00 03/03/08 19,000,000
19,000,000 Deutsche Bank Securities, Inc., dated 02/29/08, to be repurchased at
$19,002,850; collaterized by various U.S. Treasury Obligations 1.80 03/03/08 19,000,000
19,000,000 Merrill Lynch, dated 02/29/08, to be repurchased at $19,002,375;
collaterized by various U.S. Treasury Obligations 1.50 03/03/08 19,000,000
-----------
Total Repurchase Agreements 91,793,000
-----------
SHARES
- -----------
MONEY MARKET FUND - 4.2%
4,000,000 Dreyfus Treasury Cash Management Fund 1.93 4,000,000
-----------
Total Investments at Amortized Cost* - 99.8% $95,793,000
Other Assets and Liabilities, Net - 0.2% 198,508
-----------
NET ASSETS - 100.0% $95,991,508
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Money Market Fund 4.2%
Repurchase Agreements 95.8%
* 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 29, 2008
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ----------- -------------------------------------------------------------------------- ---- -------- -----------
U.S. GOVERNMENT SECURITIES - 87.5%
GOVERNMENT BOND # - 87.5%
$ 3,500,000 Federal Home Loan Bank - Discount Note 2.79% 03/12/08 $ 3,497,027
16,500,000 Federal Home Loan Bank - Discount Note 2.89 03/26/08 16,466,943
-----------
Total U.S. Government Securities 19,963,970
-----------
SHARES
- -----------
MONEY MARKET FUND - 12.0%
2,740,000 Dreyfus Treasury Prime Cash Management Fund 2.36 2,740,000
-----------
Total Investments at Amortized Cost* - 99.5% $22,703,970
Other Assets and Liabilities, Net - 0.5% 102,821
-----------
NET ASSETS - 100.0% $22,806,791
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Security 87.9%
Money Market Fund 12.1%
# 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 29, 2008
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ------------ -------------------------------------------------------------------------- ---- -------- ------------
REPURCHASE AGREEMENTS - 100.0%
$ 12,429,000 Bank of America Securities, dated 02/29/08, to be repurchased at
$12,433,350; collaterized by various U.S. Government Agency Obligations 3.15% 03/03/08 $ 12,429,000
150,000,000 Bear Stearns & Co., Inc., dated 02/29/08, to be repurchased at
$87,210,997; collaterized by various U.S. Government Agency Obligations 3.20 03/03/08 150,000,000
140,000,000 Deutsche Bank Securities, Inc., dated 02/29/08, to be repurchased at
$140,049,467; collaterized by various U.S. Government Agency Obligations 3.18 03/03/08 140,000,000
139,420,000 Merrill Lynch & Co., Inc., dated 02/29/08, to be repurchased at
$139,469,262; Collaterized by various U.S. Government Agency Obligations 3.18 03/03/08 139,420,000
------------
Total Investments at Amortized Cost* - 100.0% $441,849,000
Other Assets and Liabilities, Net - 0.0% (172,385)
------------
NET ASSETS - 100.0% $441,676,615
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Repurchase Agreements 100%
* 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 29, 2008
FACE
AMOUNT SECURITY DESCRIPTION RATE MATURITY VALUE
- ------------ -------------------------------------------------------------------------- ---- -------- ------------
CERTIFICATES OF DEPOSIT + - 8.6%
$ 25,000,000 Comerica Bank 4.98% 10/02/08 $ 25,000,000
5,000,000 Comerica Bank 4.11 10/22/08 5,001,513
20,000,000 Deutsche Bank of New York 4.94 06/19/08 20,002,267
------------
Total Certificates of Deposit 50,003,780
------------
COMMERCIAL PAPER # - 14.5%
25,000,000 Bear Stearns 3.24 03/24/08 24,948,409
30,000,000 International Lease Finance Corp. 3.98 03/10/08 29,970,375
10,000,000 Societe Generale North America 4.83 04/24/08 9,928,750
19,455,000 UBS Finance Delaware, LLC 3.08 04/23/08 19,367,069
------------
Total Commercial Paper 84,214,603
------------
CORPORATE NOTES + - 28.5%
25,000,000 AllState Life Global Funding II^ 4.46 04/14/08 25,003,225
6,000,000 American Express Credit Corp. 3.13 04/18/08 5,999,381
24,750,000 ASIF Global Financing XXI^ 5.41 03/14/08 24,753,345
3,000,000 Goldman Sachs Group, Inc. 3.19 11/10/08 2,984,078
30,000,000 Goldman Sachs Group, Inc. 3.25 11/14/08 29,910,044
35,000,000 IBM Corp.^ 3.10 09/02/08 34,967,762
6,050,000 Lehman Brothers Holdings, Inc. 3.12 05/29/08 6,050,711
8,085,000 Morgan Stanley 5.20 03/07/08 8,085,104
12,000,000 Royal Bank of Scotland PLC^ 4.45 04/11/08 12,000,566
15,000,000 Wells Fargo & Co. 3.22 03/10/08 15,000,101
------------
Total Corporate Notes 164,754,317
------------
SHARES
- ------------
MONEY MARKET FUND - 5.4%
31,450,000 Dreyfus Cash Management Fund 3.58 31,450,000
------------
FACE
AMOUNT
- ------------
REPURCHASE AGREEMENTS - 43.0%
$ 21,665,000 Bank of America Securities, dated 02/29/08, to be repurchased at
$21,669,333; collaterized by various U.S. Government Agency Obligations 1.80 03/03/08 21,665,000
87,180,000 Bear Stearns & Co., Inc., dated 02/29/08, to be repurchased at
$87,210,997; collaterized by various U.S. Government Agency Obligations 3.20 03/03/08 87,180,000
140,000,000 Deutsche Bank Securities, Inc., dated 02/29/08, to be repurchased at
$140,049,467; collaterized by various U.S. Government Agency Obligations 3.18 03/03/08 140,000,000
------------
Total Repurchase Agreements 248,845,000
------------
Total Investments at Amortized Cost* - 100.0% $579,267,700
Other Assets and Liabilities, Net - 0.0% 140,325
------------
NET ASSETS - 100.0% $579,408,025
============
See Notes to Financial Statements.
5
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS CASH FUND
February 29, 2008
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
Certificates of Deposit 8.6%
Commercial Paper 14.5%
Corporate Notes 28.4%
Money Market Fund 5.4%
Repurchase Agreements 43.1%
+ 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 29, 2008.
# Rates shown are annualized yields at time of purchase.
^ Security exempt from registration under Rule 144A under the Securities Act of
1933. At the period end, the value of these securities amounted to
$61,757,136 or 10.7% 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 (UNAUDITED)
February 29, 2008
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Assets
Investments:
Securities at amoritized cost $ 4,000,000 $22,703,970 $ -- $330,422,700
Repurchase agreements 91,793,000 -- 441,849,000 248,845,000
Cash 258,618 156,123 70,899 --
Receivables:
Dividends 7,836 5,251 -- 96,998
Interest 4,397 -- 39,103 1,212,001
Due from Administrator 14,663 1,243 20,052 58,766
Prepaid expenses and other assets 136 2,351 11,753 44,332
----------- ----------- ------------ ------------
Total Assets 96,078,650 22,868,938 441,990,807 580,679,797
----------- ----------- ------------ ------------
Liabilities
Payables:
Due to custodian -- -- -- 618,685
Dividends 4,012 47,689 17,240 287,839
Accrued expenses:
Payable to adviser 2,960 895 12,923 19,468
Other expenses and other liabilities 80,170 13,563 284,029 345,780
----------- ----------- ------------ ------------
Total Liabilities 87,142 62,147 314,192 1,271,772
----------- ----------- ------------ ------------
Net Assets $95,991,508 $22,806,791 $441,676,615 $579,408,025
=========== =========== ============ ============
Components of Net Assets
Paid-in capital $95,984,551 $22,786,923 $441,702,741 $579,431,140
Distributions in excess of net investment income (1,334) (825) (49,569) (48,201)
Accumulated net realized gain 8,291 20,693 23,443 25,086
----------- ----------- ------------ ------------
Net Assets $95,991,508 $22,806,791 $441,676,615 $579,408,025
=========== =========== ============ ============
Net Assets by Class of Shares
Preferred Shares $ -- $ -- $ 30,010,358 $ 94,329,403
Universal Shares -- 22,806,791 60,337,601 97,912,782
Institutional Service Shares 31,410,872 -- 78,806,096 68,569,337
Institutional Shares -- -- 103,171,057 125,979,282
Investor Shares 64,580,636 -- 169,351,503 188,546,512
B Shares -- -- -- 674,455
C Shares -- -- -- 3,396,254
----------- ----------- ------------ ------------
Net Assets $95,991,508 $22,806,791 $441,676,615 $579,408,025
=========== =========== ============ ============
Shares of Beneficial Interest for each Class of Shares
Preferred Shares -- -- 30,009,194 94,327,864
Universal Shares -- 22,806,156 60,379,153 97,924,193
Institutional Service Shares 31,405,444 -- 78,804,704 68,573,937
Institutional Shares -- -- 103,166,600 125,978,401
Investor Shares 64,577,868 -- 169,342,272 188,554,559
B Shares -- -- -- 674,415
C Shares -- -- -- 3,396,078
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 (UNAUDITED)
Six Months Ended February 29, 2008
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Investment Income:
Interest income $1,424,506 $415,856 $8,418,422 $16,422,755
Dividend income 11,227 30,247 5,355 337,868
---------- -------- ---------- -----------
Total Investment Income 1,435,733 446,103 8,423,777 16,760,623
---------- -------- ---------- -----------
Expenses:
Investment adviser fees 14,482 5,354 71,534 132,043
Administrator fees
Preferred Shares -- -- 44,921 60,023
Universal Shares -- 11,778 29,263 76,290
Institutional Shares -- -- 48,351 65,969
Institutional Service Shares 7,598 -- 23,849 39,254
Investor Shares 34,442 -- 60,956 138,550
Class B Shares -- -- -- 12,713
Class C Shares -- -- -- 13,608
Distribution fees
Investor Shares 78,277 -- 138,537 314,886
Shareholder servicing fees
Institutional Shares -- -- 87,912 119,944
Investor Shares 62,622 -- 110,830 251,911
Institutional Service Shares 13,814 -- 43,362 71,371
Transfer agent fees
Preferred Shares -- -- 12,100 9,432
Universal Shares -- 14,482 24,975 46,078
Institutional Shares -- -- 100,900 131,263
Institutional Service Shares 18,901 -- 31,089 46,061
Investor Shares 74,625 -- 125,997 262,427
Class B Shares -- -- -- 12,009
Class C Shares -- -- -- 21,779
Accountant fees 25,566 20,446 49,596 64,215
Custodian fees 3,822 1,071 18,850 34,687
Compliance service fees 666 319 -- 2,135
Trustee fees and expenses 4,353 1,095 18,333 35,431
Audit fees 11,417 10,662 11,835 14,197
Legal fees 7,506 7,564 6,341 7,410
Other expenses 22,719 5,500 32,178 78,660
---------- -------- ---------- -----------
Total Expenses Before Fee Reductions 380,810 78,271 1,091,709 2,062,346
---------- -------- ---------- -----------
Administration fees waived (39,173) (10,975) (145,983) (208,387)
Shareholder servicing fees waived Institutional Service
Shares -- -- (5,272) --
Transfer agent fees waived -- (13,465) (17,107) --
Accountant fees waived (25,104) (20,886) -- --
Other expenses waived by Administrator (22,309) (12,345) (20,052) (103,299)
---------- -------- ---------- -----------
Net Expenses 294,224 20,600 903,295 1,750,660
---------- -------- ---------- -----------
Net Investment Income 1,141,509 425,503 7,520,482 15,009,963
---------- -------- ---------- -----------
Net Realized Gain (Loss) on Investments (205) 22,124 9,291 25,656
---------- -------- ---------- -----------
Increase in Net Assets from Operations $1,141,304 $447,627 $7,529,773 $15,035,619
========== ======== ========== ===========
See Notes to Financial Statements.
8
MONARCH FUNDS
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STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS GOVERNMENT
DAILY ASSETS TREASURY FUND OBLIGATIONS FUND
--------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2008 AUGUST 31, 2007 FEBRUARY 29, 2008 AUGUST 31, 2007
----------------- --------------- ----------------- ---------------
(UNAUDITED) (UNAUDITED)
Operations
Net investment income $ 1,141,509 $ 3,540,918 $ 425,503 $ 934,309
Net realized gain (loss) on investments (205) 8,496 22,124 3,790
------------- --------------- ----------- ------------
Increase in Net Assets from Operations 1,141,304 3,549,414 447,627 938,099
------------- --------------- ----------- ------------
Distributions to Shareholders from
Net investment income:
Universal Shares (625) -- (426,737) (934,308)
Institutional Service Shares (204,867) (704,968) -- --
Institutional Shares -- -- -- --
Investor Shares (937,362) (2,835,952) -- --
------------- --------------- ----------- ------------
Total Distributions to Shareholders (1,142,854) (3,540,920) (426,737) (934,308)
------------- --------------- ----------- ------------
Capital Share Transactions (in dollar and shares)
Universal Shares
Proceeds from shares issued -- -- 10,330,628 16,200,785
Dividends reinvested -- -- 3,947 10,616
Cost of shares redeemed -- -- (5,744,557) (16,862,876)
------------- --------------- ----------- ------------
Total Universal Shares -- -- 4,590,018 (651,475)
------------- --------------- ----------- ------------
Institutional Service Shares
Proceeds from shares issued 56,781,436 59,251,693 -- --
Dividends reinvested 172,303 543,453 -- --
Cost of shares redeemed (34,309,708) (66,160,159) -- --
------------- --------------- ----------- ------------
Total Institutional Service Shares 22,644,031 (6,365,013) -- --
------------- --------------- ----------- ------------
Investor Shares
Proceeds from shares issued 441,708,491 1,099,309,749 -- --
Dividends reinvested 947,987 2,818,966 -- --
Cost of shares redeemed (444,061,958) (1,094,960,263) -- --
------------- --------------- ----------- ------------
Total Investor Shares (1,405,480) 7,168,452 -- --
------------- --------------- ----------- ------------
Increase in Net assets from Capital Transactions 21,238,551 803,439 4,590,018 (651,475)
------------- --------------- ----------- ------------
Increase (Decrease) in Net Assets 21,237,001 811,933 4,610,908 (647,684)
------------- --------------- ----------- ------------
Net Assets
Beginning of Period 74,754,507 73,942,574 18,195,883 18,843,567
------------- --------------- ----------- ------------
End of Period $ 95,991,508 $ 74,754,507 $22,806,791 $ 18,195,883
============= =============== =========== ============
Undistributed (distributions in excess of)
Net Investment Income $ (1,334) $ 11 $ (825) $ 409
------------- --------------- ----------- ------------
See Notes to Financial Statements.
9
MONARCH FUNDS
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STATEMENTS OF CHANGES IN NET ASSETS
DAILY ASSETS GOVERNMENT FUND DAILY ASSETS CASH FUND
--------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2008 AUGUST 31, 2007 FEBRUARY 29, 2008 AUGUST 31, 2007
----------------- --------------- ----------------- ---------------
(UNAUDITED) (UNAUDITED)
Operations
Net investment income $ 7,520,482 $ 18,989,271 $ 15,009,963 $ 28,453,678
Net realized gain on investments 9,291 14,150 25,656 13,702
------------- --------------- --------------- ---------------
Increase in Net Assets from Operations 7,529,773 19,003,421 15,035,619 28,467,380
------------- --------------- --------------- ---------------
Distributions to Shareholders from
Net investment income:
Preferred Shares (1,873,692) (6,134,632) (2,569,755) (8,193,071)
Universal Shares (1,119,200) (3,713,783) (3,249,617) (3,734,857)
Institutional Service Shares (865,682) (1,582,715) (1,543,103) (2,804,839)
Institutional Shares (1,710,653) (3,564,712) (2,545,612) (4,615,665)
Investor Shares (1,969,103) (3,996,725) (5,111,326) (9,062,066)
B Shares -- -- (7,933) (8,381)
C Shares -- -- (32,319) (33,052)
------------- --------------- --------------- ---------------
Total Distributions to Shareholders (7,538,330) (18,992,567) (15,059,665) (28,451,931)
------------- --------------- --------------- ---------------
Capital Share Transactions (in dollar and shares)
Preferred Shares
Proceeds from shares issued 108,082,789 1,242,343,346 404,149,047 1,479,999,002
Dividends reinvested 1,873,681 5,634,900 1,129,277 4,167,357
Cost of shares redeemed (220,116,204) (1,219,729,132) (380,301,773) (1,516,318,866)
------------- --------------- --------------- ---------------
Total Preferred Shares (110,159,734) 28,249,114 24,976,551 (32,152,507)
------------- --------------- --------------- ---------------
Universal Shares
Proceeds from shares issued 284,274,021 463,703,586 528,133,746 711,452,056
Dividends reinvested 1,133,800 3,699,021 3,050,465 3,352,850
Cost of shares redeemed (254,200,869) (480,793,053) (536,099,421) (690,668,285)
------------- --------------- --------------- ---------------
Total Universal Shares 31,206,952 (13,390,446) (4,915,210) 24,136,621
------------- --------------- --------------- ---------------
Institutional Service Shares
Proceeds from shares issued 186,332,632 223,481,697 268,283,856 367,725,335
Dividends reinvested 865,671 1,575,394 1,541,983 2,797,725
Cost of shares redeemed (145,872,795) (234,450,705) (256,049,677) (370,491,479)
------------- --------------- --------------- ---------------
Total Institutional Service Shares 41,325,508 (9,393,614) 13,776,162 31,581
------------- --------------- --------------- ---------------
Institutional Shares
Proceeds from shares issued 412,368,870 742,566,876 490,671,736 1,049,036,474
Dividends reinvested 1,542,543 3,162,004 2,460,509 4,427,997
Cost of shares redeemed (385,642,843) (744,668,649) (471,573,555) (1,048,368,336)
------------- --------------- --------------- ---------------
Total Institutional Shares 28,268,570 1,060,231 21,558,690 5,096,135
------------- --------------- --------------- ---------------
Investor Shares
Proceeds from shares issued 779,751,916 1,233,465,393 1,488,657,604 2,852,482,706
Dividends reinvested 1,960,137 3,984,410 4,750,191 8,420,806
Cost of shares redeemed (713,023,996) (1,204,536,860) (1,541,847,375) (2,831,373,592)
------------- --------------- --------------- ---------------
Total Investor Shares 68,688,057 32,912,943 (48,439,580) (29,529,920)
------------- --------------- --------------- ---------------
B Shares
Proceeds from shares issued -- -- 435,006 499,657
Dividends reinvested -- -- 7,933 8,381
Cost of shares redeemed -- -- (258,710) (340,991)
------------- --------------- --------------- ---------------
Total B Shares -- -- 184,229 167,047
------------- --------------- --------------- ---------------
C Shares
Proceeds from shares issued -- -- 3,493,538 2,505,898
Dividends reinvested -- -- 32,319 33,051
Cost of shares redeemed -- -- (1,824,147) (1,712,222)
------------- --------------- --------------- ---------------
Total C Shares -- -- 1,701,710 826,727
------------- --------------- --------------- ---------------
Increase in Net Assets from Capital Transactions 59,329,353 39,438,228 8,842,552 27,635,524
------------- --------------- --------------- ---------------
Increase in Net Assets 59,320,796 39,449,082 8,818,506 27,650,973
------------- --------------- --------------- ---------------
Net Assets
Beginning of Period 382,355,819 342,906,737 570,589,519 542,938,546
------------- --------------- --------------- ---------------
End of Period $ 441,676,615 $ 382,355,819 $ 579,408,025 $ 570,589,519
============= =============== =============== ===============
Undistributed (distributions in excess of)
Net Investment Income $ (49,569) $ (31,721) $ (48,201) $ 1,501
------------- --------------- --------------- ---------------
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
Beginning Net Distributions Ending Assets at
Year Ended Net Asset Net Realized from Net Net Asset End of
August 31, Value Per Investment Gain (Loss) on Investment Value Total Period
(except as noted) Share Income Investments Income Per Share Return/(b)/ (000's)
- ----------------- --------- ---------- -------------- ------------- --------- ---------- ---------
- - - - - - - - -
DAILY ASSETS TREASURY FUND
Institutional Service Shares/(d)/
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ $1.00 $0.02/(e)/ --/(f)/ $(0.02) $1.00 1.69% $31,411
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 4.79% 8,768
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
Investor Shares
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.01/(e)/ --/(f)/ (0.01) 1.00 1.49% 64,581
2007 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 4.39% 65,987
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
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Universal Shares/(g)/
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.01% 22,807
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.10% 18,196
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
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratio of Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.45% 0.87% 2.97%
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% 3.00%
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%
- ----------------------------------
0.19% 0.72% 3.98%
0.20% 0.78% 4.99%
0.20% 0.81% 4.24%
0.20% 0.75% 2.20%
0.20% 0.70% 0.86%
0.20% 0.48% 1.14%
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
Beginning Net Distributions Ending Assets at
Year Ended Net Asset Net Realized from Net Net Asset End of
August 31, Value Per Investment Gain (Loss) on Investment Value Total Period
(except as noted) Share Income Investments Income Per Share Return/(b)/ (000's)
- ----------------- --------- ---------- -------------- ------------- --------- ---------- ---------
- - - - - - - - -
DAILY ASSETS GOVERNMENT FUND
Preferred Shares
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ $1.00 $0.02/(e)/ --/(f)/ $(0.02) $1.00 2.21% $ 30,010
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.35% 140,173
2006 1.00 0.04/(e)/ -- (0.04) 1.00 4.57% 111,921
2005 1.00 0.02/(e)/ -- (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
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.17% 60,338
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.26% 29,134
2006 1.00 0.04/(e)/ -- (0.04) 1.00 4.49% 42,523
2005 1.00 0.02/(e)/ -- (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
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.04% 78,806
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.01% 37,480
2006 1.00 0.04/(e)/ -- (0.04) 1.00 4.23% 46,873
2005 1.00 0.02/(e)/ -- (0.02) 1.00 2.18% 55,420
2004 1.00 --/(f)/ --/(f)/ --/(f)/ 1.00 0.71% 55,142
2003 1.00 --/(f)/ -- --/(f)/ 1.00 0.16% 76,273
Institutional Shares
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 1.98% 103,171
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 4.88% 74,905
2006 1.00 0.04/(e)/ -- (0.04) 1.00 4.11% 73,843
2005 1.00 0.02/(e)/ -- (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
- -------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 1.84% 169,352
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 4.60% 100,663
2006 1.00 0.04/(e)/ -- (0.04) 1.00 3.83% 67,747
2005 1.00 0.02/(e)/ -- (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
- --------------------------------
Ratio of Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.12% 0.25% 4.59%
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%
- ----------------------------------
0.19% 0.30% 4.19%
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%
- ----------------------------------
0.44% 0.54% 4.00%
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%
- ----------------------------------
0.56% 0.65% 3.89%
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%
- ----------------------------------
0.83% 0.90% 3.56%
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
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
Beginning Net Distributions Ending Assets at
Year Ended Net Asset Net Realized from Net Net Asset End of
August 31, Value Per Investment Gain (Loss) on Investment Value Total Period
(except as noted) Share Income Investments Income Per Share Return/(b)/ (000's)
- ----------------- --------- ---------- -------------- ------------- --------- ---------- ---------
- - - - - - - - -
DAILY ASSETS CASH FUND
Preferred Shares
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ $1.00 $0.02/(e)/ --/(f)/ $(0.02) $1.00 2.38% $ 94,329
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.37% 69,354
2006 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 4.56% 101,504
2005 1.00 0.03/(e)/ $(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
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.34% 97,913
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.29% 102,838
2006 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 4.48% 78,698
2005 1.00 0.02/(e)/ --/(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
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.21% 68,569
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 5.02% 54,799
2006 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 4.22% 54,766
2005 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.15% 27,137
2004 1.00 0.01 --/(f)/ (0.01) 1.00 0.71% 26,423
2003 1.00 --/(f)/ -- --/(f)/ 1.00 0.18% 36,876
Institutional Shares
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.15% 125,979
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 4.90% 104,420
2006 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 4.10% 99,321
2005 1.00 0.02/(e)/ --/(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
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 2.01% 188,547
2007 1.00 0.05/(e)/ --/(f)/ (0.05) 1.00 4.62% 236,993
2006 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 3.82% 207,458
2005 1.00 0.02/(e)/ --/(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
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 1.60% 674
2007 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 3.78% 490
2006 1.00 0.03/(e)/ --/(f)/ (0.03) 1.00 2.99% 323
2005/(i)/ 1.00 0.01/(e)/ --/(f)/ (0.01) 1.00 0.92% 30
C Shares
- --------------------------------------------------------------------------------------------------------------
Six months ended
February 29, 2008/(h)/ 1.00 0.02/(e)/ --/(f)/ (0.02) 1.00 1.60% 3,396
2007 1.00 0.04/(e)/ --/(f)/ (0.04) 1.00 3.78% 1,694
2006 1.00 0.03/(e)/ --/(f)/ (0.03) 1.00 2.99% 868
2005/(i)/ 1.00 0.01/(e)/ --/(f)/ (0.01) 1.00 0.93% 36
RATIOS/SUPPLEMENTAL DATA
- --------------------------------
Ratio of Average Net Assets/(a)/
- --------------------------------
Net
Net Gross Investment
Expenses Expenses/(c)/ Income
- ---------------------------------
- ----------------------------------
0.11% 0.22% 4.71%
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%
- ----------------------------------
0.19% 0.27% 4.67%
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%
- ----------------------------------
0.44% 0.53% 4.31%
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%
- ----------------------------------
0.55% 0.63% 4.25%
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%
- ----------------------------------
0.83% 0.87% 4.05%
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%
- ----------------------------------
1.62% 11.94% 3.11%
1.65% 21.75% 3.72%
1.65% 48.98% 3.39%
1.65% 161.82% 1.20%
- ----------------------------------
1.61% 4.18% 3.03%
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)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.
(h)Unaudited
(i)See Note 1 for dates of commencement of operations.
See Notes to Financial Statements.
13
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
February 29, 2008
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 29, 2008, 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
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with the accounting principles generally accepted in
the United States of America ("GAAP"). The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses for the period. Actual results
could differ from those estimates.
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 (UNAUDITED)
February 29, 2008
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. As of and during the period ended February 29, 2008, the Trust did
not have a liability for any unrecognized tax expenses. The Trust recognizes
interest and penalties, if any, related to tax liabilities as income tax
expense in the Statement of Operations. As of February 29, 2008, tax years 2005
through 2008 remain subject to examination by the Trust's major tax
jurisdictions, which include the United States of America and the state of
Massachusetts.
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 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 Citi Fund Services, LLC ("Citi"), 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 Citi 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 (UNAUDITED)
February 29, 2008
TRUSTEES AND OFFICERS Certain officers of the Trust are directors, officers or
employees of the aforementioned companies.
NOTE 4. 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 $ -- $ -- $35,151.00
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)
February 29, 2008
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' Forms 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 11, 2007 Board meeting, the Board, including the Independent
Trustees, considered the approval of the continuance of the investment advisory
agreement pertaining to each Fund (the "Advisory Agreement"). In evaluating the
Advisory Agreement for each Fund, 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 each Fund 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 Fund; (3) the advisory fee and total expense ratio of the Fund compared to
relevant peer groups of funds; (4) the extent to which economies of scale would
be realized as the Fund grows and whether the advisory fee would enable the
Fund's investors to share in the benefits of economies of scale; and (5) other
benefits received by the Adviser from its relationship with the Fund. In their
deliberations, the Board did not identify any particular factor 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 SERVICES
The Board met with representatives of Monarch Investment Advisors, LLC (the
"Adviser") and discussed the Adviser's personnel, operations and financial
condition. The Board also considered the quality of its personnel assigned
responsibility for servicing the Funds. The Board also considered information
regarding the experience and professional background of the portfolio managers
at the Adviser and the qualifications and capabilities of the portfolio
managers and other personnel who would have principal investment responsibility
for the Funds' investments; the investment philosophy and decision-making
processes of those professionals; the capability and integrity of the Adviser's
senior management and staff; the quality of the Adviser's services with respect
to regulatory compliance and compliance with the funds' specific investment
policies and restrictions; and the financial condition and operational
stability of the Adviser. The Board then discussed with the Adviser its
financial condition for the year ended December 31, 2006 and for the nine-month
period ended September 30, 2007. The Board concluded that it was satisfied with
the nature, extent and quality of services provided to the Funds by the Adviser
and also concluded that the Adviser was financially able to provide investment
advisory services to the Funds.
COSTS OF SERVICES AND PROFITABILITY
The Board 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
17
MONARCH FUNDS
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ADDITIONAL INFORMATION (UNAUDITED)
February 29, 2008
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 to the Funds.
PERFORMANCE
The Adviser discussed its approach to managing the Funds as well as the Funds'
performance. The Board considered the Funds' performance for the 3- and 6-month
and the 1-, 3- and 5-year periods ended August 31, 2007 for Daily Assets Cash B
Shares and C Shares.
DAILY ASSETS TREASURY FUND - The Board noted that the Fund's Institutional
Service Shares outperformed their Lipper Inc. peer group average return for the
3- and 6-month and 1-, 3- and 5-year periods, while the Fund's Investor Shares
performed at or near their Lipper Inc. peer group average return for the 3- and
6-month and 1-, 3- and 5-year periods. The Board noted that no significant
changes to the investment strategies adopted by the Adviser were anticipated in
the near future.
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND - The Board noted that the Fund's
Universal Shares outperformed their Lipper Inc. peer group average return for
the 3- and 6-month and 1-, 3- and 5-year periods.
DAILY ASSETS GOVERNMENT FUND - The Board considered that the Fund's Preferred,
Universal, Institutional Service and Institutional Shares outperformed their
Lipper Inc. peer group average return for the 3- and 6-month and 1-, 3- and
5-year periods, while the Investor Shares performed at or above their Lipper
Inc. peer group average return for the 3- and 6-month and 1-, 3- and 5-year
periods. The Board noted that the Fund's Preferred and Universal Shares ranked
in the top quartile of their Lipper Inc. peer group over all periods.
DAILY ASSETS CASH FUND - The Board considered that the Fund's Preferred,
Universal, Institutional Service, Institutional and Investor Shares
outperformed their Lipper Inc. peer group average return for the 3- and 6-month
and 1-, 3- and 5-year periods, while the B Shares and C Shares slightly lagged
their Lipper Inc. peer group average return. The Board noted that the Preferred
Shares ranked in the top quartile of their Lipper Inc. peer group over the all
periods, while the Universal Shares ranked in the top quartile of their Lipper
Inc. peer group over the 3- and 5-year periods.
COMPENSATION
The Board also considered the Adviser's compensation for providing advisory
services to the Funds and analyzed comparative information on fees 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 actual total
expenses for the Institutional Service Shares were lower than the mean and
median total expenses of its Lipper Inc. peer group, while the Investor Shares
of the Fund were within 15 basis points of the median total expenses of its
Lipper Inc. peer group.
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND - The Board noted that the contractual
investment advisory fee rate and the actual total expenses of the Fund were
lower than the mean and median advisory fee rates and total expenses of its
Lipper Inc. peer group.
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 actual total
expenses of each share class, noting that the Institutional Shares,
Institutional Service Shares, Preferred Shares and Universal Shares were lower
than the mean and median total expenses of its Lipper Inc. peer group, while
the Investor Shares were within 11 basis points of the 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 actual total
expenses of each share class, noting that the Preferred Shares and Universal
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 within 26 basis points, 14 basis points and 9 basis
points, respectively, of the median total expenses of its Lipper Inc. peer
group.
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 paid by certain Funds were appropriate to share
benefits from any economies of scale with the Funds' shareholders.
18
MONARCH FUNDS
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ADDITIONAL INFORMATION (UNAUDITED)
February 29, 2008
OTHER BENEFITS
The Board noted that the Adviser does not receive significant ancillary
benefits as a result of its relationship with the Funds, other than the benefit
of research received from the brokers executing transactions on behalf of its
clients and the ability to refer to its advisory relationship with the Funds.
CONCLUSION
Prior to voting, the Board reviewed a memorandum from Fund Counsel discussing
the legal standards applicable to its consideration of the Advisory Agreements.
The Board also discussed the proposed approval of the continuance of the
Advisory Agreements. Based upon its review, including consideration of each of
the factors referred to above, the Board (including all of the Independent
Trustees) determined, in the exercise of its business judgment, that the
advisory fees of the Funds were fair, and that renewing the Advisory Agreements
was in the best interest of the Funds' shareholders.
SHAREHOLDER EXPENSES EXAMPLE - As a shareholder of the Monarch Funds, you incur
two types of costs: (1) transaction costs, including sales charges (loads) on
purchases and redemption fees; and (2) ongoing costs, including management
fees, 12b-1 distribution and/or service fees and other Fund expenses. These
examples are intended to help you understand your ongoing costs (in dollars) of
investing in the Monarch Funds and to compare these costs with the ongoing
costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning
of the period and held for the entire period.
ACTUAL EXPENSES - The table below provides information about actual account
values and actual expenses. You may use the information in this table, 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 table under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
BEGINNING ENDING ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE EXPENSES EXPENSE
SEPTEMBER 1, FEBRUARY 29, PAID DURING RATIO DURING
2007 2008 PERIOD* PERIOD
------------- ------------- ----------- ------------
DAILY ASSETS TREASURY FUND
Institutional Service Shares $1,000.00 $1,016.90 $2.26 0.45%
Investor Shares $1,000.00 $1,014.90 $4.21 0.84%
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Universal Shares $1,000.00 $1,020.10 $0.95 0.19%
DAILY ASSETS GOVERNMENT FUND
Preferred Shares $1,000.00 $1,022.10 $0.60 0.12%
Universal Shares $1,000.00 $1,021.70 $0.96 0.19%
Institutional Service Shares $1,000.00 $1,020.40 $2.21 0.44%
Institutional Shares $1,000.00 $1,019.80 $2.81 0.56%
Investor Shares $1,000.00 $1,018.40 $4.17 0.83%
DAILY ASSETS CASH FUND
Preferred Shares $1,000.00 $1,023.80 $0.55 0.11%
Universal Shares $1,000.00 $1,023.40 $0.96 0.19%
Institutional Service Shares $1,000.00 $1,022.10 $2.21 0.44%
Institutional Shares $1,000.00 $1,021.50 $2.76 0.55%
Investor Shares $1,000.00 $1,020.10 $4.17 0.83%
B Shares $1,000.00 $1,016.00 $8.12 1.62%
C Shares $1,000.00 $1,016.00 $8.07 1.61%
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
19
MONARCH FUNDS
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ADDITIONAL INFORMATION (UNAUDITED)
February 29, 2008
HYPOTHETICAL EXAMPLE - The table below provides information about hypothetical
account values and hypothetical expenses based on each Monarch Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the 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 costs of investing in the Monarch Funds 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 the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, 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 transactional costs were included, your costs would have been higher.
BEGINNING ENDING ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE EXPENSES EXPENSE
SEPTEMBER 1, FEBRUARY 29, PAID DURING RATIO DURING
2007 2008 PERIOD* PERIOD
------------- ------------- ----------- ------------
DAILY ASSETS TREASURY FUND
Institutional Service Shares $1,000.00 $1,022.63 $2.26 0.45%
Investor Shares $1,000.00 $1,020.69 $4.22 0.84%
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Universal Shares $1,000.00 $1,023.92 $0.96 0.19%
DAILY ASSETS GOVERNMENT FUND
Preferred Shares $1,000.00 $1,024.27 $0.60 0.12%
Universal Shares $1,000.00 $1,023.92 $0.96 0.19%
Institutional Service Shares $1,000.00 $1,022.68 $2.21 0.44%
Institutional Shares $1,000.00 $1,022.08 $2.82 0.56%
Investor Shares $1,000.00 $1,020.74 $4.17 0.83%
DAILY ASSETS CASH FUND
Preferred Shares $1,000.00 $1,024.32 $0.55 0.11%
Universal Shares $1,000.00 $1,023.92 $0.96 0.19%
Institutional Service Shares $1,000.00 $1,022.68 $2.21 0.44%
Institutional Shares $1,000.00 $1,022.13 $2.77 0.55%
Investor Shares $1,000.00 $1,020.74 $4.17 0.83%
B Shares $1,000.00 $1,016.81 $8.12 1.62%
C Shares $1,000.00 $1,016.86 $8.07 1.61%
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
20
MONARCH FUNDS
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
MONARCH FUNDS
3435 Stelzer Road
Suite 1000
Columbus, OH 43219
(800) 754-8757
110-AT-0408
FOR MORE 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 principal executive officer and principal financial officer
have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant on Form N-CSR is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b)There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) 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) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished 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 (Signature and Title)* /s/ Anthony R. Fischer
---------------------------
Anthony R. Fischer,
Principal Executive Officer
Date April 25, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Anthony R. Fischer
---------------------------
Anthony R. Fischer,
Principal Executive Officer
Date April 25, 2008
By (Signature and Title)* /s/ Jack J. Singer
---------------------------
Jack J. Singer,
Principal Financial Officer
Date April 25, 2008