As filed with the Securities and Exchange Commission on November 5, 2004
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
David I. Goldstein, President
Two Portland Square
Portland, Maine 04101
207-879-1900
Date of fiscal year end: August 31, 2004
Date of reporting period: August 31, 2004
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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
MONARCH ANNUAL REPORT
FUNDS AUGUST 31, 2004
DAILY ASSETS TREASURY FUND
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
DAILY ASSETS GOVERNMENT FUND
DAILY ASSETS CASH FUND
[MONARCH LOG0]
MONARCH FUNDS
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A MESSAGE TO OUR SHAREHOLDERS
August 31, 2004
Dear Shareholders:
During most of the past year the Federal Reserve Bank continued to focus its
efforts on moving the economy forward and encouraging job growth. It succeeded
so well, that by June, it began to raise the Federal Funds Rate to stop a
growing inflationary bias. The Federal Funds Rate is still under the stated rate
of inflation, and, for that reason, your portfolio management team believes that
short-term rates will remain higher than inflation well into 2005. As a result,
the portfolios' average maturities are being kept very short to take advantage
of potentially rising rates.
We are pleased to report that Daily Assets Government Fund, our oldest fund,
continued to exhibit strong performance for the year end August 31, 2004. For
the one-, five- and ten-year periods ended as of that date, the Fund's Universal
Shares ranked 18 out of 158, 6 out of 90, and 2 out of 46, respectively, within
the Government and Agencies Institutional Funds category tracked by iMoneyNet,
Inc. (The Universal Shares 7-day simple yield, as of August 31, 2004, was 1.37%.
The Fund's administrator has voluntarily agreed to waive certain fees and
reimburse expenses. To the extent these waivers or reimbursements were not in
effect, the Fund's 7-day simple yield as of August 31 would have been 1.32%).
As stated in our last report to you, for nearly 12 years, we have remained
committed to maintaining a $1.00 per share price through the skilled and prudent
portfolio management you expect. We thank all of our investors and the financial
intermediaries we service for their continued support. Please feel free to call
us with your questions or comments at (800) 754-8757.
Monarch Funds
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. Investment return will fluctuate and current performance may be
lower or higher than the performance data quoted. For the most recent month end
performance, please call (800) 754-8757. iMoneyNet, Inc. Rankings are based on
total return and will vary for other share classes.
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. Forum Fund
Services, LLC, distributor. (10/04)
2
MONARCH FUNDS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Trustees
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 (formerly Treasury Cash Fund, Daily Assets Government Fund, Government Cash
Fund and the Cash Fund, respectively) (collectively, the "Funds"), each a series
of the Monarch Funds, as of August 31, 2004, and the related statements of
operations for the year then ended, statements of changes in net assets for each
of the years in the two-year period then ended, and financial highlights for
each of the years or periods in the five-year period then ended. These financial
statements and financial highlights are the responsibility of the Funds'
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 auditing 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, 2004 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statements 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 Asset Treasury Fund, Daily Assets Government Obligations Fund, Daily Asset
Government Fund and Daily Asset Cash Fund as of August 31, 2004, the results of
their operations for the year then ended, changes in their net assets for each
of the years in the two-year period then ended, and financial highlights for
each of the years or periods in the five-year period then ended in conformity
with accounting principles generally accepted in the United States of America.
[KPMG LOGO]
October 19, 2004
3
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SCHEDULE OF INVESTMENTS - DAILY ASSETS TREASURY FUND
August 31, 2004
<Table>
<Caption>
FACE SECURITY
AMOUNT DESCRIPTION RATE MATURITY VALUE
- ------------ ------------------------------------------------------------ ----- -------- ------------
U.S. TREASURY BILLS (A) - (63.1%)
$100,000,000 U.S. Treasury Bill 1.30% 09/02/04 $ 99,996,389
------------
Total U.S. Treasury Bills 99,996,389
------------
REPURCHASE AGREEMENTS - (37.0%)
18,402,000 Bank of America, to be repurchased at $18,402,751;
collateralized by various U.S. Treasury Obligations 1.47 09/01/04 18,402,000
20,260,000 Deutsche Bank, to be repurchased at $20,260,867;
collateralized by various U.S. Treasury Obligations 1.54 09/01/04 20,260,000
20,000,000 Merrill Lynch & Co., Inc., to be repurchased at $20,000,861;
collateralized by various U.S. Treasury Obligations 1.55 09/01/04 20,000,000
------------
Total Repurchase Agreements 58,662,000
------------
Total Investments at Amortized Cost* - (100.1%) $158,658,389
Other Assets and Liabilities, Net - (0.1%) (139,334)
------------
NET ASSETS - (100.0%) $158,519,055
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Treasury Bills 63.0%
Repurchase Agreements 37.0%
</Table>
(A) 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
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
August 31, 2004
<Table>
<Caption>
FACE SECURITY
AMOUNT DESCRIPTION RATE MATURITY VALUE
- ----------- ------------------------------------------------------------ ----- -------- -----------
U.S. GOVERNMENT SECURITIES - (95.4%)
FEDERAL HOME LOAN BANK - DISCOUNT NOTES (A) - (95.4%)
$ 3,200,000 FHLB 1.42% 09/01/04 $ 3,200,000
1,200,000 FHLB 1.22 09/03/04 1,199,919
2,020,000 FHLB 1.48 09/08/04 2,019,419
2,125,000 FHLB 1.04 10/12/04 2,122,507
10,730,000 FHLB 1.53 10/15/04 10,709,935
190,000 FHLB 1.58 10/18/04 189,608
-----------
Total U.S. Government Securities 19,441,388
-----------
<Caption>
SHARES
- -----------
MONEY MARKET FUND - (4.7%)
952,714 Dreyfus Prime Treasury Cash Management Fund 952,714
-----------
Total Investments at Amortized Cost* - (100.1%) $20,394,102
Other Assets and Liabilities, Net - (0.1)% (11,460)
-----------
NET ASSETS - (100.0%) $20,382,642
===========
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Securities 95.4%
Money Market Fund 4.7%
</Table>
(A) 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.
5
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT FUND
August 31, 2004
<Table>
<Caption>
FACE SECURITY
AMOUNT DESCRIPTION RATE MATURITY VALUE
- ------------ ------------------------------------------------------------ ----- -------- ------------
U.S. GOVERNMENT SECURITIES - (76.3%)
FEDERAL HOME LOAN BANK - DISCOUNT NOTES (A) - (17.9%)
$ 59,000,000 FHLB 1.47% 09/01/04 $ 59,000,000
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - DISCOUNT NOTES (A) -
(43.0%)
141,962,000 FNMA 1.48 09/01/04 141,962,000
------------
SMALL BUSINESS ADMINISTRATION (B) - (15.4%)
29,715 Pool #500536 3.25 05/25/13 30,223
143,173 Pool #501690 2.38 12/25/16 143,173
388,838 Pool #501733 2.25 02/25/17 391,697
310,970 Pool #501077 2.75 11/25/14 310,970
118,307 Pool #501308 2.75 10/25/15 118,307
867,480 Pool #501543 2.63 07/25/16 867,480
388,404 Pool #501898 2.50 07/25/17 388,404
425,697 Pool #501989 2.38 10/25/12 429,091
1,903,712 Pool #502150 2.25 02/25/18 1,915,005
60,588 Pool #502161 2.25 02/25/18 60,588
603,840 Pool #502208 2.25 02/25/18 605,934
54,074 Pool #502306 2.25 02/25/18 54,074
44,767 Pool #502613 2.25 04/25/19 44,767
53,591 Pool #502914 2.25 03/25/15 53,944
309,173 Pool #503058 2.13 07/25/15 309,173
417,397 Pool #503082 2.13 09/25/20 417,397
272,649 Pool #503120 2.13 10/25/20 272,649
911,442 Pool #503121 2.13 09/25/15 914,421
2,922,741 Pool #503152 1.88 11/25/20 2,922,741
370,965 Pool #503232 1.88 12/25/15 370,965
307,282 Pool #503278 1.88 02/25/21 307,300
702,668 Pool #503429 2.00 06/25/16 703,674
573,565 Pool #503431 2.00 07/25/21 573,724
1,385,143 Pool #503461 2.00 09/25/21 1,385,862
259,638 Pool #503472 2.00 08/25/21 259,638
1,180,890 Pool #503553 1.88 11/25/21 1,181,773
1,896,393 Pool #503614 1.88 01/25/22 1,896,393
836,987 Pool #503671 1.88 03/25/22 836,987
816,493 Pool #503754 1.88 05/25/22 817,198
61,366 Pool #503780 1.88 03/25/22 61,416
1,188,701 Pool #503882 1.75 09/25/22 1,187,813
239,255 Pool #503892 1.88 07/25/22 239,499
1,742,767 Pool #503909 1.75 10/25/22 1,742,190
822,376 Pool #504015 1.75 01/25/23 822,259
904,234 Pool #504062 1.75 02/25/23 904,234
1,257,574 Pool #504074 1.75 02/25/23 1,257,574
563,078 Pool #504203 1.88 07/25/13 563,830
556,552 Pool #504269 1.88 05/25/15 557,327
427,845 Pool #504345 1.88 05/25/18 427,845
10,179,658 Pool #504366 1.63 02/25/24 10,156,059
5,455,484 Pool #504719 1.88 07/25/24 5,455,484
1,712,277 Pool #504727 1.88 09/25/24 1,712,277
2,672,495 Pool #504765 1.88 10/25/09 2,668,065
2,931,110 Pool #504769 1.88 10/25/24 2,931,110
</Table>
See Notes to Financial Statements.
6
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT FUND
August 31, 2004
<Table>
<Caption>
FACE SECURITY
AMOUNT DESCRIPTION RATE MATURITY VALUE
- ------------ ------------------------------------------------------------ ----- -------- ------------
SMALL BUSINESS ADMINISTRATION (B)
$ 1,031,991 Pool #505204 2.00% 09/25/25 $ 1,031,764
705,410 Pool #505205 2.06 09/25/07 705,337
------------
Total Small Business Administration 51,007,635
------------
Total U.S. Government Securities 251,969,635
------------
REPURCHASE AGREEMENTS - (23.1%)
20,961,000 Bank of America Securities, to be repurchased at
$20,961,897; collateralized by various U.S. Government
Agency Obligations 1.54 09/01/04 20,961,000
30,000,000 Bear Stearns & Co., Inc., to be repurchased at $30,001,333;
collateralized by various U.S. Government Agency
Obligations 1.60 09/01/04 30,000,000
25,175,000 Goldman Sachs & Co., to be repurchased at $25,176,098;
collateralized by various U.S. Government Agency
Obligations 1.57 09/01/04 25,175,000
------------
Total Repurchase Agreements 76,136,000
------------
SHARES
- ------------
MONEY MARKET FUND - (0.4%)
1,177,150 Dreyfus Government Cash Management Fund 1,177,150
------------
Total Investments at Amortized Cost* - (99.8%) $329,282,785
Other Assets and Liabilities, Net - (0.2%) 728,844
------------
NET ASSETS - (100.0%) $330,011,629
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Securities 76.5%
Repurchase Agreements 23.1%
Money Market Fund 0.4%
</Table>
(A) Rates shown are annualized yields at time of purchase.
(B) 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, 2004.
* Cost for federal income tax purposes is the same as for financial
statement purposes.
See Notes to Financial Statements.
7
MONARCH FUNDS
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SCHEDULE OF INVESTMENTS -- DAILY ASSETS CASH FUND
August 31, 2004
<Table>
<Caption>
FACE SECURITY
AMOUNT DESCRIPTION RATE MATURITY VALUE
- ----------- ------------------------------------------------------------ ----- -------- ------------
U.S. GOVERNMENT SECURITIES - (26.2%)
FEDERAL HOME LOAN BANK - DISCOUNT NOTES (A) - (13.1%)
$75,000,000 FHLB 1.47% 09/01/04 $ 75,000,000
FEDERAL HOME LOAN MORTGAGE CORPORATION - DISCOUNT NOTES (A) - (13.1%)
75,000,000 FNMA 1.48 09/01/04 75,000,000
------------
Total U.S. Government Securities 150,000,000
------------
COMMERCIAL PAPER (A) - (16.8%)
17,000,000 Delaware Funding Co., LLC 1.53 09/09/04 16,994,220
20,000,000 Deutsche Bank Financial 1.11 12/31/04 19,926,056
16,000,000 Edison Asset Securities, LLC 1.52 09/09/04 15,994,596
15,000,000 Goldman Sachs Group, Inc. 1.64 07/29/05 15,000,000
18,000,000 UBS Finance Delaware, LLC 1.56 10/12/04 17,968,122
10,000,000 Windmill Funding Corp. 1.53 09/23/04 9,990,650
------------
Total Commercial Paper 95,873,644
------------
CORPORATE NOTES (B) - (14.0%)
4,500,000 Bear Stearns & Co., Inc. 1.94 09/21/04 4,500,969
15,000,000 Bear Stearns & Co., Inc. 2.15 07/15/05 15,075,439
15,000,000 CIT Group, Inc. 1.98 02/14/05 15,016,040
20,000,000 Countrywide Home Loan 1.67 01/18/05 19,999,684
10,000,000 Credit Suisse First Boston USA, Inc. 1.68 12/03/04 10,007,708
15,590,000 Lehman Brothers Holdings 1.73 07/22/05 15,608,030
------------
Total Corporate Notes 80,207,870
------------
ASSET-BACKED SECURITY (B,C) - (2.4%)
13,852,978 Grand Central CDO Ltd. 1.56 06/10/05 13,852,978
------------
REPURCHASE AGREEMENTS - (40.6%)
62,648,000 Bank of America, to be repurchased at $62,650,680;
collateralized by various U.S. Government Agency
Obligations 1.54 09/01/04 62,648,000
$60,000,000 Bear Stearns & Co., Inc., to be repurchased at $60,002,667;
collateralized by various U.S. Government Agency
Obligations 1.60 09/01/04 60,000,000
70,000,000 Goldman Sachs Group, Inc., to be repurchased at $70,003,053,
collateralized by various U.S. Government Agency
Obligations 1.57 09/01/04 70,000,000
39,540,000 Merrill Lynch, to be repurchased at $39,541,724;
collateralized by various U.S. Government Agency
Obligations 1.57 09/01/04 39,540,000
------------
Total Repurchase Agreements 232,188,000
------------
Total Investments at Amortized Cost* - (100.0%) $572,122,492
Other Assets and Liabilities, Net - (0.0%) 8,798
------------
NET ASSETS - (100.0%) $572,131,290
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
U.S. Government Securities 26.2%
Commercial Paper 16.8%
Corporate Notes 14.0%
Asset-Backed Security 2.4%
Repurchase Agreements 40.6%
</Table>
(A) Rates shown are annualized yields at time of purchase.
(B) 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, 2004.
(C) Securities that may be resold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933, as amended. At
period end, these securities amounted to $13,852,978 or 2.4% of
Net Assets.
* Cost for federal income tax purposes is the same as for financial
statement purposes.
See Notes to Financial Statements.
8
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STATEMENTS OF ASSETS AND LIABILITIES
August 31, 2004
<Table>
<Caption>
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT DAILY ASSETS
FUND FUND FUND CASH FUND
------------ ------------ ------------ ------------
Assets
Investments:
Securities at amortized cost $ 99,996,389 $20,394,102 $253,146,785 $339,934,492
Repurchase agreements 58,662,000 -- 76,136,000 232,188,000
Cash 23,323 2,459 28,455 14,866
Receivables:
Interest 2,479 394 166,360 274,066
Investment securities sold -- -- 919,377 --
Receivable from administrator -- 20,044 -- 935
Prepaid expenses and other assets 18,314 4,159 37,683 72,689
------------ ----------- ------------ ------------
Total Assets 158,702,505 20,421,158 330,434,660 572,485,048
------------ ----------- ------------ ------------
Liabilities
Payables:
Dividends 96,053 19,699 114,206 53,132
Accrued expenses:
Payables to related parties 20,439 -- 53,433 75,278
Trustees' fees and expenses -- -- 59 --
Other expenses 66,958 18,817 214,034 225,348
Other liabilities -- -- 41,299 --
------------ ----------- ------------ ------------
Total Liabilities 183,450 38,516 423,031 353,758
------------ ----------- ------------ ------------
Net Assets $158,519,055 $20,382,642 $330,011,629 $572,131,290
============ =========== ============ ============
Components of Net Assets
Paid in capital $158,519,174 $20,406,454 $330,040,143 $572,143,490
Undistributed (distributions in excess of) net
investment income (83) 408 (28,665) (559)
Accumulated net realized gain (loss) (36) (24,220) 151 (11,641)
------------ ----------- ------------ ------------
Net Assets $158,519,055 $20,382,642 $330,011,629 $572,131,290
============ =========== ============ ============
Net Assets by Class of Shares
Preferred Shares $ -- $ -- $ 23,385,632 $ 19,165,676
Universal Shares 86,750,457 20,382,642 113,880,506 35,892,518
Institutional Service Shares 15,551,805 -- 55,141,609 26,423,320
Institutional Shares -- -- 73,575,455 95,984,754
Investor Shares 56,216,793 -- 64,028,427 394,665,022
------------ ----------- ------------ ------------
Net Assets $158,519,055 $20,382,642 $330,011,629 $572,131,290
============ =========== ============ ============
Shares of Beneficial Interest for each Class of Shares
Preferred Shares -- -- 23,384,839 19,166,065
Universal Shares 86,759,486 20,406,688 113,919,933 35,911,642
Institutional Service Shares 15,545,458 -- 55,141,690 26,428,502
Institutional Shares -- -- 73,570,400 96,000,169
Investor Shares 56,214,240 -- 64,023,294 394,713,785
Net Asset Value Per Share
(Offering and Redemption Price per Share)
for each Class of Shares $ 1.00 $ 1.00 $ 1.00 $ 1.00
</Table>
See Notes to Financial Statements.
9
MONARCH FUNDS
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STATEMENTS OF OPERATIONS
Year Ended August 31, 2004
<Table>
<Caption>
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY OBLIGATIONS GOVERNMENT CASH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Investment Income:
Interest income $2,465,949 $ 229,397 $10,982,456 $5,854,267
Dividend income 30,902 6,678 34,701 49,031
---------- --------- ----------- ----------
Total Investment Income 2,496,851 236,075 11,017,157 5,903,298
---------- --------- ----------- ----------
Expenses:
Investment adviser fees 87,513 11,130 334,271 181,812
Administrator fees
Preferred Shares -- -- 685,430 10,351
Universal Shares 146,972 24,485 123,662 94,419
Institutional Service Shares 26,175 -- 73,864 31,949
Institutional Shares -- -- 81,949 105,468
Investor Shares 96,142 -- 72,906 318,315
Shareholder service fees
Institutional Service Shares 47,593 -- 134,299 58,111
Institutional Shares -- -- 148,998 191,809
Investor Shares 174,800 -- 132,556 578,693
Distribution fees
Investor Shares 218,498 -- 165,694 723,362
Transfer agency fees
Preferred Shares -- -- 38,480 9,666
Universal Shares 81,430 29,758 73,005 56,982
Institutional Service Shares 33,730 -- 79,268 40,624
Institutional Shares -- -- 162,448 209,140
Investor Shares 197,377 -- 146,758 614,705
Custodian fees 30,600 2,782 117,930 63,692
Professional fees 24,908 34,159 28,294 36,014
Accountant fees 72,015 38,744 123,273 104,561
Trustees' fees and expenses 4,564 132 9,306 3,714
Miscellaneous expenses 27,816 14,274 64,571 97,741
---------- --------- ----------- ----------
Total Expenses 1,270,133 155,464 2,796,962 3,531,128
Expenses reimbursed and fees waived (154,265) (110,139) (560,896) (223,448)
---------- --------- ----------- ----------
Net Expenses 1,115,868 45,325 2,236,066 3,307,680
---------- --------- ----------- ----------
Net Investment Income (Loss) 1,380,983 190,750 8,781,091 2,595,618
---------- --------- ----------- ----------
Net Realized Gain (Loss) on Investments -- 32 1,250 (333)
---------- --------- ----------- ----------
Increase (Decrease) in Net Assets from
Operations $1,380,983 $ 190,782 $ 8,782,341 $2,595,285
========== ========= =========== ==========
</Table>
See Notes to Financial Statements.
10
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
DAILY ASSETS DAILY ASSETS
TREASURY FUND GOVERNMENT OBLIGATIONS FUND
---------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2004 AUGUST 31, 2003
---------------- --------------- --------------- ---------------
Operations
Net investment income $ 1,380,983 $ 1,031,564 $ 190,750 $ 312,641
Net realized gain (loss) on investments -- -- 32 --
Net realized gain (loss) on investments allocated
from Portfolios -- (40) -- (10)
---------------- --------------- -------------- ---------------
Increase (Decrease) in Net Assets from Operations 1,380,983 1,031,524 190,782 312,631
---------------- --------------- -------------- ---------------
Distributions to Shareholders from
Net investment income--Universal Shares (1,090,584) (256,355) (200,674) (308,095)(d)
Net investment income--Institutional Service
Shares (135,993) (272,364)(b) -- (13,659)(c)
Net investment income--Investor Shares (164,100) (511,818) -- (2,232)(c)
Net investment income--Service Shares (a) -- (6,421) -- --
---------------- --------------- -------------- ---------------
Total Distributions to Shareholders (1,390,677) (1,046,958) (200,674) (323,986)
---------------- --------------- -------------- ---------------
Capital Share Transactions
Sale of shares--Universal Shares 286,622,339 63,758,141 18,831,339 23,392,457(d)
Sale of shares--Institutional Service Shares 343,639,316 788,768,505(b) -- 960,790(c)
Sale of shares--Investor Shares 1,655,597,362 2,221,411,726 -- 517,114(c)
Sale of shares--Service Shares (a) -- 29,717,963 -- --
Reinvestment of distributions--Universal Shares 664 4,620 4,082 3,444(d)
Reinvestment of distributions--Institutional
Service Shares 73,446 106,985(b) -- 13,655(c)
Reinvestment of distributions--Investor Shares 164,012 511,763 -- 2,225(c)
Reinvestment of distributions--Service Shares (a) -- 6,421 -- --
Redemption of shares--Universal Shares (340,004,807) (60,521,256) (23,194,936) (24,392,971)(d)
Redemption of shares--Institutional Service Shares (363,233,772) (781,026,237)(b) -- (2,726,685)(c)
Redemption of shares--Investor Shares (1,696,367,845) (2,258,845,469) -- (910,051)(c)
Redemption of shares--Service Shares (a) -- (32,233,218) -- --
Transactions due to reorganization--Universal
Shares (Notes 1 and 5) -- 136,794,829 -- --
Transactions due to reorganization--Institutional
Service Shares (Notes 1 and 5) -- 7,158,960 -- --
---------------- --------------- -------------- ---------------
Increase (Decrease) from Capital Transactions (113,509,285) 115,613,733 (4,359,515) (3,140,022)
---------------- --------------- -------------- ---------------
Increase (Decrease) in Net Assets (113,518,979) 115,598,299 (4,369,407) (3,151,377)
---------------- --------------- -------------- ---------------
Net Assets
Beginning of Period 272,038,034 156,439,735 24,752,049 27,903,426
---------------- --------------- -------------- ---------------
End of Period $ 158,519,055 $ 272,038,034 $ 20,382,642 $ 24,752,049
================ =============== ============== ===============
Undistributed (distributions in excess of) Net
Investment Income $ (83) $ 9,611 $ 408 $ 9,924
---------------- --------------- -------------- ---------------
</Table>
(a) On February 10, 2003, Service Shares ceased operations.
(b) On April 23, 2003, Institutional Shares were renamed Institutional Service
Shares.
(c) On June 26, 2003, Institutional Service Shares and Investor Shares ceased
operations.
(d) On July 22, 2003, Institutional Shares were redesignated as Universal
Shares.
See Notes to Financial Statements.
11
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
DAILY ASSETS DAILY ASSETS
GOVERNMENT FUND CASH FUND
---------------------------------- ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2004 AUGUST 31, 2003
---------------- --------------- --------------- ---------------
Operations
Net investment income (loss) $ 8,781,091 $ 3,387,985 $ 2,595,618 $ 6,339,246
Net realized gain (loss) on investments 1,250 -- (333) (5,268)
Net realized gain (loss) on investments allocated
from Portfolios -- 1,354 -- (5,698)
---------------- --------------- -------------- ---------------
Increase (Decrease) in Net Assets from Operations 8,782,341 3,389,339 2,595,285 6,328,280
---------------- --------------- -------------- ---------------
Distributions to Shareholders from
Net investment income--Preferred Shares (6,598,646) (621,089) (99,959) (151,590)
Net investment income--Universal Shares (1,071,470) (1,413,090) (802,986) (1,103,415)
Net investment income--Institutional Service
Shares (464,263) (110,393)(b) (205,357) (57,923)(b)
Net investment income--Institutional Shares (432,700) (880,906) (561,597) (1,997,736)
Net investment income--Investor Shares (213,682) (370,340) (926,265) (3,058,136)
Net investment income--Service Shares (a) -- (3,730) -- (8,311)
---------------- --------------- -------------- ---------------
Total Distributions to Shareholders (8,780,761) (3,399,548) (2,596,164) (6,377,111)
---------------- --------------- -------------- ---------------
Capital Share Transactions
Sale of shares--Preferred Shares 8,137,440,578 774,265,384 157,487,629 134,949,972
Sale of shares--Universal Shares 510,810,226 618,388,835 1,013,494,516 545,045,220
Sale of shares--Institutional Service Shares 349,941,112 97,674,061(b) 313,903,413 79,389,684(b)
Sale of shares--Institutional Shares 661,445,829 634,925,725 943,789,517 934,006,867
Sale of shares--Investor Shares 979,714,457 860,191,768 5,071,433,156 5,847,733,697
Sale of shares--Service Shares (a) -- 32,275,958 -- 35,906,214
Reinvestment of distributions--Preferred Shares 6,548,329 598,859 42,043 90,085
Reinvestment of distributions--Universal Shares 482,630 1,221,360 435,925 904,881
Reinvestment of distributions--Institutional
Service Shares 179,970 46,875(b) 172,099 54,087(b)
Reinvestment of distributions--Institutional
Shares 247,736 584,103 386,917 1,578,425
Reinvestment of distributions--Investor Shares 213,409 370,394 835,744 2,870,274
Reinvestment of distributions--Service Shares (a) -- 3,730 -- 8,312
Redemption of shares--Preferred Shares (8,132,153,056) (775,355,933) (141,343,256) (145,153,730)
Redemption of shares--Universal Shares (511,585,416) (652,099,960) (1,082,878,630) (530,370,168)
Redemption of shares--Institutional Service Shares (371,253,091) (84,691,606)(b) (324,528,053) (72,324,735)(b)
Redemption of shares--Institutional Shares (678,858,529) (662,241,985) (940,377,890) (1,190,855,020)
Redemption of shares--Investor Shares (963,282,301) (872,270,125) (4,980,992,461) (6,194,764,416)
Redemption of shares--Service Shares (a) -- (33,658,096) -- (43,608,634)
Transactions due to reorganization--Universal
Shares (Notes 1 and 5) -- 65,240,533 -- 42,432,455
Transactions due to reorganization--Institutional
Service Shares (Notes 1 and 5) -- 63,244,162 -- 29,757,106
Transactions due to reorganization--Investor
Shares (Notes 1 and 5) -- 695,432 -- 1,292,555
---------------- --------------- -------------- ---------------
Increase (Decrease) Decrease from Capital
Transactions (10,108,117) 69,409,474 31,860,669 (521,056,869)
---------------- --------------- -------------- ---------------
Increase (Decrease) in Net Assets (10,106,537) 69,399,265 31,859,790 (521,105,700)
---------------- --------------- -------------- ---------------
Net Assets
Beginning of Period 340,118,166 270,718,901 540,271,500 1,061,377,200
---------------- --------------- -------------- ---------------
End of Period $ 330,011,629 $ 340,118,166 $ 572,131,290 $ 540,271,500
================ =============== ============== ===============
Undistributed (distributions in excess of) Net
Investment Income $ (28,665) $ (31,056) $ (559) $ --
---------------- --------------- -------------- ---------------
</Table>
(a) On February 10, 2003, Service Shares ceased operations.
(b) On June 9, 2003, Institutional Service Shares commenced operations.
See Notes to Financial Statements.
12
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
DAILY ASSETS DAILY ASSETS
TREASURY FUND GOVERNMENT OBLIGATIONS FUND
---------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2004 AUGUST 31, 2003
---------------- --------------- --------------- ---------------
Share Transactions
Sale of shares--Universal Shares 286,622,338 63,758,144 18,831,340 23,392,207(d)
Sale of shares--Institutional Service Shares 343,639,316 788,768,505(b) -- 960,024(c)
Sale of shares--Investor Shares 1,655,597,362 2,221,411,726 -- 516,995(c)
Sale of shares--Service Shares (a) -- 29,717,963 -- --
Reinvestment of distributions--Universal Shares 664 4,621 4,082 3,444(d)
Reinvestment of distributions--Institutional
Service Shares 73,446 106,985(b) -- 13,655(c)
Reinvestment of distributions--Investor Shares 164,012 511,763 -- 2,225(c)
Reinvestment of distributions--Service Shares
(a) -- 6,421 -- --
Redemption of shares--Universal Shares (340,004,807) (60,521,256) (23,194,936) (24,392,203)(d)
Redemption of shares--Institutional Service
Shares (363,233,772) (781,026,237)(b) -- (2,726,685)(c)
Redemption of shares--Investor Shares (1,696,367,845) (2,258,845,469) -- (910,046)(c)
Redemption of shares--Service Shares (a) -- (32,233,218) -- --
Transactions due to reorganization--Universal
Shares (Notes 1 and 5) -- 136,795,448 -- --
Transactions due to
reorganization--Institutional Service Shares
(Notes 1 and 5) -- 7,158,341 -- --
---------------- --------------- --------------- --------------
Increase (Decrease) in Shares (113,509,286) 115,613,737 (4,359,514) (3,140,384)
================ =============== =============== ==============
</Table>
(a) On February 10, 2003, Service Shares ceased operations.
(b) On April 23, 2003, Institutional Shares were renamed Institutional Service
Shares.
(c) On June 26, 2003, Institutional Service Shares and Investor Shares ceased
operations.
(d) On July 22, 2003, Institutional Shares were redesignated as Universal
Shares.
See Notes to Financial Statements.
13
MONARCH FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
DAILY ASSETS DAILY ASSETS
GOVERNMENT FUND CASH FUND
---------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2004 AUGUST 31, 2003
---------------- --------------- --------------- ---------------
Share Transactions
Sale of shares--Preferred Shares 8,137,440,578 774,265,384 157,487,629 134,949,972
Sale of shares--Universal Shares 510,810,227 618,388,835 1,013,494,518 545,045,222
Sale of shares--Institutional Service Shares 349,941,112 97,674,061(b) 313,903,413 79,389,684(b)
Sale of shares--Institutional Shares 661,445,830 634,925,725 943,789,517 934,006,868
Sale of shares--Investor Shares 979,714,457 860,191,768 5,071,433,157 5,847,733,697
Sale of shares--Service Shares (a) -- 32,275,958 -- 35,906,215
Reinvestment of distributions--Preferred Shares 6,548,329 598,859 42,043 90,085
Reinvestment of distributions--Universal Shares 482,630 1,221,360 435,925 904,881
Reinvestment of distributions--Institutional
Service Shares 179,970 46,875(b) 172,099 54,087(b)
Reinvestment of distributions--Institutional Shares 247,735 584,103 386,917 1,578,426
Reinvestment of distributions--Investor Shares 213,409 370,394 835,744 2,870,274
Reinvestment of distributions--Service Shares (a) -- 3,730 -- 8,311
Redemption of shares--Preferred Shares (8,132,153,056) (775,355,933) (141,343,256) (145,153,307)
Redemption of shares--Universal Shares (511,585,416) (652,099,960) (1,082,878,630) (530,355,298)
Redemption of shares--Institutional Service Shares (371,253,091) (84,691,606)(b) (324,528,053) (72,319,505)(b)
Redemption of shares--Institutional Shares (678,858,529) (662,241,985) (940,377,890) (1,190,841,943)
Redemption of shares--Investor Shares (963,282,301) (872,270,125) (4,980,992,461) (6,194,721,376)
Redemption of shares--Service Shares (a) -- (33,658,096) -- (43,608,634)
Transactions due to reorganization--Universal
Shares (Notes 1 and 5) -- 65,240,211 -- 42,433,148
Transactions due to reorganization--Institutional
Service Shares (Notes 1 and 5) -- 63,244,369 -- 29,756,777
Transactions due to reorganization--Investor Shares
(Notes 1 and 5) -- 695,485 -- 1,292,578
---------------- --------------- --------------- ---------------
Increase (Decrease) in Shares (10,108,116) 69,409,412 31,860,672 (520,979,838)
================ =============== =============== ===============
</Table>
(a) On February 10, 2003, Service Shares ceased operations.
(b) On June 9, 2003, Institutional Service Shares commenced operations.
See Notes to Financial Statements.
14
MONARCH FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These financial highlights reflect selected data for an outstanding share of
each class of each Fund during the periods indicated.
<Table>
<Caption>
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 Per Total (000's
(except as noted) Share Income Investments Income Gains Share Return Omitted)
- ----------------------------------------------------------------------------------------------------------------------------
DAILY ASSETS TREASURY FUND
Universal Shares
- ----------------------------------------------------------------------------------------------------------------------------
2004 $1.00 $0.01 -- $(0.01) -- $1.00 0.84% $ 86,750
2003 1.00 0.01 -- (0.01) -- 1.00 1.10% 140,137
2002 1.00 0.02 --(e) (0.02) --(e) 1.00 1.82% 105
2001 1.00 0.05 -- (0.05) -- 1.00 5.24% 102
2000(d) 1.00 0.04 -- (0.04) -- 1.00 4.02%(b) 5,976
Institutional Service Shares (f)
- ----------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 -- (0.01) -- 1.00 0.59% 15,552
2003 1.00 0.01 -- (0.01) -- 1.00 0.84% 35,074
2002 1.00 0.02 --(e) (0.02) --(e) 1.00 1.57% 20,068
2001 1.00 0.05 -- (0.05) -- 1.00 4.92% 50,554
2000 1.00 0.05 -- (0.05) -- 1.00 5.47% 30,480
Investor Shares
- ----------------------------------------------------------------------------------------------------------------------------
2004 1.00 --(e) -- --(e) -- 1.00 0.20% 56,217
2003 1.00 --(e) -- --(e) -- 1.00 0.45% 96,827
2002 1.00 0.01 --(e) (0.01) --(e) 1.00 1.17% 133,758
2001 1.00 0.04 -- (0.04) -- 1.00 4.52% 233,138
2000 1.00 0.05 -- (0.05) -- 1.00 5.06% 314,305
DAILY ASSETS GOVERNMENT OBLIGATIONS FUND
Universal Shares (g)
- ----------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.91% 20,383
2003 1.00 0.01 -- (0.01) -- 1.00 1.18% 24,752
2002 1.00 0.02 -- (0.02) -- 1.00 1.97% 25,760
2001 1.00 0.05 -- (0.05) -- 1.00 5.26% 29,100
2000 1.00 0.06 -- (0.06) -- 1.00 5.93% 39,777
<Caption>
RATIOS/SUPPLEMENTAL DATA
------------------------------------
Ratios to Average Net Assets (a)
------------------------------------
Year Ended Net
August 31, Net Gross Investment
(except as noted) Expenses Expenses (c) Income
- --------------------- ------------------------------------
DAILY ASSETS TREASURY
Universal Shares
- ----------------------------------------------------------------------
2004 0.20% 0.27% 0.81%
2003 0.21% 0.37% 0.80%
2002 0.20% 8.77% 1.81%
2001 0.20% 0.92% 6.22%
2000(d) 0.20% 0.38% 5.86%
Institutional Service Shares
- ----------------------------------------------------------------------------------
2004 0.45% 0.56% 0.57%
2003 0.45% 0.67% 0.84%
2002 0.45% 0.62% 1.68%
2001 0.45% 0.61% 4.57%
2000 0.45% 0.62% 5.30%
Investor Shares
- ----------------------------------------------------------------------------------------------
2004 0.84% 0.89% 0.18%
2003 0.84% 0.90% 0.45%
2002 0.85% 0.87% 1.22%
2001 0.84% 0.84% 4.52%
2000 0.84% 0.85% 5.01%
DAILY ASSETS GOVERNMENT
Universal Shares (g)
- ----------------------------------------------------------------------------------------------------------
2004 0.20% 0.70% 0.86%
2003 0.20% 0.48% 1.14%
2002 0.20% 0.71% 1.97%
2001 0.20% 0.57% 5.24%
2000 0.20% 0.65% 5.78%
</Table>
(a) All ratios for periods less than a year are annualized.
(b) Not annualized.
(c) The ratio of Gross Expenses to Average Net Assets reflects the expense ratio
excluding any fee waivers and/or expense reimbursements.
(d) See Note 1 for dates of commencement of operations.
(e) Less than $0.01 per share.
(f) On April 23, 2003, Institutional Shares were renamed Institutional Service
Shares.
(g) On July 22, 2003, Institutional Shares were redesignated as Universal
Shares.
See Notes to Financial Statements.
15
MONARCH FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These financial highlights reflect selected data for an outstanding share of
each class of each Fund during the periods indicated.
<Table>
<Caption>
SELECTED DATA FOR A SINGLE SHARE
-------------------------------------------------------------------------------- Net
Assets at
Year Ended Beginning Net Distributions Distributions Ending End of
August 31, Net Asset Net Realized from Net from Net Net Asset Period
(except as Value Per Investment Gain on Investment Realized Value Per Total (000's
noted) Share Income Investments Income Gains Share Return Omitted)
- -------------------------------------------------------------------------------------------------------------------------------
DAILY ASSETS GOVERNMENT FUND
Preferred Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 $1.00 $0.01 --(e) $(0.01) -- $1.00 1.04% $ 23,386
2003 1.00 0.01 -- (0.01) -- 1.00 1.40% 11,549
2002 1.00 0.02 --(e) (0.02) --(e) 1.00 2.25% 12,041
2001 (d) 1.00 --(e) -- --(e) -- 1.00 0.22%(b) 8
Universal Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.96% 113,881
2003 1.00 0.01 -- (0.01) -- 1.00 1.29% 114,173
2002 1.00 0.02 --(e) (0.02) --(e) 1.00 2.17% 81,426
2001 1.00 0.05 -- (0.05) -- 1.00 5.34% 164,500
2000 1.00 0.06 -- (0.06) -- 1.00 5.94% 225,697
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 --(e) --(e) --(e) -- 1.00 0.71% 55,142
2003 (d) 1.00 --(e) -- --(e) -- 1.00 0.16%(b) 76,273
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.59% 73,575
2003 1.00 0.01 -- (0.01) -- 1.00 0.91% 90,740
2002 1.00 0.02 --(e) (0.02) --(e) 1.00 1.80% 117,476
2001 1.00 0.05 -- (0.05) -- 1.00 4.95% 198,324
2000 1.00 0.05 -- (0.05) -- 1.00 5.54% 400,418
Investor Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.32% 64,028
2003 1.00 0.01 -- (0.01) -- 1.00 0.64% 47,383
2002 1.00 0.02 --(e) (0.02) --(e) 1.00 1.52% 58,397
2001 1.00 0.05 -- (0.05) -- 1.00 4.68% 61,546
2000 (d) 1.00 0.04 -- (0.04) -- 1.00 3.68%(b) 36,091
DAILY ASSETS CASH FUND
Preferred Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 1.04% 19,166
2003 1.00 0.01 -- (0.01) -- 1.00 1.37% 2,979
2002 1.00 0.02 -- (0.02) -- 1.00 2.21% 13,095
2001 (d) 1.00 --(e) -- --(e) -- 1.00 0.22%(b) 8
Universal Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.96% 35,892
2003 1.00 0.01 -- (0.01) -- 1.00 1.29% 104,842
2002 1.00 0.02 -- (0.02) -- 1.00 2.12% 46,833
2001 1.00 0.05 -- (0.05) -- 1.00 5.49% 37,236
2000 1.00 0.06 -- (0.06) -- 1.00 6.04% 70,451
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.71% 26,423
2003 (d) 1.00 --(e) -- --(e) -- 1.00 0.18%(b) 36,876
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 0.01 --(e) (0.01) -- 1.00 0.59% 95,985
2003 1.00 0.01 -- (0.01) -- 1.00 0.92% 92,186
2002 1.00 0.02 -- (0.02) -- 1.00 1.75% 347,469
2001 1.00 0.05 -- (0.05) -- 1.00 5.11% 736,555
2000 1.00 0.06 -- (0.06) -- 1.00 5.65% 863,603
Investor Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 1.00 --(e) --(e) --(e) -- 1.00 0.32% 394,665
2003 1.00 0.01 -- (0.01) -- 1.00 0.64% 303,389
2002 1.00 0.01 -- (0.01) -- 1.00 1.48% 646,285
2001 1.00 0.05 -- (0.05) -- 1.00 4.85% 791,138
2000 1.00 0.05 -- (0.05) -- 1.00 5.38% 994,191
<Caption>
RATIOS/SUPPLEMENTAL DATA
------------------------------------
Ratios to Average Net Assets (a)
Year Ended ------------------------------------
August 31, Net
(except as Net Gross Investment
noted) Expenses Expenses (c) Income
- --------------------- ------------------------------------
DAILY ASSETS GOVERNMENT FUND
Preferred Shares
- ----------------------------------------------------------------------------------------------------------------------
2004 0.12% 0.18% 1.06%
2003 0.11% 0.25% 1.05%
2002 0.12% 0.22% 2.19%
2001 (d) 0.12% 97.77% 3.64%
Universal Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.20% 0.26% 0.95%
2003 0.20% 0.28% 1.26%
2002 0.21% 0.25% 2.17%
2001 0.20% 0.23% 5.29%
2000 0.20% 0.24% 5.73%
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.45% 0.51% 0.69%
2003 (d) 0.45% 0.58% 0.70%
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.57% 0.62% 0.58%
2003 0.57% 0.63% 0.92%
2002 0.57% 0.59% 2.05%
2001 0.57% 0.58% 4.80%
2000 0.57% 0.58% 5.41%
Investor Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.84% 0.86% 0.32%
2003 0.84% 0.89% 0.63%
2002 0.85% 0.85% 1.43%
2001 0.84% 0.84% 4.51%
2000 (d) 0.85% 0.97% 5.70%
DAILY ASSETS CASH FUND
Preferred Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.12% 0.31% 1.06%
2003 0.12% 0.30% 1.39%
2002 0.12% 0.20% 1.88%
2001 (d) 0.12% 91.14% 3.76%
Universal Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.20% 0.27% 0.94%
2003 0.20% 0.28% 1.24%
2002 0.21% 0.25% 2.03%
2001 0.20% 0.24% 5.68%
2000 0.20% 0.23% 5.84%
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.45% 0.54% 0.71%
2003 (d) 0.45% 0.58% 0.76%
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.57% 0.63% 0.59%
2003 0.57% 0.61% 1.01%
2002 0.57% 0.58% 1.84%
2001 0.57% 0.57% 5.07%
2000 0.58% 0.58% 5.55%
Investor Shares
- -------------------------------------------------------------------------------------------------------------------------------
2004 0.84% 0.87% 0.32%
2003 0.84% 0.86% 0.68%
2002 0.83% 0.83% 1.51%
2001 0.82% 0.82% 4.78%
2000 0.83% 0.85% 5.40%
</Table>
(a) All ratios for periods less than a year are annualized.
(b) Not annualized.
(c) The ratio of Gross Expenses to Average Net Assets reflects the expense ratio
excluding any fee waivers and/or expense reimbursements.
(d) See Note 1 for dates of commencement of operations.
(e) Less than $0.01 per share.
See Notes to Financial Statements.
16
MONARCH FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
August 31, 2004
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 (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, 2004, and the dates on which they commenced operations were as
follows:
<Table>
<Caption>
FUND SHARE CLASS COMMENCEMENT OF OPERATIONS
- ----------------------------------- ---------------------------- --------------------------
Daily Assets Treasury Fund Universal Shares December 30, 1999
Daily Assets Treasury Fund Institutional Service Shares July 12, 1993
Daily Assets Treasury Fund Investor Shares October 25, 1995
Daily Assets Government Fund Preferred Shares August 10, 2001
Daily Assets Government Fund Universal Shares October 29, 1992
Daily Assets Government Fund Institutional Service Shares June 9, 2003
Daily Assets Government Fund Institutional Shares July 15, 1993
Daily Assets Government Fund Investor Shares December 30, 1999
Daily Assets Cash Fund Preferred Shares August 10, 2001
Daily Assets Cash Fund Universal Shares December 1, 1992
Daily Assets Cash Fund Institutional Service Shares June 9, 2003
Daily Assets Cash Fund Institutional Shares July 15, 1993
Daily Assets Cash Fund Investor Shares June 16, 1995
Daily Assets Government Obligations Universal Shares (Note 5) March 13, 1998
</Table>
Prior to June 9, 2003, the Funds operated under a master-feeder fund structure
whereby they sought to achieve their respective investment objectives by
investing all of their investable assets in separate portfolios (each a
"Portfolio") of another registered open-end management investment company whose
series had the same investment objective and policies as the Funds. Each Fund
now invests directly in portfolio securities.
On July 22, 2003, Daily Assets Government Obligations Fund, a newly created
series of the Trust, merged with Daily Assets Government Fund (the "Forum
Fund"), a series of Forum Funds, another registered investment company. Daily
Assets Government Obligation Fund was the accounting successor of that merger
and, thus, the financial information reported in the financial statements prior
to July 23, 2003, reflects the history of the Forum Fund.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in net
assets during the fiscal period. Actual results could differ from those
estimates. The following summarizes the significant accounting policies of the
Funds:
SECURITY VALUATION 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 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 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
17
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
August 31, 2004
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 Fund's 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 and Service
Shares incur shareholder servicing fees and Investor Shares and Service Shares
incur distribution fees. In addition, there are differences between the classes
of shares with respect to the minimum investment required.
SECURITIES TRANSACTIONS, INTEREST INCOME AND REALIZED GAIN AND LOSS Securities
transactions are recorded on trade date. Interest income is accrued as earned
and realized gain and loss on investments sold are recorded on the basis of
identified cost.
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.
The capital loss carryovers available to offset future gains, as of August 31,
2004, were as follows:
<Table>
Daily Assets Government Obligations Fund Expiring August 2006 $18,999
Expiring August 2007 986
Expiring August 2008 3,602
Expiring August 2009 632
Daily Assets Cash Fund Expiring August 2010 232
Expiring August 2011 9,421
Expiring August 2012 1,655
</Table>
For tax purposes, Daily Assets Cash Fund had current year deferred post-October
losses of $333. These losses will be recognized for tax purposes on the first
day of the following tax year.
RECLASSIFICATION OF CAPITAL ACCOUNTS On the Statement of Assets and Liabilities,
as a result of a non-deductible expense paid by Daily Assets Government
Obligations Fund, and a dividend reclass in Daily Assets Government Fund,
certain amounts for the year ended August 31, 2004 have been reclassified from
what was previously reported. The reclassifications have no impact on the net
assets of the Funds.
<Table>
<Caption>
ACCUMULATED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED LOSS PAID-IN-CAPITAL
----------------- --------------- ---------------
Daily Assets Government Obligations Fund $ 408 $ -- $(408)
Daily Assets Government Fund 2,061 (2,061) --
</Table>
DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders of net investment
income are declared daily and paid monthly. Net capital gain, if any, is
distributed to shareholders at least annually. Distributions are based on
amounts calculated in accordance with applicable income tax regulations, which
may differ from accounting principles generally accepted in the United States.
These differences are due primarily to differing treatments of income and gain
on various investment securities held by each Fund, timing differences and
differing characterizations of distributions made by the Fund.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER Forum Investment Advisors, LLC (the "Adviser") is the
investment adviser of each Fund. The Adviser receives an advisory fee from the
Daily Assets Treasury Fund, Daily Assets Government Fund, and Daily Assets Cash
Fund based upon the total average daily net assets of the 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
18
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
August 31, 2004
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 Global Transaction Services, through
its various affiliates (collectively "Citigroup"), provides certain
administration, portfolio accounting and transfer agency services to the Fund.
SHAREHOLDER SERVICES The Funds pay 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. These fees are
paid to various financial institutions that provide shareholder services.
DISTRIBUTOR Forum Fund Services, LLC is the Trust's distributor (the
"Distributor"). The Distributor is not affiliated with the Adviser, Citigroup,
or its affiliated companies. 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. The Distributor pays some or all of these fees to various financial
institutions that provide distribution services for Investor Shares. The plan
obligates the Funds to pay the Distributor as compensation for its services.
NOTE 4. WAIVER OF FEES/REIMBURSEMENT OF EXPENSES
The Adviser, the Administrator, and the Distributor voluntarily waived a portion
of their fees and assumed certain expenses of the Funds. For the year ended
August 31, 2004, fees waived and expenses reimbursed for each of the Funds were
as follows:
<Table>
<Caption>
DAILY ASSETS
DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS
TREASURY FUND OBLIGATIONS FUND GOVERNMENT FUND CASH FUND
------------- ---------------- --------------- ------------
Advisory $ -- $ 11,129 $ -- $ --
Administration 25,003 23,659 430,528 24,920
Shareholder Service 61,156 -- 79,556 148,116
Transfer Agency 66,805 19,457 50,812 50,412
Distribution 1,301 -- -- --
Portfolio Accounting -- 35,553 -- --
Expenses Reimbursed by
Administrator -- 20,341 -- --
-------- -------- -------- --------
Total $154,265 $110,139 $560,896 $223,448
======== ======== ======== ========
</Table>
19
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Year Ended August 31, 2004
NOTE 5. REORGANIZATIONS
On June 9, 2003, Daily Assets Treasury Fund, Daily Assets Government Fund and
Daily Assets Cash Fund (the "Monarch Funds") acquired all the net assets of
Daily Assets Treasury Obligations Fund, Daily Assets Government Obligations Fund
and Daily Assets Cash Fund (the "Forum Funds"), respectively. Under the
reorganization plan, shareholders of the Forum Funds received shares in the
Monarch Funds with a value equal to their holdings in the Forum Funds. The
transaction was structured for tax purposes to qualify as a tax-free
reorganization under the Internal Revenue Code. After the reorganization plan
was consummated, each Fund redeemed its investment in Core Trust and began
investing directly in portfolio securities. A summary of shares outstanding and
net assets immediately before and after the reorganization is as follows:
<Table>
<Caption>
BEFORE REORGANIZATION AFTER REORGANIZATION
------------------------------- --------------------
DAILY ASSETS DAILY ASSETS
TREASURY TREASURY TREASURY FUND
CASH FUND OBLIGATIONS FUND --------------------
-------------------------------
Universal Shares
Shares Outstanding 105,259 -- 136,900,707
Net Assets $ 105,259 -- $136,900,088
Institutional Service Shares
Shares Outstanding 23,982,275 7,158,341 31,140,616
Net Assets $ 23,990,029 $ 7,158,960 $ 31,148,989
Institutional Shares
Shares Outstanding -- 136,795,448 --
Net Assets -- $136,794,829 --
Investor Shares
Shares Outstanding 125,118,384 -- 125,118,384
Net Assets $125,127,133 -- $125,127,133
</Table>
<Table>
<Caption>
BEFORE REORGANIZATION AFTER REORGANIZATION
------------------------------ --------------------
DAILY ASSET DAILY ASSETS
GOVERNMENT GOVERNMENT GOVERNMENT FUND
CASH FUND OBLIGATIONS FUND --------------------
------------------------------
Preferred Shares
Shares Outstanding 1,001 -- 1,001
Net Assets $ 1,001 -- $ 1,001
Universal Shares
Shares Outstanding 70,662,649 -- 135,902,860
Net Assets $70,622,707 -- $135,863,240
Institutional Service Shares
Shares Outstanding 63,244,369 63,244,369 --
Net Assets $63,244,162 $63,244,162 --
Institutional Shares
Shares Outstanding 93,296,961 65,240,211 93,296,961
Net Assets $93,301,899 $65,240,533 $ 93,301,899
Investor Shares
Shares Outstanding 63,310,358 695,485 64,005,843
Net Assets $63,315,472 $ 695,432 $ 64,010,904
</Table>
20
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Year Ended August 31, 2004
<Table>
<Caption>
BEFORE REORGANIZATION AFTER REORGANIZATION
--------------------------- --------------------
DAILY ASSETS
DAILY ASSETS CASH FUND
CASH FUND CASH FUND --------------------
---------------------------
Preferred Shares
Shares Outstanding 3,938,289 -- 3,938,289
Net Assets $ 3,938,387 -- $ 3,938,387
Universal Shares
Shares Outstanding 94,445,145 -- 136,878,293
Net Assets $ 94,442,900 -- $136,875,355
Institutional Service Shares
Shares Outstanding -- 29,756,777 29,756,777
Net Assets -- $29,757,106 $ 29,757,106
Institutional Shares
Shares Outstanding 106,837,539 42,433,148 106,837,539
Net Assets $106,836,012 $42,432,455 $106,836,012
Investor Shares
Shares Outstanding 358,133,508 1,292,578 359,426,086
Net Assets $358,131,496 $ 1,292,555 $359,424,051
</Table>
On July 22, 2003, Daily Assets Government Fund, (the "Forum Fund"), reorganized
into Daily Assets Government Obligations Fund, a newly created Monarch series,
and transferred its assets and liabilities to Daily Assets Government
Obligations Fund. As a result, Universal Shares of the Fund acquired the net
assets of Institutional share class of the Forum Fund. Financial information
reported in the financial statements prior to July 23, 2003, reflects the
financial history of the Forum Fund. A summary of shares outstanding and net
assets immediately before and after the reorganization is as follows:
<Table>
<Caption>
BEFORE REORGANIZATION AFTER REORGANIZATION
--------------------- --------------------
DAILY ASSETS
DAILY ASSETS GOVERNMENT
GOVERNMENT FUND OBLIGATIONS FUND
--------------- ----------------
Universal Shares
Shares Outstanding -- 26,349,971
Net Assets -- $26,338,017
Institutional Shares
Shares Outstanding 26,349,971 --
Net Assets $26,338,017 --
</Table>
NOTE 6. DISTRIBUTIONS TO SHAREHOLDERS
As of August 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED CAPITAL AND
ORDINARY INCOME OTHER LOSSES TOTAL
--------------- ------------ --------
Daily Assets Treasury Fund $ (85) $ (34) $ (119)
Daily Assets Government Obligations Fund 409 (24,221) (23,812)
Daily Assets Government Fund (28,514) -- (28,514)
Daily Assets Cash Fund (559) (11,641) (12,200)
</Table>
21
MONARCH FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Year Ended August 31, 2004
The tax character of distributions paid during 2004 and 2003 was as follows:
<Table>
<Caption>
ORDINARY INCOME
---------------------------
2004 2003
---------- ----------
Daily Assets Treasury Fund $1,390,677 $1,046,958
Daily Assets Government Obligations Fund 200,674 323,986
Daily Assets Government Fund 8,780,761 3,399,548
Daily Assets Cash Fund 2,596,164 6,377,111
</Table>
22
MONARCH FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
August 31, 2004
PROXY VOTING INFORMATION - 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 Web site at HTTP://WWW.SEC.GOV. For the twelve
months ended June 30, 2004, the Funds did not own any securities for which they
could vote.
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 is available on the SEC's
website at HTTP://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
All the income dividends paid by each Fund for the tax year ended August 31,
2004 were ordinary income for federal income tax purposes.
SHAREHOLDER EXPENSE EXAMPLE - As a shareholder of the Fund, you incur ongoing
costs, including management fees, Rule 12b-1 distribution fees for certain share
classes 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, 2004 through August 31, 2004.
ACTUAL EXPENSES - The "Actual Return" rows in the table below provide
information about actual account values and actual expenses. You may use the
information, 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 "Expenses Paid During Period" column to estimate the
expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The "Hypothetical Return" rows in
the table below provide 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.
Expenses shown in the table are meant to highlight your ongoing costs.
Therefore, the "Hypothetical Return" rows in the table are useful in fund
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. Total costs of funds include transactional
costs, such as sales charges and redemption fees, of which the Funds have none.
23
MONARCH FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
August 31, 2004
<Table>
<Caption>
BEGINNING ENDING EXPENSES ANNUAL
ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
MARCH 1, 2004 AUGUST 31, 2004 PERIOD(1) RATIO
------------- --------------- ----------- -------
DAILY ASSETS TREASURY FUND
UNIVERSAL SHARES
Actual Return $1,000.00 $1,004.46 $1.01 0.20%
Hypothetical Return $1,000.00 $1,024.20 $1.02 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,003.20 $2.27 0.45%
Hypothetical Return $1,000.00 $1,022.94 $2.29 0.45%
INVESTOR SHARES
Actual Return $1,000.00 $1,001.25 $4.24 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 $1,004.49 $1.01 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 $1,005.41 $0.61 0.12%
Hypothetical Return $1,000.00 $1,024.60 $0.61 0.12%
UNIVERSAL SHARES
Actual Return $1,000.00 $1,005.08 $1.01 0.20%
Hypothetical Return $1,000.00 $1,024.20 $1.02 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,003.82 $2.27 0.45%
Hypothetical Return $1,000.00 $1,022.94 $2.29 0.45%
INSTITUTIONAL SHARES
Actual Return $1,000.00 $1,003.21 $2.88 0.57%
Hypothetical Return $1,000.00 $1,022.33 $2.91 0.57%
INVESTOR SHARES
Actual Return $1,000.00 $1,001.85 $4.24 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 $1,005.35 $0.61 0.12%
Hypothetical Return $1,000.00 $1,024.60 $0.61 0.12%
UNIVERSAL SHARES
Actual Return $1,000.00 $1,004.95 $1.01 0.20%
Hypothetical Return $1,000.00 $1,024.20 $1.02 0.20%
INSTITUTIONAL SERVICE SHARES
Actual Return $1,000.00 $1,003.69 $2.27 0.45%
Hypothetical Return $1,000.00 $1,022.94 $2.29 0.45%
INSTITUTIONAL SHARES
Actual Return $1,000.00 $1,003.08 $2.88 0.57%
Hypothetical Return $1,000.00 $1,022.33 $2.91 0.57%
INVESTOR SHARES
Actual Return $1,000.00 $1,001.72 $4.24 0.84%
Hypothetical Return $1,000.00 $1,020.97 $4.28 0.84%
</Table>
(1) Equals 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.
24
MONARCH FUNDS
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (UNAUDITED)
August 31, 2004
The Board is responsible for managing the Trust's business affairs and
exercising all the Trust's powers except those reserved for shareholders. The
following tables give information about each Board member and the senior
officers of the Trust. The fund complex includes the Trust and three other
investment companies (collectively, "fund complex"), which hold themselves out
to investors as related companies for purposes of investment and investor
services. Mr. Keffer is considered an Interested Trustee due to his control of
the Adviser. 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. The Funds' Statement of Additional Information includes additional
information about the Trustees and is available, without charge and upon
request, by calling (800) 754-8757.
<Table>
<Caption>
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
POSITION LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, WITH THE TIME DURING OVERSEEN BY HELD BY
AGE AND ADDRESS TRUST SERVED PAST 5 YEARS TRUSTEE TRUSTEE
- ------------------------- ---------- ------------- ------------------------- ------------- -------------
INTERESTED TRUSTEES
John Y. Keffer Trustee 1992-Present* President, Citigroup; 24 None
Born: July 15, 1942 fund services division
since 2003; President,
Forum Financial Group,
LLC ("Forum") (a fund
services company acquired
by Citigroup in 2003).
- -----------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Costas Azariadis Trustee 2003-Present Professor of Economics, 24 None
Born: February 15, 1943 University of
California-Los Angeles;
Visiting Professor of
Economics, Athens
University of Economics
and Business 1998-1999.
James C. Cheng Trustee 2003-Present President, Technology 24 None
Born: July 26, 1942 Marketing Associates
(marketing company for
small and medium sized
businesses in New
England).
J. Michael Parish Chairman 2003-Present Retired; Partner, Wolf, 24 None
Born: November 9, 1943 Trustee (Chairman Block, Schorr and Solis-
since 2004) Cohen LLP (law firm)
2002-2003; Partner,
Thelen Reid & Priest LLP
(law firm) from
1995-2002.
- -----------------------------------------------------------------------------------------------------------------
* Mr. Keffer served as Chairman and Trustee of the Trust's predecessor.
</Table>
25
MONARCH FUNDS
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (UNAUDITED)
August 31, 2004
<Table>
<Caption>
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
POSITION LENGTH OF OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
NAME, WITH THE TIME DURING OVERSEEN BY HELD BY
AGE AND ADDRESS TRUST SERVED PAST 5 YEARS TRUSTEE TRUSTEE
- ------------------------- ---------- ------------- ------------------------- ------------- -------------
OFFICERS
David I. Goldstein President 2003-Present Director, Citigroup since N/A N/A
Born: August 3, 1961 2003; Director Business &
Product Development,
Forum 1999-2003.
Beth P. Hanson Vice 2003-Present Relationship Manager; N/A N/A
Born: July 15, 1966 President/ Citigroup since 2003;
Assistant Relationship Manager,
Secretary Forum 1999-2003.
Stacey E. Hong Treasurer 2002-Present Director, Fund N/A N/A
Born: May 10, 1966 Accounting, Citigroup
since 2003; Director of
Accounting, Forum
1999-2003.
David M. Whitaker Secretary 2004-Present Counsel, Citigroup since N/A N/A
Born: September 6, 1971 2004; Assistant Counsel,
PFPC Inc. (a fund
services company)
1999-2004.
- -----------------------------------------------------------------------------------------------------------------
</Table>
26
FOR MORE INFORMATION MONARCH
FUNDS
DAILY ASSETS
TREASURY FUND
DAILY ASSETS GOVERNMENT
OBLIGATIONS FUND
DAILY ASSETS
GOVERNMENT FUND
DAILY ASSETS CASH FUND
TRANSFER AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, Maine 04101
MONARCH FUNDS
This report is authorized for distribution only to P.O. Box 446
shareholders and to others who have received a Portland, Maine 04112
copy of an applicable Monarch Funds prospectus (800) 754-8757
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, Monarch Funds has adopted a
Code of Ethics as defined in Item 2 of Form N-CSR, which applies to its
President and Treasurer. A copy of the Code of Ethics is filed as an exhibit to
this Form N-CSR.
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 $69,500 in 2003 and $73,500 in 2004.
(b) Audit-Related Fees - The aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit of the Funds' financial
statements and are not reported under paragraph (a) of this Item were $0 in 2003
and $5,032 in 2004.
(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 $26,196 in 2003 and $10,600 in
2004. These services consisted of review or preparation of U.S. federal, state,
and local income and excise tax returns.
(d) Other Fees - There were no other fees billed in the Reporting Periods for
products and services provided to the Registrant by the principal accountant, or
services provided to the investment adviser, other than the services reported
above.
(e) (1) The Registrant's Audit Committee pre-approves all audit and permissible
non-audit services rendered to the Registrant.
(e) (2) 0.00%
(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 $26,196 in 2003 and
$10,600 in 2004. 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
Not applicable.
ITEM 7. PROXY VOTING POLICY FOR CLOSED-END FUNDS
Not applicable.
ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) are effective, based on
their evaluation of these disclosure controls and procedures required by Rule
30a-3(b) as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) that occurred during the
registrant's last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(a) (1) Code of Ethics.
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Exhibit 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 /s/ David I. Goldstein
______________________________
David I. Goldstein, President
Date November 5, 2004
______________________________
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/ David I. Goldstein
______________________________
David I. Goldstein, President
Date November 5, 2004
______________________________
By /s/ Stacey E. Hong
______________________________
Stacey E. Hong, Treasurer
Date November 5, 2004
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