-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KxZrlinlc1uEa/WWrSz0cvY9tG3R9MQdS4ME9nUS4pvfDb75/Tj0pWfWNfGXUI1U Zmn6ya7tfCTE6E6w9KzGlQ== 0001004402-03-000582.txt : 20031110 0001004402-03-000582.hdr.sgml : 20031110 20031110105921 ACCESSION NUMBER: 0001004402-03-000582 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031110 EFFECTIVENESS DATE: 20031110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH FUNDS CENTRAL INDEX KEY: 0000889509 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06742 FILM NUMBER: 03987065 BUSINESS ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101-4049 BUSINESS PHONE: 2078791900 MAIL ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101-4049 N-CSR 1 mo03-205.txt MONARCH FUNDS ANNUAL REPORT As filed with the Securities and Exchange Commission on November 10, 2003 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, 2003 Date of reporting period: AUGUST 31, 2003 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. A copy of the shareholder report(s) transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (the "Act") is included at the end of this Form N-CSR. ITEM 2. CODE OF ETHICS. As of the end of the period, August 31, 2003, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that 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 sufficent for them to perform the services required of Audit Committee members. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. 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 Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR. (b) There were no changes in the registrant's internal control over financial reporting (as defined in rule 30a-3(d) under the Act), or the internal control over financial reporting of its service providers during the last fiscal half year (the registrant's second half year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Code of Ethics (Exhibit filed herewith). (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 filed herewith). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant MONARCH FUNDS ------------- By /S/ STACEY E. HONG, TREASURER ----------------------------- Date NOVEMBER 5, 2003 ---------------- 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, PRESIDENT --------------------------------- Date NOVEMBER 5, 2003 ---------------- By /S/ STACEY E. HONG, TREASURER ----------------------------- Date NOVEMBER 5, 2003 ---------------- MONARCH ANNUAL REPORT FUNDS AUGUST 31, 2003 DAILY ASSETS TREASURY FUND DAILY ASSETS GOVERNMENT OBLIGATIONS FUND DAILY ASSETS GOVERNMENT FUND DAILY ASSETS CASH FUND [IMAGE: GREEK COLISEUM] MONARCH FUNDS - -------------------------------------------------------------------------------- A MESSAGE TO OUR SHAREHOLDERS August 31, 2003 Dear Shareholders: During the past year, the Federal Reserve Bank focused its efforts on moving the economy toward sustained growth. To achieve this, the Fed lowered the Federal Funds rate in November 2002 to 1.25% and again in June 2003 to 1.00%. The Federal government also contributed to the recovery effort with new tax and fiscal policies in an attempt to stimulate job creation and economic growth. Based on this, our portfolio management team extended the average maturities of the Funds' portfolios. The team also increased its scrutiny of issuers to ensure that credit quality did not suffer during this difficult economic period. Based on recent economic data, we anticipate that this period of stable short-term rates will continue through the spring of 2004, at which time we hope that sustained economic growth will begin to put upward pressure on short-term rates. We are pleased to report that Monarch's Daily Assets Government Fund, our oldest fund, continued to exhibit strong performance for the year ended August 31, 2003. For the one- and ten-year periods ended as of that date, the Fund's Universal Shares ranked five out of 148 and one out of 41, respectively, within the Government and Agencies Institutional Funds category tracked by iMoneyNet, Inc. (The Universal Shares seven-day yield as of August 31, 2003 was 0.92%.)* For nearly 11 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. Sincerely, /s/ JOHN Y. KEFFER John Y. Keffer Chairman *PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND INVESTMENT RETURNS WILL FLUCTUATE. AS TRACKED BY IMONEYNET, INC., DAILY ASSETS GOVERNMENT FUND UNIVERSAL SHARES RANKED FIVE OUT OF 150, SIX OUT OF 81, AND ONE OUT OF 41 WITHIN THE GOVERNMENT AND AGENCIES INSTITUTIONAL FUNDS CATEGORY FOR THE ONE- AND TEN-YEAR TOTAL RETURNS AS OF SEPTEMBER 30, 2003, RESPECTIVELY. 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. THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY TO CURRENT SHAREHOLDERS AND TO OTHERS WHO HAVE RECEIVED A COPY OF A MONARCH FUNDS PROSPECTUS. FORUM FUND SERVICES, LLC, DISTRIBUTOR. (10/03) 2 MONARCH FUNDS - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT 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 Cash Fund, respectively) (collectively, the "Funds"), each a series of the Monarch Funds, as of August 31, 2003, 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 generally accepted in the United States of America. 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, 2003 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 Assets Treasury Fund, Daily Assets Government Obligations Fund, Daily Assets Government Fund, and Daily Assets Cash Fund as of August 31, 2003, 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. /s/ KPMG LLP Boston, Massachusetts October 17, 2003 3 MONARCH FUNDS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS - DAILY ASSETS TREASURY FUND AUGUST 31, 2003 FACE SECURITY AMOUNT DESCRIPTION VALUE -------- ------------- ------------- U.S. TREASURY BILLS (A) (73.4%) $ 150,000,000 0.94%, 9/25/03 ................................... $ 149,901,833 25,000,000 0.96%, 11/28/03 .................................. 24,940,722 25,000,000 1.03%, 2/26/04 ................................... 24,872,681 ------------- Total U.S. Treasury Bills 199,715,236 ------------- REPURCHASE AGREEMENTS (24.8%) 35,800,000 Bank of America, 0.90%, 9/2/03, to be repurchased at $35,803,580; collateralized by various U.S. Treasury Obligations ........................ 35,800,000 31,600,000 Bear Stearns & Co., Inc., 0.98%, 9/2/03, to be repurchased at $31,603,441; collateralized by various U.S. Treasury Obligations ........................ 31,600,000 ------------- Total Repurchase Agreements 67,400,000 ------------- SHARES SHORT-TERM INVESTMENT (1.9%) 5,114,000 Dreyfus Treasury Cash Management Fund .................................. 5,114,000 ------------- Total Investments at Amortized Cost* (100.1%) $ 272,229,236 Other Assets and Liabilities, Net (-0.1)% (191,202) ------------- Total Net Assets (100.0%) $ 272,038,034 ============= (A) Yields shown are annualized yields at time of purchase. * Cost for federal income tax purposes is the same as for financial statement purposes. 4 MONARCH FUNDS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT OBLIGATIONS FUND AUGUST 31, 2003 FACE SECURITY AMOUNT DESCRIPTION VALUE -------- ------------- ------------- U.S. GOVERNMENT SECURITIES (97.3%) FEDERAL HOME LOAN BANK - DISCOUNT NOTES (A) (97.3%) $ 4,000,000 0.98%, 9/17/03 ................................... $ 3,998,258 4,000,000 0.86%, 9/24/03 ................................... 3,997,802 3,200,000 0.98%, 10/3/03 ................................... 3,197,227 4,300,000 1.02%, 10/10/03 ................................... 4,295,248 3,400,000 1.04%, 10/29/03 ................................... 3,394,330 4,200,000 1.04%, 11/12/03 ................................... 4,191,264 1,015,000 0.96%, 12/19/03 ................................... 1,012,050 ------------- Total U.S. Government Securities 24,086,179 ------------- SHARES - ------------------ SHORT-TERM INVESTMENT (2.8%) 693,219 Dreyfus Treasury Prime Cash Management Fund .......................................... 693,219 Total Investments at Amortized Cost* (100.1%) $ 24,779,398 Other Assets and Liabilities, Net (-0.1)% (27,349) ------------ Total Net Assets (100.0%) $ 24,752,049 ============ (A) Yields shown are annualized yields at time of purchase. * Cost for federal income tax purposes is the same as for financial statement purposes. 5 MONARCH FUNDS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS - DAILY ASSETS GOVERNMENT FUND AUGUST 31, 2003 FACE SECURITY FACE SECURITY AMOUNT DESCRIPTION VALUE AMOUNT DESCRIPTION VALUE - -------- ------------- ------------- -------- ------------- ------------- U.S. GOVERNMENT SECURITIES (71.9%) SMALL BUSINESS ADMINISTRATION (B) $ 3,053,272 Pool #504769 1.63% 10/25/24 .... 3,053,272 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1,798,739 Pool #505204 1.75% 9/25/25 ..... 1,798,324 DISCOUNT NOTES (A) (52.8%) 1,295,483 Pool #505205 1.81% 9/25/07 ..... 1,295,305 $ 150,000,000 1.06%, 10/29/03 ............. $149,745,042 ------------ 30,000,000 1.07%, 11/26/03 ............. 29,923,317 Total Small Business Administration 64,957,618 ------------ ------------ Total U.S. Government Securities 244,625,977 Total Federal National Mortgage ------------ Association - Discount Notes 179,668,359 ------------ REPURCHASE AGREEMENTS - 26.5% 40,000,000 Bank of America, 0.92%, SMALL BUSINESS ADMINISTRATION (B) (19.1%) 9/2/03, to be repurchased at 93,456 Pool #500536 3.00% 5/25/13 ..... 95,237 $40,004,089; collateralized 24,665 Pool #500730 3.88% 2/25/04 ..... 24,665 by various U.S. Government 337,473 Pool #501077 2.50% 11/25/14 .... 337,473 Agency Securities .............. 40,000,000 624,953 Pool #501308 2.50% 10/25/15 .... 624,953 24,950,000 Bear Stearns & Co., Inc., 1.08%, 1,028,238 Pool #501543 2.38% 7/25/16 ..... 1,028,238 9/2/03, to be repurchased at 153,285 Pool #501690 2.13% 12/25/16 .... 153,284 $24,952,994; collateralized 416,115 Pool #501733 2.00% 2/25/17 ..... 419,422 by various U.S. Government 414,183 Pool #501898 2.25% 7/25/17 ..... 414,183 Agency Securities .............. 24,950,000 534,469 Pool #501989 2.13% 10/25/12 .... 539,258 25,000,000 Citigroup, 1.05%, 9/2/03, to be 2,183,838 Pool #502150 2.00% 2/25/18 ..... 2,197,761 repurchased at $25,005,833; 64,481 Pool #502161 2.00% 2/25/18 ..... 64,481 collateralized by various U.S. 642,633 Pool #502208 2.00% 2/25/18 ..... 645,028 Government Agency Securities ... 25,000,000 144,988 Pool #502306 2.00% 2/25/18 ..... 144,988 ------------ 165,461 Pool #502613 2.00% 4/25/19 ..... 165,461 58,127 Pool #502914 2.00% 3/25/15 ..... 58,547 Total Repurchase Agreements 89,950,000 397,167 Pool #503058 1.88% 7/25/15 ..... 397,167 ------------ 637,507 Pool #503082 1.88% 9/25/20 ..... 637,507 287,013 Pool #503120 1.88% 10/25/20 .... 287,013 SHARES 985,266 Pool #503121 1.88% 9/25/15 ..... 988,779 ------------- 3,399,846 Pool #503152 1.63% 11/25/20 .... 3,399,846 400,738 Pool #503232 1.63% 12/25/15 .... 400,738 SHORT-TERM INVESTMENT (1.4%) 337,906 Pool #503278 1.63% 2/25/21 ..... 337,927 4,800,000 Dreyfus Government Cash 755,995 Pool #503429 1.75% 6/25/16 ..... 757,170 Management Fund ................ 4,800,000 770,836 Pool #503431 1.75% 7/25/21 ..... 771,062 ------------ 1,535,350 Pool #503461 1.75% 9/25/21 ..... 1,536,194 272,687 Pool #503472 1.75% 8/25/21 ..... 272,687 Total Investments at Amortized Cost* (99.8%) $339,375,977 1,504,135 Pool #503553 1.63% 11/25/21 .... 1,505,327 Other Assets and Liabilities, Net (0.2%) 742,189 2,572,103 Pool #503614 1.63% 1/25/22 ..... 2,572,103 ------------ 1,147,319 Pool #503671 1.63% 3/25/22 ..... 1,147,319 Net Assets (100.0%) $340,118,166 1,074,735 Pool #503754 1.63% 5/25/22 ..... 1,075,715 ============ 64,368 Pool #503780 1.63% 3/25/22 ..... 64,423 1,538,018 Pool #503882 1.50% 9/25/22 ..... 1,536,805 (A) Yields shown are annualized yields at time of purchase. 250,706 Pool #503892 1.63% 7/25/22 ..... 250,976 (B) Certain securities are deemed to have a maturity remaining 1,870,244 Pool #503909 1.50% 10/25/22 .... 1,869,590 until the next adjustment of the interest rate, or the 1,252,770 Pool #504015 1.50% 1/25/23 ..... 1,252,583 longer of the demand period or time to the next readjustment. 1,155,703 Pool #504062 1.50% 2/25/23 ..... 1,155,703 The interest rates shown reflect the rate in effect on 1,990,564 Pool #504074 1.50% 2/25/23 ..... 1,990,564 August 31, 2003. 621,820 Pool #504203 1.63% 7/25/13 ..... 622,744 * Cost for federal income tax purposes is the same as for 1,070,756 Pool #504269 1.63% 5/25/15 ..... 1,072,387 financial statement purposes. 455,535 Pool #504345 1.63% 5/25/18 ..... 455,535 13,205,443 Pool #504366 1.38% 2/25/24 ..... 13,173,246 6,061,087 Pool #504719 1.63% 7/25/24 ..... 6,061,087 2,792,462 Pool #504727 1.63% 9/25/24 ..... 2,792,462 3,520,056 Pool #504765 1.63% 10/25/09 .... 3,513,079 ------------ See Notes to Financial Statements. 6 MONARCH FUNDS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS - DAILY ASSETS CASH FUND AUGUST 31, 2003 FACE SECURITY FACE SECURITY AMOUNT DESCRIPTION VALUE AMOUNT DESCRIPTION VALUE - -------- ------------- ------------- -------- ------------- ------------- U.S. GOVERNMENT SECURITIES (15.7%) REPURCHASE AGREEMENTS $ 46,950,000 Bear Stearns & Co., Inc., FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.08%, 9/2/03, to be repurchased DISCOUNT NOTES (A) (15.7%) at $46,955,634; collateralized by $ 50,000,000 1.06%, 10/29/03 ............... $ 49,914,611 various U.S. Government Agency 35,000,000 1.07%, 11/26/03 ............... 34,910,536 Securities .................... 46,950,000 ------------ 40,000,000 Citigroup, 1.05%, 9/2/03, to be repurchased at $40,009,333; Total U.S. Government Securities 84,825,147 collateralized by various U.S. ------------ Government Agency Securities .. 40,000,000 25,000,000 Merrill Lynch, 1.03%, 9/2/03, to COMMERCIAL PAPER (A) (38.8%) be repurchased at $25,002,861; 25,000,000 Edison Asset Securitization collateralized by various U.S. 1.03% 10/7/03 ................. 24,974,250 Government Agency Securities .. 25,000,000 30,000,000 General Electric Capital Corp. ------------ 1.02% 9/10/03 ................. 29,992,350 25,000,000 Goldman Sachs Group, Inc. Total Repurchase Agreements 128,750,000 1.04% 11/26/03 ................ 24,937,889 ------------ 25,000,000 International Lease Finance Corp. 1.05% 10/10/03 ................ 24,971,562 SHARES 25,000,000 Societe Generale, N.A. ------------- 1.02% 11/10/03 ................ 24,950,416 25,000,000 UBS Financial Delaware LLC SHORT-TERM INVESTMENT (0.9%) 1.02% 9/8/03 .................. 24,995,042 4,941,000 Dreyfus Cash Management Fund .. 4,941,000 30,000,000 Westdeutsche Landesbank ------------ 1.20% 9/3/03 .................. 29,998,000 25,000,000 Windmill Funding Corp. Total Investments at Amortized Cost* (100.0%)$540,315,740 1.06% 10/1/03 ................. 24,977,917 Other Assets & Liabilities, Net (0.0%) (44,240) ------------ ------------ Net Assets (100.0%) $540,271,500 Total Commercial Paper 209,797,426 ============ ------------ (A) Yields shown are annualized yields at time of purchase. CORPORATE NOTES (B) (18.0%) (B) Certain securities are deemed to have a maturity remaining 25,000,000 Bear Stearns & Co., Inc. until the next adjustment of the interest rate, or the 1.11% 9/24/03 ................. 25,000,000 longer of the demand period or time to the next readjustment. 20,000,000 CIT Group, Inc. The interest rates shown reflect the rate in effect on August 2.36% 11/25/03 ................ 20,002,167 31, 2003. 22,000,000 CIT Group, Inc. (C) Securities that may be resold to "qualified institutional 2.36% 1/9/04 .................. 22,000,000 buyers" under Rule 144A or securities offered pursuant to 30,000,000 Wells Fargo Bank, N.A. Section 4 (2) of the Securities Act of 1933, as amended. 1.04% 6/17/04 ................. 30,000,000 These securities have been determined to be liquid by the ------------ adviser pursuant to procedures approved by the Board of Trustees. Total Corporate Notes 97,002,167 CDO - Collateralized Debt Obligations ------------ * Cost for federal income tax purposes is the same as for financial statement purposes. ASSET-BACKED SECURITY (B, C) (2.8%) 15,000,000 Grand Central CDO Ltd. 1.26% 9/10/38 ................. 15,000,000 ------------ REPURCHASE AGREEMENTS (23.8%) 16,800,000 Bank of America, 0.92%, 9/2/03, to be repurchased at $16,801,717; collateralized by various U.S. Government Agency Securities .. 16,800,000
See Notes to Financial Statements. 7 MONARCH FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES August 31, 2003 DAILY ASSETS DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS TREASURY OBLIGATIONS GOVERNMENT CASH FUND FUND FUND FUND ---------------- ----------------- ----------------- ----------------- Assets Investments: Securities at amortized cost $ 204,829,236 $ 24,779,398 $ 249,425,977 $ 411,565,740 Repurchase agreements 67,400,000 - 89,950,000 128,750,000 Cash 17,949 601 43,828 27,145 Receivables: Interest 8,859 656 196,303 247,398 Investment securities sold - - 805,190 - Receivable from Administrator - - 11,762 5,773 Prepaid expenses 553 - 13,951 39,398 ---------------- ----------------- ----------------- ----------------- Total Assets 272,256,597 24,780,655 340,447,011 540,635,454 ---------------- ----------------- ----------------- ----------------- Liabilities Payables: Dividends 97,461 18,295 151,457 27,550 Accrued Expenses: Payables to related parties 72,129 308 114,213 281,018 Other expenses 48,973 10,003 63,175 55,386 ---------------- ----------------- ----------------- ----------------- Total Liabilities 218,563 28,606 328,845 363,954 ---------------- ----------------- ----------------- ----------------- Net Assets $ 272,038,034 $ 24,752,049 $ 340,118,166 $ 540,271,500 ================ ================= ================= ================= Components of Net Assets Paid in capital $ 272,028,459 $ 24,766,377 $ 340,148,260 $ 540,282,808 Undistributed (distributions in excess of) net investment income 9,611 9,924 (31,056) - Accumulated net realized gain (loss) (36) (24,252) 962 (11,308) ---------------- ----------------- ----------------- ----------------- Net Assets $ 272,038,034 $ 24,752,049 $ 340,118,166 $ 540,271,500 ================ ================= ================= ================= Net Assets by Class of Shares Preferred Shares $ - $ - $ 11,548,978 $ 2,979,268 Universal Shares 140,137,258 24,752,049 114,172,779 104,841,317 Institutional Service Shares 35,073,929 - 76,273,430 36,875,880 Institutional Shares - - 90,740,227 92,186,258 Investor Shares 96,826,847 - 47,382,752 303,388,777 ---------------- ----------------- ----------------- ----------------- Net Assets $ 272,038,034 $ 24,752,049 $ 340,118,166 $ 540,271,500 ================ ================= ================= ================= Shares of Beneficial Interest for each Class of Shares Preferred Shares - - 11,548,988 2,979,649 Universal Shares 140,141,291 24,766,202 114,212,492 104,859,829 Institutional Service Shares 35,066,468 - 76,273,699 36,881,043 Institutional Shares - - 90,735,364 92,201,625 Investor Shares 96,820,711 - 47,377,729 303,437,345 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. 8 MONARCH FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS Year Ended August 31, 2003 DAILY ASSETS DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS TREASURY OBLIGATIONS GOVERNMENT CASH FUND FUND FUND FUND -------------- -------------- ------------ ----------- Investment Income: Interest income $ 636,712 $ 58,888 $ 1,500,435 $ 1,607,937 Dividend income 15,554 2,114 21,441 18,478 Interest income allocated from Portfolios 1,504,684 302,265 3,153,472 9,758,570 Dividend income allocated from Portfolios 38,162 11,025 127,312 145,498 Allocated Portfolio expenses (149,298) (32,626) (260,771) (736,679) -------------- -------------- ------------ ----------- Total Investment Income 2,045,814 341,666 4,541,889 10,793,804 -------------- -------------- ------------ ----------- Expenses: Investment advisory 23,356 2,976 48,805 48,075 Administration Preferred Shares - - 61,889 7,195 Universal Shares 34,569 14,737 (e) 83,015 64,494 Institutional Service Shares 23,480 (b) 666 (d) 17,377 (c) 8,378 (c) Institutional Shares - - 67,234 129,713 Investor Shares 79,748 151 (d) 41,944 308,532 Service Shares (a) 1,170 - 1,052 3,445 Shareholder services Institutional Service Shares 63,741 (b) 3,327 (d) 31,595 (c) 15,232 (c) Institutional Shares - - 190,158 394,415 Investor Shares 224,717 757 (d) 116,884 896,145 Service Shares (a) 2,659 - 2,390 7,831 Distribution Investor Shares 280,893 454 (d) 146,103 1,120,169 Service Shares (a) 7,977 - 7,171 23,493 Transfer agency Preferred Shares - - 10,919 8,674 Universal Shares 26,167 25,878 (e) 72,921 59,804 Institutional Service Shares 67,156 (b) 11,749 (d) 21,123 (c) 12,350 (c) Institutional Shares - - 205,631 419,712 Investor Shares 250,681 11,122 (d) 130,685 946,866 Service Shares (a) 5,995 - 5,680 10,777 Custody 8,097 744 16,800 16,662 Professional Services 41,775 7,836 53,588 59,618 Accounting 21,778 36,448 28,241 26,174 Trustees' fees and expenses 10,139 1,051 18,993 36,905 Registration 17,942 16,699 13,047 15,953 Miscellaneous 25,218 4,471 39,792 66,380 -------------- -------------- ------------ ----------- Total Expenses 1,217,258 139,066 1,433,037 4,706,992 Expenses reimbursed and fees waived (203,008) (110,041) (279,133) (252,434) -------------- -------------- ------------ ----------- Net Expenses 1,014,250 29,025 1,153,904 4,454,558 -------------- -------------- ------------ ----------- Net Investment Income 1,031,564 312,641 3,387,985 6,339,246 -------------- -------------- ------------ ----------- Net Realized Loss on Investments - - - (5,268) Net Realized Gain (Loss) on Investments Allocated from Portfolios (40) (10) 1,354 (5,698) -------------- -------------- ------------ ----------- Increase in Net Assets from Operations $ 1,031,524 $ 312,631 $ 3,389,339 $ 6,328,280 ============== ============== ============ =========== (a) On February 10, 2003, Service Shares ceased operations. (b) On April 23, 2003, Institutional Shares were renamed Institutional Service Shares. (c) On June 9, 2003, Institutional Service Shares commenced operations. (d) On June 26, 2003, Institutional Service Shares and Investor Shares ceased operations. (e) On July 22, 2003, Institutional Shares were redesignated as Universal Shares.
See Notes to Financial Statements. 9 MONARCH FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Years Ended August 31, 2002 and 2003 DAILY ASSETS DAILY ASSETS TREASURY GOVERNMENT OBLIGATIONS FUND FUND ---------------------------------- ----------------------------------- Year Ended Year Ended Year Ended Year Ended August 31, 2003 August 31, 2002 August 31, 2003 August 31, 2002 --------------- ---------------- ---------------- --------------- Operations Net investment income 1,031,564 2,936,919 312,641 568,254 Net realized gain (loss) on investments - - - - Net realized gain (loss) on investments allocated from Portfolios (40) 54 (10) 1 --------------- ---------------- ---------------- --------------- Increase in Net Assets from Operations 1,031,524 2,936,973 312,631 568,255 --------------- ---------------- ---------------- --------------- Distributions to Shareholders from Net investment income--Preferred Shares - - - - Net investment income--Universal Shares (256,355) (1,830) (308,095) (d) (519,130) Net investment income--Institutional Service Shares (272,364) (b) (679,973) (13,659) (c) (32,621) Net investment income--Institutional Shares - - - - Net investment income--Investor Shares (511,818) (2,143,681) (2,232) (c) (7,273) Net investment income--Service Shares (a) (6,421) (32,467) - - Net realized gain--Preferred Shares - - - - Net realized gain--Universal Shares - (8) - - Net realized gain--Institutional Service Shares - (1,552) - - Net realized gain--Institutional Shares - - - - Net realized gain--Investor Shares - (10,344) - - Net realized gain--Service Shares (a) - (194) - - --------------- ---------------- ---------------- --------------- Total Distributions to Shareholders (1,046,958) (2,870,049) (323,986) (559,024) --------------- ---------------- ---------------- --------------- Capital Share Transactions Sale of shares--Preferred Shares - - - - Sale of shares--Universal Shares 63,758,141 - 23,392,457 (d) 21,608,881 Sale of shares--Institutional Service Shares 788,768,505 (b) 247,836,193 960,790 (c) 5,764,181 Sale of shares--Institutional Shares - - - - Sale of shares--Investor Shares 2,221,411,726 2,499,197,025 517,114 (c) 846,644 Sale of shares--Service Shares (a) 29,717,963 79,307,974 - - Reinvestment of distributions--Preferred Shares - - - - Reinvestment of distributions--Universal Shares 4,620 1,867 3,444 (d) 5,951 Reinvestment of distributions--Institutional Service Shares 106,985 (b) 363,863 13,655 (c) 27,199 Reinvestment of distributions--Institutional Shares - - - - Reinvestment of distributions--Investor Shares 511,763 2,207,085 2,225 (c) 7,380 Reinvestment of distributions--Service Shares (a) 6,421 33,528 - - Redemption of shares--Preferred Shares - - - - Redemption of shares--Universal Shares (60,521,256) - (24,392,971) (d) (24,962,901) Redemption of shares--Institutional Service Shares (781,026,237) (b) (278,699,511) (2,726,685) (c) (6,697,090) Redemption of shares--Institutional Shares - - - - Redemption of shares--Investor Shares (2,258,845,469) (2,600,836,834) (910,051) (c) (891,499) Redemption of shares--Service Shares (a) (32,233,218) (85,980,481) - - 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 - - - Transactions due to reorganization--Investor Shares (Notes 1 and 5) - - - - --------------- ---------------- ---------------- --------------- Increase (Decrease) from Capital Transactions 115,613,733 (136,569,291) (3,140,022) (4,291,254) --------------- ---------------- ---------------- --------------- Increase (Decrease) in Net Assets 115,598,299 (136,502,367) (3,151,377) (4,282,023) --------------- ---------------- ---------------- --------------- Net Assets Beginning of Period 156,439,735 292,942,102 27,903,426 32,185,449 --------------- ---------------- ---------------- --------------- End of Period $ 272,038,034 $ 156,439,735 $ 24,752,049 $ 27,903,426 =============== ================ ================ =============== Undistributed (distributions in excess of) Net Investment Income $ 9,611 $ 24,951 $ 9,924 $ 21,269 --------------- ---------------- ---------------- --------------- (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. 10 MONARCH FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Years Ended August 31, 2002 and 2003 DAILY ASSETS DAILY ASSETS GOVERNMENT CASH FUND FUND ---------------------------------- ---------------------------------- Year Ended Year Ended Year Ended Year Ended August 31, 2003 August 31, 2002 August 31, 2003 August 31, 2002 --------------- ---------------- --------------- ---------------- Operations Net investment income 3,387,985 10,292,103 6,339,246 22,705,475 Net realized gain (loss) on investments (5,268) - Net realized gain (loss) on investments allocated from Portfolios 1,354 16,108 (5,698) 54,031 --------------- ---------------- --------------- ---------------- Increase in Net Assets from Operations 3,389,339 10,308,211 6,328,280 22,759,506 --------------- ---------------- --------------- ---------------- Distributions to Shareholders from Net investment income--Preferred Shares (621,089) (648,015) (151,590) (1,251,211) Net investment income--Universal Shares (1,413,090) (3,085,902) (1,103,415) (936,651) Net investment income--Institutional Service Shares (110,393) (b) - (57,923) (b) - Net investment income--Institutional Shares (880,906) (5,332,274) (1,997,736) (9,675,064) Net investment income--Investor Shares (370,340) (1,017,308) (3,058,136) (10,255,316) Net investment income--Service Shares (a) (3,730) (83,081) (8,311) (186,947) Net realized gain--Preferred Shares - (168) - - Net realized gain--Universal Shares - (1,140) - - Net realized gain--Institutional Service Shares - - - - Net realized gain--Institutional Shares - (1,645) - - Net realized gain--Investor Shares - (818) - - Net realized gain--Service Shares (a) - (19) - - --------------- ---------------- --------------- ---------------- Total Distributions to Shareholders (3,399,548) (10,170,370) (6,377,111) (22,305,189) --------------- ---------------- --------------- ---------------- Capital Share Transactions Sale of shares--Preferred Shares 774,265,384 81,195,742 134,949,972 254,441,042 Sale of shares--Universal Shares 618,388,835 1,512,833,007 545,045,220 190,623,922 Sale of shares--Institutional Service Shares 97,674,061 (b) - 79,389,684 (b) - Sale of shares--Institutional Shares 634,925,725 3,131,770,836 934,006,867 1,418,938,982 Sale of shares--Investor Shares 860,191,768 694,457,809 5,847,733,697 7,051,630,371 Sale of shares--Service Shares (a) 32,275,958 105,103,222 35,906,214 242,162,740 Reinvestment of distributions--Preferred Shares 598,859 647,749 90,085 419,759 Reinvestment of distributions--Universal Shares 1,221,360 2,021,112 904,881 846,923 Reinvestment of distributions--Institutional Service Shares 46,875 (b) - 54,087 (b) - Reinvestment of distributions--Institutional Shares 584,103 4,650,922 1,578,425 8,693,836 Reinvestment of distributions--Investor Shares 370,394 1,036,664 2,870,274 10,443,280 Reinvestment of distributions--Service Shares (a) 3,730 84,252 8,312 190,897 Redemption of shares--Preferred Shares (775,355,933) (69,810,329) (145,153,730) (241,775,419) Redemption of shares--Universal Shares (652,099,960) (1,597,982,455) (530,370,168) (181,885,661) Redemption of shares--Institutional Service Shares (84,691,606) (b) - (72,324,735) (b) - Redemption of shares--Institutional Shares (662,241,985) (3,217,334,657) (1,190,855,020) (1,816,935,824) Redemption of shares--Investor Shares (872,270,125) (698,660,396) (6,194,764,416) (7,207,142,271) Redemption of shares--Service Shares (a) (33,658,096) (109,714,030) (43,608,634) (255,124,020) 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) from Capital Transactions 69,409,474 (159,700,552) (521,056,869) (524,471,443) --------------- ---------------- --------------- ---------------- Increase (Decrease) in Net Assets 69,399,265 (159,562,711) (521,105,700) (524,017,126) --------------- ---------------- --------------- ---------------- Net Assets Beginning of Period 270,218,901 430,281,612 1,061,377,200 1,585,394,326 --------------- ---------------- --------------- ---------------- End of Period $ 339,618,166 $ 270,718,901 $ 540,271,500 $ 1,061,377,200 =============== ================ =============== ================ Undistributed (distributions in excess of) Net Investment Income $ (31,056) $ (31,162) $ - $ - --------------- ---------------- --------------- ----------------
(a) On February 10, 2003, Service Shares ceased operations. (b) On June 9, 2003, Institutional Service Shares commenced operations. See Notes to Financial Statements. 11 MONARCH FUNDS STATEMENTS OF CHANGES IN NET ASSETS DAILY ASSETS DAILY ASSETS TREASURY GOVERNMENT OBLIGATIONS FUND FUND -------------------------------- -------------------------------- Year Ended Year Ended Year Ended Year Ended August 31, 2003 August 31, 2002 August 31, 2003 August 31, 2002 --------------- --------------- --------------- --------------- Share Transactions Sale of shares--Preferred Shares - - - - Sale of shares--Universal Shares 63,758,144 - 23,392,207 (d) 21,608,881 Sale of shares--Institutional Service Shares 788,768,505 (b) 247,836,193 960,024 (c) 5,764,181 Sale of shares--Institutional Shares - - - - Sale of shares--Investor Shares 2,221,411,726 2,499,197,025 516,995 (c) 846,644 Sale of shares--Service Shares (a) 29,717,963 79,307,974 - - Reinvestment of distributions--Preferred Shares - - - - Reinvestment of distributions--Universal Shares 4,621 1,867 3,444 (d) 5,951 Reinvestment of distributions--Institutional Service Shares 106,985 (b) 363,863 13,655 (c) 27,199 Reinvestment of distributions--Institutional Shares - - - - Reinvestment of distributions--Investor Shares 511,763 2,207,085 2,225 (c) 7,380 Reinvestment of distributions--Service Shares (a) 6,421 33,528 - - Redemption of shares--Preferred Shares - - (24,392,203) (d) - Redemption of shares--Universal Shares (60,521,256) - (2,726,685) (c) (24,962,901) Redemption of shares--Institutional Service Shares (781,026,237)(b) (278,699,511) - (6,697,090) Redemption of shares--Institutional Shares - - (910,046) (c) - Redemption of shares--Investor Shares (2,258,845,469) (2,600,836,834) - (891,499) Redemption of shares--Service Shares (a) (32,233,218) (85,980,481) - - 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 - - - Transactions due to reorganization--Investor Shares (Notes 1 and 5) - - - - --------------- -------------- --------------- ------------ Increase (Decrease) in Shares 115,613,737 (136,569,291) (3,140,384) (4,291,254) =============== ============== =============== ============ (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. 12 MONARCH FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Years Ended August 31, 2002 and 2003 DAILY ASSETS DAILY ASSETS GOVERNMENT CASH FUND FUND --------------------------------- --------------------------------- Year Ended Year Ended Year Ended Year Ended August 31, 2003 August 31, 2002 August 31, 2003 August 31, 2002 --------------- --------------- --------------- --------------- Share Transactions Sale of shares--Preferred Shares 774,265,384 81,195,742 134,949,972 254,441,042 Sale of shares--Universal Shares 618,388,835 1,512,833,007 545,045,222 190,623,922 Sale of shares--Institutional Service Shares 97,674,061(b) - 79,389,684(b) - Sale of shares--Institutional Shares 634,925,725 3,131,770,836 934,006,868 1,418,938,982 Sale of shares--Investor Shares 860,191,768 694,457,809 5,847,733,697 7,051,630,371 Sale of shares--Service Shares (a) 32,275,958 105,103,222 35,906,215 242,162,740 Reinvestment of distributions--Preferred Shares 598,859 647,749 90,085 419,759 Reinvestment of distributions--Universal Shares 1,221,360 2,021,112 904,881 846,923 Reinvestment of distributions--Institutional Service Shares 46,875(b) - 54,087(b) - Reinvestment of distributions--Institutional Shares 584,103 4,650,922 1,578,426 8,693,836 Reinvestment of distributions--Investor Shares 370,394 1,036,664 2,870,274 10,443,280 Reinvestment of distributions--Service Shares (a) 3,730 84,252 8,311 190,897 Redemption of shares--Preferred Shares (775,355,933) (69,810,329) (145,153,307) (241,775,419) Redemption of shares--Universal Shares (652,099,960) (1,597,982,455) (530,355,298) (181,885,661) Redemption of shares--Institutional Service Shares (84,691,606)(b) - (72,319,505)(b) - Redemption of shares--Institutional Shares (662,241,985) (3,217,334,657) (1,190,841,943) (1,816,935,824) Redemption of shares--Investor Shares (872,270,125) (698,660,396) (6,194,721,376) (7,207,142,271) Redemption of shares--Service Shares (a) (33,658,096) (109,714,030) (43,608,634) (255,124,020) 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 69,409,412 (159,700,552) (520,979,838) (524,471,443) =============== =============== =============== ===============
(a) On February 10, 2003, Service Shares ceased operations. (b) On June 9, 2003, Institutional Service Shares commenced operations. See Notes to Financial Statements. 13 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 -------------------------------------------------------------------------- Beginning Net Distributions Distributions Ending Net Asset Net Realized from Net from Net Net Asset Value Per Investment Gain on Investment Realized Value Per Total Year Ended August 31, Share Income Investments Income Gains Share Return (g) - ------------------------------------------------------------------------------------------------------------------ DAILY ASSETS TREASURY FUND Universal Shares - ------------------------------------------------------------------------------------------------------------------ 2003 $1.00 $0.01 - $(0.01) - $1.00 1.10% 2002 1.00 0.02 - (d) (0.02) - (d) 1.00 1.82% 2001 1.00 0.05 - (0.05) - 1.00 5.24% 2000 (c) 1.00 0.04 - (0.04) - 1.00 4.02% Institutional Service Shares (e) - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 0.84% 2002 1.00 0.02 - (d) (0.02) - (d) 1.00 1.57% 2001 1.00 0.05 - (0.05) - 1.00 4.92% 2000 1.00 0.05 - (0.05) - 1.00 5.47% 1999 1.00 0.04 - (d) (0.04) - (d) 1.00 4.50% Investor Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 - (d) - - (d) - 1.00 0.45% 2002 1.00 0.01 - (d) (0.01) - (d) 1.00 1.17% 2001 1.00 0.04 - (0.04) - 1.00 4.52% 2000 1.00 0.05 - (0.05) - 1.00 5.06% 1999 1.00 0.04 - (d) (0.04) - (d) 1.00 4.10% DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Universal Shares (f) - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 1.18% 2002 1.00 0.02 - (0.02) - 1.00 1.97% 2001 1.00 0.05 - (0.05) - 1.00 5.26% 2000 1.00 0.06 - (0.06) - 1.00 5.93% 1999 1.00 0.05 - (0.05) - 1.00 4.92%
RATIOS/SUPPLEMENTAL DATA -------------------------------- Ratios to Average Net Assets (a) -------------------------------- Net Assets at Net End of Period Net Investment Gross Year Ended August 31, (000's Omitted) Expenses Income Expenses(b) - -------------------------------------------------------------------------------- DAILY ASSETS TREASURY FUND Universal Shares - -------------------------------------------------------------------------------- 2003 $140,137 0.21% 0.80% 0.37% 2002 105 0.20% 1.81% 8.77% 2001 102 0.20% 6.22% 0.92% 2000 (c) 5,976 0.20% 5.86% 0.38% Institutional Service Shares (e) - -------------------------------------------------------------------------------- 2003 35,074 0.45% 0.84% 0.67% 2002 20,068 0.45% 1.68% 0.62% 2001 50,554 0.45% 4.57% 0.61% 2000 30,480 0.45% 5.30% 0.62% 1999 55,134 0.45% 4.43% 0.62% Investor Shares - -------------------------------------------------------------------------------- 2003 96,827 0.84% 0.45% 0.90% 2002 133,758 0.85% 1.22% 0.87% 2001 233,138 0.84% 4.52% 0.84% 2000 314,305 0.84% 5.01% 0.85% 1999 232,624 0.83% 4.02% 0.89% DAILY ASSETS GOVERNMENT OBLIGATIONS FUND Universal Shares (f) - -------------------------------------------------------------------------------- 2003 24,752 0.20% 1.14% 0.48% 2002 25,760 0.20% 1.97% 0.71% 2001 29,100 0.20% 5.24% 0.57% 2000 39,777 0.20% 5.78% 0.65% 1999 28,709 0.20% 4.81% 0.61% (a) All ratios for periods less than a year are annualized. (b) The ratio of Gross Expenses to Average Net Assets reflects the expense ratio excluding any fee waivers and expense reimbursements for the Fund and its corresponding Portfolio. (c) See Note 1 for dates of commencement of operations. (d) Less than $0.01 per share. (e) On April 23, 2003, Institutional Shares were renamed Institutional Service Shares. (f) On July 22, 2003, Institutional Shares were redesignated as Universal Shares. (g) Not annualized. 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. SELECTED DATA FOR A SINGLE SHARE -------------------------------------------------------------------------- Beginning Net Distributions Distributions Ending Net Asset Net Realized from Net from Net Net Asset Value Per Investment Gain on Investment Realized Value Per Total Year Ended August 31, Share Income Investments Income Gains Share Return - ------------------------------------------------------------------------------------------------------------------ DAILY ASSETS GOVERNMENT FUND Preferred Shares - ------------------------------------------------------------------------------------------------------------------ 2003 $1.00 $0.01 - $(0.01) - $1.00 1.40% 2002 1.00 0.02 - (d) (0.02) - (d) 1.00 2.25% 2001 (c) 1.00 - (d) - - (d) - 1.00 0.22% Universal Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 1.29% 2002 1.00 0.02 - (d) (0.02) - (d) 1.00 2.17% 2001 1.00 0.05 - (0.05) - 1.00 5.34% 2000 1.00 0.06 - (0.06) - 1.00 5.94% 1999 1.00 0.05 - (0.05) - 1.00 5.00% Institutional Service Shares - ------------------------------------------------------------------------------------------------------------------ 2000 (c) 1.00 - (d) - - (d) - 1.00 0.16% Institutional Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 0.91% 2002 1.00 0.02 - (d) (0.02) - (d) 1.00 1.80% 2001 1.00 0.05 - (0.05) - 1.00 4.95% 2000 1.00 0.05 - (0.05) - 1.00 5.54% 1999 1.00 0.05 - (0.05) - 1.00 4.59% Investor Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 0.64% 2002 1.00 0.02 - (d) (0.02) - (d) 1.00 1.52% 2001 1.00 0.05 - (0.05) - 1.00 4.68% 2000 (c) 1.00 0.04 - (0.04) - 1.00 3.68% DAILY ASSETS CASH FUND Preferred Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 1.37% 2002 1.00 0.02 - (0.02) - 1.00 2.21% 2001 (c) 1.00 - (d) - - (d) - 1.00 0.22% Universal Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 1.29% 2002 1.00 0.02 - (0.02) - 1.00 2.12% 2001 1.00 0.05 - (0.05) - 1.00 5.49% 2000 1.00 0.06 - (0.06) - 1.00 6.04% 1999 1.00 0.05 - (0.05) - 1.00 5.09% Institutional Service Shares - ------------------------------------------------------------------------------------------------------------------ 2003 (c) 1.00 - (d) - - (d) - 1.00 0.18% Institutional Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 0.92% 2002 1.00 0.02 - (0.02) - 1.00 1.75% 2001 1.00 0.05 - (0.05) - 1.00 5.11% 2000 1.00 0.06 - (0.06) - 1.00 5.65% 1999 1.00 0.05 - (0.05) - 1.00 4.68% Investor Shares - ------------------------------------------------------------------------------------------------------------------ 2003 1.00 0.01 - (0.01) - 1.00 0.64% 2002 1.00 0.01 - (0.01) - 1.00 1.48% 2001 1.00 0.05 - (0.05) - 1.00 4.85% 2000 1.00 0.05 - (0.05) - 1.00 5.38% 1999 1.00 0.04 - (0.04) - 1.00 4.41%
RATIOS/SUPPLEMENTAL DATA -------------------------------- Ratios to Average Net Assets (a) -------------------------------- Net Assets at Net End of Period Net Investment Gross Year Ended August 31, (000's Omitted) Expenses Income Expenses(b) - -------------------------------------------------------------------------------- DAILY ASSETS GOVERNMENT FUND Preferred Shares - -------------------------------------------------------------------------------- 2003 $11,549 0.11% 1.05% 0.25% 2002 12,041 0.12% 2.19% 0.22% 2001 (c) 8 0.12% 3.64% 97.77% Universal Shares - -------------------------------------------------------------------------------- 2003 114,173 0.20% 1.26% 0.28% 2002 81,426 0.21% 2.17% 0.25% 2001 164,500 0.20% 5.29% 0.23% 2000 225,697 0.20% 5.73% 0.24% 1999 277,549 0.18% 4.88% 0.25% Institutional Service Shares - -------------------------------------------------------------------------------- 2000 (c) 76,273 0.45% 0.70% 0.58% Institutional Shares - -------------------------------------------------------------------------------- 2003 90,740 0.57% 0.92% 0.63% 2002 117,476 0.57% 2.05% 0.59% 2001 198,324 0.57% 4.80% 0.58% 2000 400,418 0.57% 5.41% 0.58% 1999 455,239 0.57% 4.50% 0.59% Investor Shares - -------------------------------------------------------------------------------- 2003 47,383 0.84% 0.63% 0.89% 2002 58,397 0.85% 1.43% 0.85% 2001 61,546 0.84% 4.51% 0.84% 2000 (c) 36,091 0.85% 5.70% 0.97% DAILY ASSETS CASH FUND Preferred Shares - -------------------------------------------------------------------------------- 2003 2,979 0.12% 1.39% 0.30% 2002 13,095 0.12% 1.88% 0.20% 2001 (c) 8 0.12% 3.76% 91.14% Universal Shares - -------------------------------------------------------------------------------- 2003 104,842 0.20% 1.24% 0.28% 2002 46,833 0.21% 2.03% 0.25% 2001 37,236 0.20% 5.68% 0.24% 2000 70,451 0.20% 5.84% 0.23% 1999 98,705 0.18% 4.99% 0.25% Institutional Service Shares - -------------------------------------------------------------------------------- 2003 (c) 36,876 0.45% 0.76% 0.58% Institutional Shares - -------------------------------------------------------------------------------- 2003 92,186 0.57% 1.01% 0.61% 2002 347,469 0.57% 1.84% 0.58% 2001 736,555 0.57% 5.07% 0.57% 2000 863,603 0.58% 5.55% 0.58% 1999 569,409 0.57% 4.56% 0.60% Investor Shares - -------------------------------------------------------------------------------- 2003 303,389 0.84% 0.68% 0.86% 2002 646,285 0.83% 1.51% 0.83% 2001 791,138 0.82% 4.78% 0.82% 2000 994,191 0.83% 5.40% 0.85% 1999 269,421 0.83% 4.30% 0.85% (a) All ratios for periods less than a year are annualized. (b) The ratio of Gross Expenses to Average Net Assets reflects the expense ratio excluding any fee waivers and expense reimbursements for the Fund and its corresponding Portfolio. (c) See Note 1 for dates of commencement of operations. (d) Less than $0.01 per share. (e) Not annualized. See Notes To Financial Statements. 15 MONARCH FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS August 31, 2003 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 merged with Monarch Funds, a Delaware statutory trust on April 23, 2003 and assumed that trust's registration statement under the Act. As a result, on April 23, 2003, three separate series of the Trust were renamed and the Trust reorganized as a Massachusetts business trust. The series were renamed as follows: Treasury Cash Fund became Daily Assets Treasury Fund; Government Cash Fund became Daily Assets Government Fund and Cash Fund became Daily Assets Cash Fund. The Trust currently consists of four diversified investment portfolios listed below (each a "Fund" and collectively the "Funds"). The Funds are authorized under the Trust's Trust Instrument to issue an unlimited number of shares of beneficial interest without par value. The Funds and classes offered as of August 31, 2003, and the dates on which they commenced operations were as follows: 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 Obligations (Universal Shares, Note 5) March 13, 1998 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 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 Obligations 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 of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets during the fiscal period. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Funds: SECURITY VALUATION Generally, each Fund determines its net asset value per share as of 4:00 p.m., Eastern time, on each Fund business day, utilizing the amortized cost method pursuant to Rule 2a-7 under the Act. Under this method, all investments purchased at a discount or premium are valued by accreting or amortizing, respectively, the difference between the original purchase price and the maturity value of the investment over the period to the investment's maturity. 16 MONARCH FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS August 31, 2003 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 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 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 capital gains, as of August 31, 2003, were as follows: Daily Assets Treasury Fund Expiring August 2011 $ 34 Daily Assets Government Obligations Fund Expiring August 2006 19,022 Expiring August 2007 986 Expiring August 2008 3,602 Expiring August 2009 632 Expiring August 2011 2 Daily Assets Cash Fund Expiring August 2010 232 Expiring August 2011 9,421 For tax purposes, the following Funds have current year deferred post-October losses. These losses will be recognized for tax purposes on the first day of the following tax year. The losses were as follows: Daily Assets Government Obligations Fund $ 9 Daily Assets Government Fund 1,101 Daily Assets Cash Fund 1,655 RECLASSIFICATIONS OF CAPITAL ACCOUNTS On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassifications adjustments were made as follows: ACCUMULATED NET ACCUMULATED NET INVESTMENT INCOME REALIZED LOSS PAID-IN-CAPITAL ----------------- --------------- --------------- Daily Assets Treasury Fund $ 54 $ (48) $ (6) Daily Assets Government Fund 11,669 (11,595) (74) Daily Assets Cash Fund 37,865 (38,210) 345 17 MONARCH FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS August 31, 2003 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 of Amercia. 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 ("Forum Advisors") serves as the investment adviser of each Fund. Forum Advisors 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 those 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. Forum Advisors 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. Prior to June 9, 2003, the Funds operated under a master-feeder fund structure through which the Funds sought to achieve their respective investment objectives by investing all of their investable assets in a corresponding series of another investment company. Forum Advisors served as the investment adviser of each Portfolio. Forum Advisors received an advisory fee from the Portfolios (except for Government Portfolio) based on the total average daily net assets of the Portfolios ("Total Portfolio Assets") that was calculated on a cumulative basis at the following annual rates: 0.06% for the first $200 million of Total Portfolio Assets, 0.04% of the next $300 million of Total Portfolio Assets and 0.03% of the remaining Total Portfolio Assets. Forum Advisors received an advisory fee from Government Portfolio at an annual rate of 0.05% of the average daily net assets of the Portfolio. ADMINISTRATOR Forum Administrative Services, LLC ("FAdS") is the administrator of each Fund. For its services, FAdS receives from each Fund a fee at an annual rate of 0.11% of the average daily net assets of each share class. Prior to June 9, 2003, FAdS received from each Fund a fee at the annual rate of 0.06% (0.11% for Service Shares) of the average daily net assets of each share class. TRANSFER AGENT Forum Shareholder Services, LLC ("FSS") is the transfer agent and dividend disbursing agent for the Funds. FSS is paid a fee at an annual rate of 0.20% of the average daily net assets of Institutional Shares, Investor Shares and Service Shares of each Fund, 0.10% of the average daily net assets of Institutional Service Shares of each Fund and 0.05% of the average daily net assets of Universal Shares of each Fund. All share classes, including Preferred Shares, also pay certain account fees and out-of-pocket expenses. In addition, FSS is paid an annual fee of $12,000 per Fund plus $6,000 per class of shares for each class above one. SHAREHOLDER SERVICE AGENT The Trust has adopted a shareholder servicing plan with respect to each of Institutional Service Shares, Institutional Shares and Investor Shares under which the Trust pays FAdS a shareholder servicing fee at the annual rate of 0.20% of the average daily net assets attributable to Institutional Service Shares, Institutional Shares and Investor Shares of each Fund. FAdS may pay any or all amounts of these fees to various institutions that provide shareholder servicing to their customers who hold Institutional Service Shares, Institutional Shares or Investor Shares. Prior to June 9, 2003, FAdS received shareholder servicing fees at the annual rates of 0.20%, 0.20% and 0.25%, respectively, of the average daily net assets attributable to Institutional Shares, Investor Shares and Service Shares of each Fund. DISTRIBUTOR Forum Fund Services, LLC ("FFS"), a registered broker-dealer and a member of the National Association of Securities Dealers, Inc., acts as each Fund's distributor. The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the Act under which the Trust pays FFS a distribution fee at an annual rate of 0.25% of the average daily net assets of Investor Shares of each Fund. FFS may pay any or all amounts of these payments to various institutions that provide distribution or shareholder services for Investor Shares. The plan obligates the Funds AUGUST 31, 2003 18 MONARCH FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS to pay FFS as compensation for FFS's services. Prior to June 9, 2003, FFS received distribution fees at an annual rate of 0.25% and 0.75%, respectively, of the average daily net assets attributable to Investor Shares and Service Shares of each Fund. OTHER SERVICES Forum Accounting Services, LLC ("FAcS") provides accounting services to the Funds. For its accounting services, FAcS receives a monthly base fee per Fund of $3,000, plus $1,000 per month for each additional share class. Forum Trust, LLC (the "Custodian") serves as the Trust's custodian and may employ sub-custodians. For its services, the Custodian receives a fee at an annual rate of 0.0125% of the average daily net assets of each Fund. NOTE 4. WAIVER OF FEES / REIMBURSEMENT OF EXPENSES Forum Advisors, FAdS, FSS, FFS and FAcS voluntarily waived a portion of their fees and FAdS also assumed certain expenses of the Funds. For the period ended August 31, 2003, fees waived and expenses reimbursed for each of the Funds were as follows: DAILY ASSETS DAILY ASSETS GOVERNMENT DAILY ASSETS DAILY ASSETS TREASURY FUND OBLIGATIONS FUND GOVERNMENT FUND CASH FUND ------------- ---------------- --------------- ------------- Forum Advisors $ - $ 2,976 $ - $ - FAdS 168,623 18,936 197,276 194,643 FSS 23,536 48,093 64,634 46,893 FFS 8,871 454 3,827 4,131 FAcS - 32,912 - - Reimbursed Expenses 1,978 6,670 13,396 6,767 --------- -------- --------- --------- Total $ 203,008 $ 110,041 $ 279,133 $ 252,434 ========= ========= ========= =========
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 of corresponding series of 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 its respective Portfolio and began investing directly in investment securities. A summary of shares outstanding and net assets immediately before and after the reorganization is as follows: BEFORE REORGANIZATION AFTER REORGANIZATION --------------------------------------- ------------------------- DAILY ASSETS TREASURY TREASURY DAILY ASSETS TREASURY CASH FUND OBLIGATIONS FUND 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
Shareholders of Institutional Shares and Institutional Service Shares of Daily Assets Treasury Obligations Fund received Universal Shares and Institutional Service Shares, respectively, of Daily Assets Treasury Fund. 19 MONARCH FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS August 31, 2003 BEFORE REORGANIZATION AFTER REORGANIZATION --------------------------------------- ------------------------- DAILY ASSETS DAILY ASSET GOVERNMENT GOVERNMENT GOVERNMENT CASH FUND OBLIGATIONS FUND 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 Shareholders of Institutional Shares and Investor Shares of Daily Assets Government Obligations Fund received Universal Shares and Investor Shares, respectively, of Daily Assets Government Fund. 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
Shareholders of Institutional Shares and Investor Shares of Daily Assets Cash Fund received Universal Shares and Investor Shares, respectively, of Daily Assets Cash Fund. 20 MONARCH FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS August 31, 2003 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 the Institutional Shares class of the Forum Fund. Financial information reported in the financial statements prior to July 23, 2003, reflects the history of the Forum Fund. A summary of shares outstanding and net assets immediately before and after the reorganization is as follows: BEFORE REORGANIZATION AFTER REORGANIZATION ------------------------- ------------------------------ DAILY ASSETS DAILY ASSETS GOVERNMENT GOVERNMENT OBLIGATIONS FUND 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 -
Shareholders of Institutional Shares of Daily Assets Government Fund received Universal Shares of Daily Assets Government Obligations Fund. NOTE 6. DISTRIBUTIONS TO SHAREHOLDERS UNDISTRIBUTED CAPITAL ORDINARY UNDISTRIBUTED AND OTHER INCOME CAPITAL GAIN LOSSES TOTAL ------------- ------------- --------- ----- Daily Assets Treasury Fund $107,070 $ - $ (34) $107,036 Daily Assets Government Obligations Fund 28,218 - (24,244) 3,974 Daily Assets Government Fund 121,798 665 - 122,463 Daily Assets Cash Fund 27,537 - (9,653) 17,884
The tax character of distributions paid during 2003 and 2002 was as follows: ORDINARY INCOME ---------------------------- 2003 2002 ---- ---- Daily Assets Treasury Fund $1,046,958 $ 2,870,049 Daily Assets Government Obligations Fund 323,986 559,024 Daily Assets Government 3,399,548 10,170,370 Daily Assets Cash Fund 6,377,111 22,305,189 21 MONARCH FUNDS - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS (UNAUDITED) August 31, 2003 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 Funds. The address of each person listed is Two Portland Square, Portland, ME 04101. The Fund Complex includes the Trust and three other investment companies for which Forum Financial Group of companies provides services. Each Board member (except for John Y. Keffer), oversees 24 portfolios in the Fund Complex. Mr. Keffer oversees 25 portfolios in the Fund Complex. Mr. Keffer is considered an interested Trustee due to his control of Forum Financial Group, LLC ("Forum") and Forum Advisors. Each Trustee and officer holds office until the person resigns, is removed, or replaced. The Funds' Statement of Additional Information includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-754-8757. INTERESTED TRUSTEE John Y. Keffer Principal Occupations: Member and Director, Forum (a mutual fund services Birth Date: July 15, 1942 holding company); Director, various affiliates of Forum including Forum Fund Chairman Services, LLC (the Trust's underwriter) Other Directorships: Trustee, Forum Began serving: February 2003 Funds; Trustee, Cutler Trust - --------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES Costas Azariadis Principal Occupations: Professor of Economics, University of California-Los Birth Date: February 15, 1943 Angeles; Visiting Professor of Economics, Athens University of Economics and Began serving: February 2003 Business 1998-1999. Other Directorships: Trustee, Forum Funds James C. Cheng Principal Occupation: President, Technology Marketing Associates (marketing Birth Date: July 26, 1942 company for small- and medium-sized businesses in New England). Began serving: February 2003 Other Directorships: Trustee, Forum Funds J. Michael Parish Principal Occupations: Retired Partner, Wolf, Block, Schorr and Solis-Cohen Birth Date: November 9, 1943 LLP (law firm) 2002 - 2003; Partner, Thelen Reid & Priest LLP (law firm) Began serving: February 2003 from 1995 - 2002. Other Directorships: Trustee, Forum Funds - --------------------------------------------------------------------------------------------------------------- OFFICERS David I. Goldstein Principal Occupations: Director of Business Development, Forum since 2000; Birth Date: August 3, 1961 Secretary of Forum and its various affiliates including Forum Fund Services, President LLC Previous Position: Managing Director and General Counsel, Forum from 1991 to 2000 Beth P. Hanson Principal Occupation: Senior Manager, Relationship Management and various Birth Date: July 15, 1966 other positions prior thereto; Vice President/Assistant Secretary of one Vice President and Assistant other investment company within the Fund Complex, Forum since 1995 Secretary Stacey E. Hong Principal Occupation: Director, Forum Accounting Services, LLC (mutual fund Birth Date: May 10, 1966 accountant) since 1992 Treasurer Leslie K. Klenk Principal Occupation: Counsel, Forum since 1998 Birth Date: August 24, 1964 Secretary - ---------------------------------------------------------------------------------------------------------------
22 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 DISTRIBUTOR Forum Fund Services LLC Two Portland Square Portland, Maine 04101 MONARCH FUNDS P.O. Box 446 This report is authorized for distribution only to Portland, Maine 04112 shareholders and to others who have received a (800) 754-8757 copy of an applicable Monarch Funds prospectus.
EX-31 3 cert302.txt CERT 302 I, David I. Goldstein, certify that: 1. I have reviewed this report on Form N-CSR of Monarch Funds (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) NA c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: NOVEMBER 5, 2003 ---------------- /S/ DAVID I. GOLDSTEIN - ---------------------- TITLE: PRESIDENT - ----------------- I, Stacey E. Hong, certify that: 1. I have reviewed this report on Form N-CSR of Monarch Funds (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being; b) NA c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second half-year in the case of an annual report) that has 2 materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: NOVEMBER 5, 2003 ---------------- /S/ STACEY E. HONG - ------------------ TITLE: TREASURER - ----------------- 3 EX-32 4 cert906.txt CERT 906 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) In connection with the attached Report of Monarch Funds (the "Trust") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the Trust does hereby certify that, to the best of such officer's knowledge: 1. The Report fully complies with the requirements of 13(a) or 15(d) of the Securities and Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust as of, and for, the periods presented in the Report. Dated: NOVEMBER 5, 2003 ---------------- /S/ DAVID I. GOLDSTEIN - ---------------------- Title: President Dated: NOVEMBER 5, 2003 ---------------- /s/ STACEY E. HONG - ------------------ Title: Treasurer A signed original of this written statement required by Section 906 has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request. EX-99 5 coe.txt CODE OF ETHICS FORUM FUNDS MONARCH FUNDS CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE, FINANCIAL AND ACCOUNTING OFFICERS SECTION 1: COVERED OFFICER/PURPOSE OF THE CODE This Code of Ethics ("CODE") has been adopted by Forum Funds and Monarch Funds (each a "TRUST") pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (the "Act"). This Code applies to the prinicipal executive, financial, and accounting officers of each Trust (each a "COVERED OFFICER," as identified in ATTACHMENT A). This Code has been adopted for the purpose of promoting: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Trust; (iii)compliance with applicable laws and governmental rules and regulations; (iv) the prompt internal reporting of violations of the Code to the appropriate person or persons identified in the Code; and (v) accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to conflicts of interest. SECTION 2: A COVERED OFFICER SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, a Trust. For example, a conflict of interest would arise if a Covered Officer, or a member of the Covered Officer's family, receives improper personal benefits as a result of the Covered Officer's position with a Trust. Certain conflicts of interest arise out of the relationships between a Covered Officer and a Trust and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (including the regulations thereunder, the "1940 ACT"), and the Investment Advisers Act of 1940, as amended (including the regulations thereunder, the "ADVISERS ACT"). For example, a Covered Officer may not engage in certain transactions (such as the purchase or sale of portfolio securities or other property) with a Trust because of his/her status as an "affiliated person" of the Trust. The compliance programs and procedures of a Trust and its investment adviser(s) (the "ADVISER(S)") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. See also Section V of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Trust and its Adviser(s) or the Trust's adminstrator or fund accounting agent ("OTHER SERVICE PROVIDERS"), of which a Covered Officer is also an officer or employee. As a result, this Code recognizes that a Covered Officer will, in the normal course of his/her duties (whether for a Trust or for its Adviser(s) or other service providers, or for any of them), be involved in establishing policies and implementing decisions that will have different effects on the Trust, its Adviser(s) and other service providers. The participation of a Covered Officer in such activities is inherent in the contractual relationships between a Trust and its Adviser(s) and such other service providers and is consistent with the performance by the Covered Officer of his/her duties as an officer of the Trust. Thus, if performed in conformity with the provisions of the 1940 Act and the Advisers Act, such activities will be deemed to have been handled ethically. In addition, a Trust's Board of Trustees ("BOARD") recognizes that a Covered Officer may also be an officer or employee of one or more other investment companies covered by this or other codes and that such service, by itself, does not give rise to a conflict of interest. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not the subject of provisions of the 1940 Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but a Covered Officer should keep in mind that these examples are not exhaustive. The overreaching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Trust. * * * * A Covered Officer must not: (i) use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; (ii) cause the Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Trust; or (iii)retaliate against any other Covered Officer or any employee of the Trust or their service providers for reports of potential violations that are made in good faith. There are some conflict of interest situations that should always be approved by a Trust's President (or, with respect to activities of the President, by the chairman of the Trust's audit committee ("COMMITTEE")). These conflict of interest situations are listed below: (i) service on the board of directors or governing board of a publicly traded entity; -2- (ii) the receipt of any non-nominal gifts from persons or entities who have or are seeking business relationships with a Trust; (iii)the receipt of any entertainment from any company with which the Trust has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; (iv) any ownership interest in, or any consulting or employment relationship with, any entities doing business with the Trust, other than its Adviser(s) or another service provider or their respective affiliates. This restriction shall not apply to or otherwise limit the ownership of publicly traded securities so long as a Covered Person's ownership does not exceed more than 2% of the outstanding securities of the relevant class. (v) a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment with a Trust's Adviser(s), the Trust's principal underwriter or their respective affiliates. This restriction shall not apply to or otherwise limit (i) the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the particular class of security outstanding or (ii) the receipt by a Trust's Adviser(s) or an affiliate of research or other benefits in exchange for "soft dollars." SECTION 3. DISCLOSURE AND COMPLIANCE (i) A Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to a Trust; (ii) a Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Trust to others, whether within or outside the Trust, including to the Trust's Board and auditors, and to governmental regulators and self-regulatory organizations; (iii)a Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Trust and its Adviser(s) and, as applicable, other service providers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trust files with, or submit to, the SEC and in other public communications made by the Trust; and (iv) it is the responsibility of a Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. -3- SECTION 4: REPORTING AND ACCOUNTABILITY A Covered Officer must: (i) upon adoption of this Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to a Trust that he or she has received, read and understands the Code; (ii) annually thereafter affirm to the Trust that he or she has complied with the requirements of the Code; (iii)provide full and fair responses to all questions asked in the Trust's periodic Trustee and Officer Questionnaire as well as with respect to any supplemental request for information; and (iv) notify the Trust's President promptly if he or she knows of any violation of this Code (with respect to violations by the President, the Covered Officer shall report to the chairman of the Committee). Failure to do so is itself a violation of this Code. A Trust's President is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by a Trust's President will be considered by the audit committee (the "COMMITTEE"). A Trust will follow these procedures in investigating and enforcing this Code (in the case of a suspected violation of this Code by its President, the actions specified below to be taken by the President will instead be the responsibility of the chairman of the Committee): (i) the Trust's President will take all appropriate action to investigate any potential violations reported to him, which may include the use of internal or external counsel, accountants or other personnel; (ii) if, after such investigation, the President believes that no violation has occurred, the President is not required to take any further action; (iii)any matter that the President believes is a violation will be reported to the Committee; (iv) if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Trust's Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Trust's Adviser(s) or its board; or a recommendation to dismiss the Covered Officer; (v) the Committee will be authorized to grant waivers, as it deems appropriate; and -4- (vi) any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. SECTION 5: OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by a Trust for purposes of the Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of a Trust or its Adviser(s) or other service providers govern or purport to govern the behavior or activities of a Covered Officer who is subject to this Code, they are superseded by this Code to the extent that they conflict with the provisions of this Code. A Trust and its Adviser(s) and service providers' codes of ethics under Rule 17j-1 under the 1940 Act and its Adviser(s) and other service providers' more detailed compliance policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code. SECTION 6: AMENDMENTS Any amendments to this Code must be approved or ratified by a majority vote of each Trust Board, including a majority of each Board's independent trustees. SECTION 7: CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone except as authorized by a Trust's Board. SECTION 8: INTERNAL USE The Code is intended solely for the internal use by a Trust and does not constitute an admission, by or on behalf of the Trust, as to any fact, circumstance or legal conclusion. As adopted August 28, 2003 -5- ATTACHMENT A PERSONS COVERED BY THIS CODE OF ETHICS - ---------------------------- -------------------------- --------------------------- ------------------------- PRINCIPAL EXECUTIVE PRINCIPAL FINANCIAL PRINCIPAL ACCOUNTING TRUST OFFICER OFFICER OFFICER - ---------------------------- -------------------------- --------------------------- ------------------------- Forum Funds David I. Goldstein Stacey E. Hong N/A - ---------------------------- -------------------------- --------------------------- ------------------------- Monarch Funds David I. Goldstein Stacey E. Hong N/A - ---------------------------- -------------------------- --------------------------- -------------------------
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