<PAGE>
As filed with the Securities and Exchange Commission
on October 1, 1996
Securities Act File No. 33-20658
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 20 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 21 /X/
(Check appropriate box or boxes)
EMERALD FUNDS
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219-3035
---------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 614-470-8000
Jeffrey A. Dalke, Esquire
DRINKER BIDDLE & REATH
PNB Building
1345 Chestnut Street
Philadelphia, PA 19107
---------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
_________________________
The Registrant has previously filed a declaration of indefinite
registration of its shares of beneficial interest, $.001 par value per
share, of all classes of the Registrant, now existing or hereafter
created, under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended. Registrant's Rule 24f-2
Notice with respect to the Prime Fund, Treasury Fund, Tax-Exempt Fund,
Treasury Trust Fund, Prime Trust Fund, Equity Fund, Small Capitalization
Fund, Balanced Fund, Short-Term Fixed Income Fund, U.S. Government
Securities Fund, Managed Bond Fund and Florida Tax-Exempt Fund for the
fiscal year ended November 30, 1995 was filed on January 29, 1996.
<PAGE>
REGISTRANT IS FILING THIS POST-EFFECTIVE AMENDMENT TO REFLECT A CHANGE IN THE
INVESTMENT ADVISORY ARRANGEMENTS FOR THE PRIME TRUST AND TREASURY TRUST FUNDS,
AS WELL AS CERTAIN OTHER CHANGES RELATING TO THESE FUNDS. THEREFORE THE
CURRENTLY EFFECTIVE PROSPECTUSES FOR REGISTRANT'S EQUITY, EQUITY VALUE,
INTERNATIONAL EQUITY, SMALL CAPITALIZATION, BALANCED, SHORT-TERM FIXED INCOME,
U.S. GOVERNMENT SECURITIES, MANAGED BOND, FLORIDA TAX-EXEMPT, PRIME, TREASURY
AND TAX-EXEMPT FUNDS ARE NOT INCLUDED.
<PAGE>
EMERALD FUNDS
(Prime Trust Fund and Treasury Trust Fund)
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Prospectus Heading
------------------
<S> <C>
1. Cover Page. . . . . . . . Cover Page
2. Synopsis. . . . . . . . . Summary of Expenses and
Financial Information -
Expenses
3. Condensed Financial Summary of Expenses and
Information . . . . . . Financial Information -
Financial Highlights; The
Business of the Funds -
Measuring Performance
4. General Description of Cover Page; Risk Factors,
Registrant. . . . . . . Investment Principles and
Policies; Your Emerald Fund
Account - The Emerald Family
of Funds;
5. Management of the Investing in Emerald Funds -
Fund. . . . . . . . . . Your Money Manager; Investing
in Emerald Funds - Other
Service Providers; The
Business of the Funds - Fund
Management
5A. Management's Discussion Summary of Expenses and
of Fund Performance . . Financial Information -
Financial Highlights
6. Capital Stock and Other Your Emerald Fund Account -
Securities. . . . . . . The Emerald Family of Funds;
Investing in Emerald Funds -
If You Have Questions;
Investing in Emerald Funds -
How to Buy Shares; Investing
in Emerald Funds - How to Sell
Shares; Investing in Emerald
Funds - Transaction Rules;
Investing in Emerald Funds -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Prospectus Heading
------------------
<S> <C>
Getting Your Investment
Started; Your Emerald Fund
Account - Dividends and
Distributions; The Business of
the Funds - Tax Implications;
Risk Factors, Investment
Principles and Policies
7. Purchase of Securities Investing in Emerald Funds -
Being Offered . . . . . Getting Your Investment
Started; Investing in Emerald
Funds - How to Buy Shares;
Investing in Emerald Funds -
Transaction Rules; Your
Emerald Fund Account -
Distribution and Service
Arrangements; Your Emerald
Fund Account - Shareholder
Services;
8. Redemption or Investing in Emerald Funds -
Repurchase. . . . . . . How to Sell Shares; Investing
in Emerald Funds - Transaction
Rules
9. Pending Legal Not applicable (All
Proceedings . . . . . . Portfolios)
</TABLE>
-2-
<PAGE>
EMERALD MONEY MARKETS FOR INSTITUTIONS
TREASURY TRUST FUND
PRIME TRUST FUND
INVESTMENT PORTFOLIOS OFFERED
BY EMERALD FUNDS
P R O S P E C T U S
DECEMBER 1, 1996
EMERALD
FUNDS
<PAGE>
EMERALD FUNDS
Prospectus for Treasury Trust and Prime Trust Funds
This Prospectus relates to the Treasury Trust and Prime Trust Funds (the
"Funds"), two separate short-term money market funds that are designed to meet
the cash management needs of qualified institutional investors. Each Fund seeks
to provide a high level of current income, consistent with liquidity, the
preservation of capital and a stable net asset value.
Barnett Capital Advisors, Inc. (the "Adviser") serves as the Funds'
investment adviser. The Funds' shares are sold by Emerald Asset Management,
Inc.without any purchase or redemption charge imposed by the Funds, although
Barnett Bank, N.A. and other institutions may charge their customer accounts for
services provided in connection with investments in the Funds.
This Prospectus describes concisely the information about the Funds that you
should consider before investing. Please read and keep it for future reference.
More information about the Funds is contained in a Statement of Additional
Information dated December 1, 1996 that has been filed with the Securities and
Exchange Commission. The Statement of Additional Information can be obtained
free upon request by calling 1-800-637-3759, and is incorporated by reference
into (considered a part of) the Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FUND SHARES ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BARNETT BANK, N.A. OR ANY OF ITS AFFILIATES, AND ARE NOT FEDERALLY
INSURED BY, GUARANTEED BY OR OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY. WHILE EACH FUND ATTEMPTS TO MAINTAIN A NET ASSET VALUE OF $1.00 PER
SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO ON A CONTINUOUS
BASIS. INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. IN ADDITION, THE DIVIDENDS PAID BY A FUND WILL GO UP AND
DOWN.
OHIO INVESTOR NOTICE: EACH FUND MAY INVEST MORE THAN 15% OF ITS TOTAL ASSETS
IN SECURITIES ISSUED UNDER RULE 144A WHICH ARE RESTRICTED AS TO DISPOSITION AND
SECURITIES OF UNSEASONED ISSUERS WHICH, TOGETHER WITH THEIR PREDECESSORS, HAVE A
RECORD OF LESS THAN THREE YEARS CONTINUOUS OPERATION.
December 1, 1996
<PAGE>
SUMMARY OF EXPENSES AND FINANCIAL INFORMATION
EXPENSES
ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and include
fees for portfolio management, maintenance of shareholder accounts, general fund
administration, accounting and other services.
Below is information regarding the Funds' operating expenses for shares of
the Prime Trust and Treasury Trust Funds. Examples based on this information are
also provided.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE REIMBURSEMENTS TREASURY PRIME TRUST
(as a percentage of average net assets) TRUST FUND FUND
------------- -----------
<S> <C> <C>
Advisory Fees............................................... 0.10% 0.10%
12b-1 Fees.................................................. 0.00% 0.00%
Shareholder Service Fees.................................... 0.00% 0.00%
All Other Expenses (After Expense Reimbursements)........... 0.10% 0.10%
------ -----------
Total Fund Operating Expenses (After Expense
Reimbursements)............................................ 0.20% 0.20%
------ -----------
------ -----------
EXAMPLE: Let's say, hypothetically, that the annual net return on each Fund is 5%, and
that the Funds' operating expenses are as described above. For every $1,000 you
invested in a particular Fund, after the periods shown below, you would have paid this
much in expenses during such periods:
</TABLE>
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
----- ----- ----- -----
<S> <C> <C> <C> <C>
Treasury Trust Fund..................... $ 2 $ 6 $ 11 $ 26
Prime Trust Fund........................ $ 2 $ 6 $ 11 $ 26
</TABLE>
- ------------------------
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
This expense information is provided to help you understand the expenses you
would bear indirectly as a shareholder of one of the Funds. The operating
expenses for the Funds have been restated using the current fees and operating
expenses that would have been applicable had they been in effect during the last
fiscal year. Without voluntary expense reimbursements, the total operating
expenses of the Treasury Trust Fund and Prime Trust Fund would be 0.33% and
0.33%, respectively.
See "Management of Emerald Funds" in this Prospectus and the financial
statements and related notes in the Statement of Additional Information for a
further description of the Funds' operating, expenses. You should note that any
fees that are charged by Barnett Bank, N.A., its affiliates or any other
institutions directly to their customer accounts for services related to an
investment in the Funds are in addition to and not reflected in the fees and
expenses described above.
2
<PAGE>
FINANCIAL HIGHLIGHTS
EXCEPT AS NOTED BELOW, THE FOLLOWING FINANCIAL HIGHLIGHTS HAVE BEEN AUDITED
BY PRICE WATERHOUSE LLP, EMERALD FUNDS' INDEPENDENT ACCOUNTANTS, WHOSE
UNQUALIFIED REPORT ON THE FINANCIAL STATEMENTS CONTAINING SUCH INFORMATION FOR
THE FIVE YEARS IN THE PERIOD ENDED NOVEMBER 30, 1995 IS INCORPORATED BY
REFERENCE INTO THE STATEMENT OF ADDITIONAL INFORMATION (WHICH CAN BE OBTAINED
FREE OF CHARGE BY CALLING 800/637-3759). THE FINANCIAL HIGHLIGHTS SHOULD BE READ
ALONG WITH THE FINANCIAL STATEMENTS AND RELATED NOTES. FURTHER INFORMATION ABOUT
EACH FUND'S PERFORMANCE IS CONTAINED IN THE FUNDS' ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1995, WHICH MAY BE OBTAINED WITHOUT
CHARGE FROM THE DISTRIBUTOR. DURING THE PERIODS SHOWN THE FUNDS RECEIVED
SUB-ADVISORY SERVICES FROM COMPANIES THAT WERE NOT AFFILIATED WITH THE ADVISER.
ON DECEMBER 1, 1996, THE ADVISER ASSUMED RESPONSIBILITY FOR THE SERVICES
PREVIOUSLY PROVIDED BY THESE SUB-ADVISERS.
Financial highlights for a Share of the Treasury Trust Fund outstanding
throughout each of the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED
MONTHS ENDED ----------------------------------------------------------
5/31/96 NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $1.0000 $1.0015 $0.9999 $0.9999 $1.0000
-------------- ------------- ------------- ------------- -------------
Income from investment operations:
Net investment income.................... 0.0251 0.0551 $ 0.0367 0.0292 0.0367
Net realized gains (losses) on
securities.............................. (0.0003 ) (0.0006 ) 0.0016 0.0000 (0.0001 )
-------------- ------------- ------------- ------------- -------------
Total income from investment operations.... 0.0248 0.0545 0.0383 0.0292 0.0366
Less dividends and distributions:
Dividends from net investment income..... (0.0251 ) (0.0551 ) (0.0367 ) (0.0292 ) (0.0367 )
Distributions from net realized gains on
securities.............................. (0.0001 ) (0.0009 ) (0.0000 ) (0.0000 ) (0.0000 )
-------------- ------------- ------------- ------------- -------------
Total dividends and distributions.......... (0.0252 ) (0.0560 ) (0.0367 ) (0.0292 ) (0.0367 )
-------------- ------------- ------------- ------------- -------------
Net change in net asset value.............. (0.0004 ) (0.0015 ) 0.0016 0.0000 (0.0001 )
-------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD............. $0.9996 $1.0000 $1.0015 $0.9999 $0.9999
-------------- ------------- ------------- ------------- -------------
-------------- ------------- ------------- ------------- -------------
Total return............................... 2.55 % 5.74 % 3.73 % 2.96 % 3.74 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s)......... $ 138,134 $ 132,850 $ 126,771 $ 166,410 $ 183,072
Ratio of expenses to average net assets.. 0.38 % 0.40 % 0.40 % 0.40 % 0.40 %
Ratio of net investment income to average
net assets.............................. 5.05 % 5.54 % 3.61 % 2.92 % 3.72 %
Ratio of expenses to average net
assets**................................ 0.38 % 0.45 % 0.44 % 0.42 % 0.40 %
Ratio of net investment income to average
net assets**............................ 5.05 % 5.50 % 3.57 % 2.90 % 3.72 %
<CAPTION>
PERIOD ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1991 1990 1989*
------------- ------------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $1.0000 $1.0000 $1.0000
------------- ------------- -------------
Income from investment operations:
Net investment income.................... 0.0598 0.0777 0.0849
Net realized gains (losses) on
securities.............................. 0.0000 0.0000 0.0000
------------- ------------- -------------
Total income from investment operations.... 0.0598 0.0777 0.0849
Less dividends and distributions:
Dividends from net investment income..... (0.0598 ) (0.0777 ) (0.0849 )
Distributions from net realized gains on
securities.............................. (0.0000 ) (0.0000 ) (0.0000 )
------------- ------------- -------------
Total dividends and distributions.......... (0.0598 ) (0.0777 ) (0.0849 )
------------- ------------- -------------
Net change in net asset value.............. 0.0000 0.0000 0.0000
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD............. $1.0000 $1.0000 $1.0000
------------- ------------- -------------
------------- ------------- -------------
Total return............................... 6.15 % 8.05 % 8.83 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s)......... $ 184,420 $ 215,948 $ 236,411
Ratio of expenses to average net assets.. 0.39 % 0.38 % 0.39 %+
Ratio of net investment income to average
net assets.............................. 6.00 % 7.77 % 8.63 %
Ratio of expenses to average net
assets**................................ 0.39 % 0.39 % 0.04 %
Ratio of net investment income to average
net assets**............................ 6.00 % 7.76 % 8.59 %
</TABLE>
- ----------------------------------
* For the period December 7, 1988 (commencement of operations) through
November 30, 1989.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
3
<PAGE>
FINANCIAL HIGHLIGHTS
Financial highlights for a Share of Prime Trust Fund outstanding throughout
each of the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED
MONTHS ENDED ------------------------------------------------------------------------
5/31/96 NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992+++ 1991
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $0.9999 $0.9999 $1.0000 $1.0017 $1.0000 $1.0000
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income.................... 0.0258 0.0561 0.0377 0.0304 0.0392 0.0637
Net realized gains (losses) on
securities.............................. 0.0000 0.0000 (0.0038) 0.0005*** 0.0017 0.0000
------------ ------------ ------------ ------------ ------------ ------------
Total income from investment operations.... 0.0258 0.0561 0.0339 0.0309 0.0409 0.0637
------------ ------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment income..... (0.0258) (0.0561) (0.0377) (0.0304) (0.0392) (0.0637)
Distributions from net realized gains on
securities.............................. (0.0000) (0.0000) (0.0000) (0.0022) (0.0000) (0.0000)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and distributions.......... (0.0258) (0.0561) (0.0377) (0.0326) (0.0392) (0.0637)
------------ ------------ ------------ ------------ ------------ ------------
Increase due to voluntary capital
contribution from sub-adviser........... 0.0000 (0.0000) (0.0001) 0.0000 (0.0000) 0.0000
------------ ------------ ------------ ------------ ------------ ------------
Net change in net asset value.............. 0.0000 (0.0001) (0.0001) (0.0017) 0.0017 0.0000
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD............. $0.9999 $0.9999 $0.9999 $1.0000 $1.0017 $1.0000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return............................... 2.61%++ 5.76% 3.83% 3.31% 4.00% 6.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s)......... $145,746 $131,089 $131,758 $111,769 $99,192 $89,777
Ratio of expenses to average net assets.. 0.38% 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to average
net assets.............................. 5.21% 5.60% 3.80% 3.03% 3.89% 6.34%
Ratio of expenses to average net
assets**................................ 0.38% 0.46% 0.44% 0.44% 0.46% 0.46%
Ratio of net investment income to average
net assets**............................ 5.21% 5.54% 3.76% 3.00% 3.83% 6.28%
<CAPTION>
PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1990 1989*
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $1.0000 $1.0000
------------ ------------
Income from investment operations:
Net investment income.................... 0.0800 0.0888
Net realized gains (losses) on
securities.............................. 0.0000 0.0000
------------ ------------
Total income from investment operations.... 0.0800 0.0888
------------ ------------
Less dividends and distributions:
Dividends from net investment income..... (0.0800) (0.0888)
Distributions from net realized gains on
securities.............................. (0.0000) (0.0000)
------------ ------------
Total dividends and distributions.......... (0.0800) (0.0888)
------------ ------------
Increase due to voluntary capital
contribution from sub-adviser........... 0.0000 0.0000
------------ ------------
Net change in net asset value.............. 0.0000 0.0000
------------ ------------
NET ASSET VALUE, END OF PERIOD............. $1.0000 $1.0000
------------ ------------
------------ ------------
Total return............................... 8.31% 9.25%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s)......... $78,363 $70,298
Ratio of expenses to average net assets.. 0.38% 0.36%
Ratio of net investment income to average
net assets.............................. 8.00% 8.99%
Ratio of expenses to average net
assets**................................ 0.47% 0.54%
Ratio of net investment income to average
net assets**............................ 7.91% 8.81%
</TABLE>
- ----------------------------------
* For the period December 7, 1988 (commencement of operations) through
November 30, 1989.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
*** Net realized gain per share is the direct result of a decrease in
outstanding shares between 11/30/92 and the date of the gain distribution.
+ Annualized.
++ Not Annualized.
4
<PAGE>
INVESTMENT PRINCIPLES AND POLICIES
The Adviser uses a range of different investments and investment techniques
in seeking to achieve each Fund's investment objective. The Adviser will use its
best efforts to achieve a Fund's investment objective, although its achievement
cannot be assured.
Each Fund invests only in U.S. dollar-denominated securities that mature in
thirteen months or less (with certain exceptions). The dollar-weighted average
portfolio maturity of each Fund may not exceed ninety days.
Instruments acquired by the Funds will be U.S. Government securities or
other "First Tier Securities" as described below. The term "First Tier
Securities" has a technical definition given by the Securities and Exchange
Commission, but generally refers to securities that, in the Adviser's view,
present minimal credit risks and have the highest short-term debt rating at the
time of purchase by one (if rated by only one) or more Nationally Recognized
Statistical Rating Organizations ("NRSROs"). A description of applicable ratings
is attached to the Statement of Additional Information as Appendix A. Unrated
instruments (including instruments with long-term but no short-term ratings)
will be of comparable quality as determined by the Adviser under guidelines
approved by the Board of Trustees .
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of both the Prime Trust and the Treasury Trust
Funds is to seek to provide a high level of current income consistent with
liquidity, the preservation of capital and a stable net asset value. The Prime
Trust Fund pursues its objective by investing in a broad range of short-term
government, bank and corporate obligations. The Treasury Trust Fund seeks to
achieve its objective by investing in obligations that the U.S. Treasury has
issued or to which the U.S. Government has pledged its full faith and credit to
guarantee the payment of principal and interest. You should note, however, that
shares of the Treasury Trust Fund are not themselves issued or guaranteed by the
U.S. Treasury or any of its agencies. U.S. Treasury obligations include Treasury
bills, certain Treasury strips, certificates of indebtedness, notes and bonds,
and obligations of other agencies and instrumentalities that are backed by the
full faith and credit of the U.S. Treasury. It is the Treasury Trust Fund's
policy that under normal conditions it will invest 65% or more of its total
assets in U.S Treasury obligations and repurchase agreements for which such
obligations serve as collateral.
In accordance with the current rules of the Securities and Exchange
Commission, the Prime Trust Fund intends to limit its purchases in the
securities of any one issuer (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities) to no more than 5% of its
total assets at the time of purchase, with the exception that up to 25% of its
total assets may be invested in the securities of any single issuer for up to
three business days.
PORTFOLIO INSTRUMENTS, PRACTICES AND RELATED RISKS
U.S. GOVERNMENT OBLIGATIONS AND MONEY MARKET INSTRUMENTS. The TREASURY
TRUST FUND may invest in U.S. Treasury obligations as described above. The PRIME
TRUST FUND may invest in securities issued or guaranteed by the U.S. Government,
as well as in obligations issued or guaranteed by U.S.
5
<PAGE>
Government agencies and instrumentalities or in money market instruments,
including bank obligations and commercial paper. Obligations of certain agencies
and instrumentalities, such as the Government National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others, like the
Export-Import Bank, are supported by the issuer's right to borrow from the
Treasury; others, including the Federal National Mortgage Association, are
backed by the discretionary ability of the U.S. Government to purchase the
entity's obligations; and still others like the Student Loan Marketing
Association are backed solely by the issuer's credit. U.S. Government
obligations also include U.S. Government-backed trusts that hold obligations of
foreign governments and are guaranteed or backed by the full faith and credit of
the United States. There is no assurance that the U.S. Government will provide
support to a U.S. Government-sponsored entity if it is not required to do so by
law. Some of these securities may have a variable or floating interest rate.
ASSET-BACKED SECURITIES. The PRIME TRUST FUND may invest in asset-backed
securities (I.E., securities backed by mortgages, installment sale contracts,
credit card receivables or other assets). The average life of an asset-backed
instrument varies with the maturities of the underlying instruments, and is
likely to be substantially less than the original maturity of the asset pools
underlying the security as the result of scheduled principal payments and
prepayments. This may be particularly true for mortgage-backed securities. The
rate of such prepayments, and hence the life of the security, will be primarily
a function of current market rates and current conditions in the relevant
market. The relationship between prepayments and interest rates may give some
high-yielding asset-backed securities less potential for growth in value than
conventional bonds with comparable maturities. In addition, in periods of
failing interest rates, the rate of prepayment tends to increase. During such
periods, the reinvestment of prepayment proceeds by the Fund will generally be
at lower rates than the rates that were carried by the obligations that have
been prepaid. Because of these and other reasons, an asset-backed security's
total return may be difficult to predict precisely. To the extent the Fund
purchases asset-backed securities at a premium, prepayments (which often may be
made at any time without penalty) may result in some loss of the Fund's
principal investment to the extent of any premiums paid.
Presently there are several types of mortgage-backed securities issued or
guaranteed by U.S. Government agencies, including guaranteed mortgage
pass-through certificates, which provide the holder with a pro rata interest in
the underlying mortgages, and collateralized mortgage obligations ("CMOs"),
which provide the holder with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities. Issuers of CMOs
frequently elect to be taxed as a pass-through entity known as a real estate
mortgage investment conduit, or REMICS. CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. Although the relative payment rights of these classes can be structured in
a number of different ways, most often payments of principal are applied to the
CMO classes in the order of their respective stated maturities. CMOs can expose
the Fund to more volatility and interest rate risk than other types of
asset-backed obligations.
MUNICIPAL OBLIGATIONS. The PRIME TRUST FUND may also invest in municipal
obligations. These securities may be advantageous for the Fund when, as a result
of prevailing economic, regulatory or other circumstances, the yield of such
securities on a pre-tax basis is comparable to that of other securities the Fund
can purchase. Dividends paid by the Fund that come from interest on municipal
obligations will be taxable to shareholders.
6
<PAGE>
The two main types of municipal obligations are "general obligation"
securities (which are secured by the issuer's full faith credit and taxing
power) and "revenue" securities (which are payable only from revenues received
from the operation of a particular facility or other specific revenue source). A
third type of municipal obligation, normally issued by special purpose public
authorities, is known as a "moral obligation" security because if the issuer
cannot meet its obligations it then draws on a reserve fund, the restoration of
which is not a legal requirement. Private activity bonds (such as bonds issued
by industrial development authorities) are usually revenue securities issued by
or for public authorities to finance a privately operated facility.
Within the principal classifications described above there are a variety of
categories including municipal leases and certificates of participation.
Municipal lease obligations are issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. Certain
municipal lease obligations may include "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Municipal leases (and participations in such leases) present
the risk that a municipality will not appropriate funds for the lease payments.
The Adviser, under the supervision of the Board of Trustees, will determine the
credit quality of any unrated municipal leases on an on-going basis, including
an assessment of the likelihood that the lease will not be cancelled.
In many cases, the Internal Revenue Service has not ruled on whether the
interest received on a municipal obligation is tax-exempt and, accordingly,
purchases of such securities are based on the opinion of counsel to the sponsors
or issuers of the instruments. Emerald Funds and the Adviser rely on these
opinions and do not intend to review the basis for them.
Municipal obligations purchased by the PRIME TRUST FUND may be backed by
letters of credit or guarantees issued by domestic or foreign banks and other
financial institutions which are not subject to federal deposit insurance.
Adverse developments affecting the banking industry generally or a particular
bank or financial institution that has provided its credit or guarantees with
respect to a municipal obligation held by the Fund could have an adverse effect
on the Fund's portfolio and the value of its shares. As described below under
"Foreign Securities," foreign letters of credit and guarantees involve certain
risks in addition to those of domestic obligations.
CORPORATE OBLIGATIONS. The PRIME TRUST FUND may purchase corporate bonds
and cash equivalents that meet the Fund's quality and maturity limitations.
These investments may include obligations issued by Canadian corporations and
Canadian counterparts of U.S. corporations, Eurodollar bonds, which are U.S.
dollar-denominated obligations of foreign issuers, Yankee bonds, which are U.S.
dollar-denominated bonds issued by foreign issuers in the U.S., and equipment
trust receipts.
Cash equivalents, such as commercial paper and other similar obligations
purchased by the Fund that have an original maturity of 13 months or less, will
either have short-term ratings at the time of purchase in the top category of
one or more NRSROs or be issued by issuers with such ratings. Unrated
instruments of these types purchased by the Fund will be determined to be of
comparable quality.
BANK OBLIGATIONS. The PRIME TRUST FUND may purchase certificates of deposit
("CDs"), bankers' acceptances, notes and time deposits issued or supported by
U.S. or foreign banks and savings institutions that have total assets of more
than $1 billion. The Fund may also invest in CDs and time
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deposits of domestic branches of U.S. banks that have total assets of less than
$1 billion if the CDs and time deposits are insured by the FDIC. Investments in
foreign banks and foreign branches of U.S. banks will not make up more than 25%
of the Fund's total assets when the investment is made. (To the extent permitted
by the SEC, bank obligations of U.S. branches of foreign banks will be
considered to be investments in U.S. domestic banks for purposes of this
calculation.) The Fund may also make interest-bearing savings deposits in
amounts not exceeding 5% of its total assets.
REPURCHASE AGREEMENTS. EACH FUND may buy portfolio securities subject to
the seller's agreement to repurchase them at an agreed upon time and price.
These transactions are known as repurchase agreements. A Fund will enter into
repurchase agreements only with financial institutions deemed to be creditworthy
by the Adviser, pursuant to guidelines established by the Board of Trustees.
During the term of any repurchase agreement, the Adviser will monitor the
creditworthiness of the seller, and the seller must maintain the value of the
securities subject to the agreement in an amount that is greater than the
repurchase price. Default or bankruptcy of the seller would, however, expose a
Fund to possible loss because of adverse market action or delays connected with
the disposition of the underlying obligations. Because of the seller's
repurchase obligations, the securities subject to repurchase agreements do not
have maturity limitations.
VARIABLE AND FLOATING RATE INSTRUMENTS. EACH FUND may purchase variable and
floating rate instruments. In the case of the Treasury Trust Fund these
instruments must be issued or fully guaranteed by the U.S. Treasury but for the
Prime Trust Fund investments may include variable amount master demand notes
issued by private issuers, which are instruments under which the indebtedness,
as well as the interest rate, varies. If rated, variable and floating rate
instruments must be rated in the highest short-term rating category by an NRSRO.
If unrated, such instruments will need to be determined to be of comparable
quality. Unless guaranteed by the U.S. Government or one of its agencies or
instrumentalities, variable or floating rate instruments purchased by the Prime
Trust Fund must permit the Fund to demand payment of the instrument's principal
at least once every thirteen months. Because of the absence of a market in which
to resell a variable or floating rate instrument, the Fund might have trouble
selling an instrument should the issuer default or during periods when the Fund
is not permitted by agreement to demand payment of the instrument, and for this
or other reasons a loss could occur with respect to the instrument.
STRIPPED SECURITIES. EACH FUND may invest in instruments known as
"stripped" securities. These instruments include U.S. Treasury bonds and notes
and federal agency obligations on which the unmatured interest coupons have been
separated from the underlying obligation. These obligations are usually issued
at a discount to their "face value," and because of the manner in which
principal and interest are returned may exhibit greater price volatility than
more conventional debt securities. The Treasury Trust Fund's investments in
these instruments will be limited to "interest only" stripped securities that
have been issued by a federal instrumentality known as the Resolution Funding
Corporation and other stripped securities issued or guaranteed by the U.S.
Treasury, where the principal and interest components are traded independently
under the Separate Trading of Registered Interest and Principal Securities
program ("STRIPS"). Under STRIPS, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently. The Prime Trust Fund may also invest in instruments that have
been stripped by their holder, typically a
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custodian bank or investment brokerage firm, and then resold in a custodian
receipt program under names you may be familiar with such as Treasury Investors
Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury Securities
("CATS").
In addition, the Prime Trust Fund may purchase stripped mortgage-backed
securities ("SMBS") issued by the U.S. Government (or a U.S. Government agency
or instrumentality) or by private issuers such as banks and other institutions.
SMBS, in particular, may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors. If the underlying obligations experience greater than
anticipated prepayments, the Fund may fail to fully recoup its initial
investment. The market value of the class consisting entirely of principal
payments can be extremely volatile in response to changes in interest rates. The
yields on a class of SMBS that receives all or most of the interest are
generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped. SMBS issued
by the U.S. Government (or a U.S. Government agency or instrumentality) may be
considered liquid under guidelines established by the Board of Trustees if they
can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of the Fund's per share net
asset value.
Although certain stripped securities may pay interest to their holders
before they mature, federal income tax rules require a Fund each year to
recognize a part of the discount attributable to a security as interest income.
This income must be distributed along with the other income a Fund earns. To the
extent shareholders request that they receive their dividends in cash rather
than reinvesting them, the money necessary to pay those dividends must come from
the assets of a Fund or from other sources such as proceeds from sales of Fund
shares and/or sales of portfolio securities. The cash so used would not be
available to purchase additional income-producing securities, and a Fund's
current income could ultimately be reduced as a result.
Bank Investment Contracts and Guaranteed Investment Contracts. The Prime
Trust Fund may invest in bank investment contracts ("BICs") issued by banks that
meet the asset size requirements described above under "Bank Obligations" and in
guaranteed investment contracts ("GICs") issued by highly rated U.S. insurance
companies that have assets of $1 billion or more and meet the quality and credit
standards established by the Adviser pursuant to guidelines approved by the
Board of Trustees. Pursuant to a BIC or GIC, the Fund would make cash
contributions to a deposit account at a bank or insurance company. These
contracts are general obligations of the issuing bank or insurance company and
are paid from the general assets of the issuing entity. In return for its cash
contribution, the Fund would receive interest from the issuing entity at either
a negotiated fixed or floating rate. Because BICs and GICs are generally not
assignable or transferable without the permission of the bank or insurance
company involved, and an active secondary market does not currently exist for
these instruments, they are considered illiquid securities and are subject to
the Fund's limitation on such investments as described below under "Managing
Liquidity."
PARTICIPATIONS AND TRUST RECEIPTS. The Prime Trust Fund may purchase from
domestic financial institutions and trusts created by such institutions
participation interests and trust receipts in high quality debt securities. A
participation interest or receipt gives the Fund an undivided interest in the
security in the proportion that the Fund's participation interest or receipt
bears to the total principal amount of the security. The Fund intends only to
purchase participations and trust receipts
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from an entity or syndicate, and does not intend to serve as a co-lender in any
such activity. As to certain instruments for which the Fund will be able to
demand payment, the Fund intends to exercise its right to do so only upon a
default under the terms of the security, as needed to provide liquidity, or to
maintain or improve the quality of its investment portfolio. It is possible that
a participation interest or trust receipt may be deemed to be an extension of
credit by the Fund to the issuing financial institution rather than to the
obligor of the underlying security and may not be directly entitled to the
protection of any collateral security provided by the obligor. In such event,
the ability of the Fund to obtain repayment could depend on the issuing
financial institution.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. Each Fund may purchase
securities on a "when-issued" basis and purchase or sell securities on a
"forward commitment" basis. When-issued and forward commitment transactions,
which involve a commitment by a Fund to purchase or sell particular securities
with payment and delivery taking place at a future date (perhaps one or two
months later), permit a Fund to lock-in a price or yield on a security it
intends to purchase or sell, regardless of future changes in interest rates.
These transactions involve the risk that the price or yield obtained may be less
favorable than the price or yield available when the delivery takes place.
When-issued purchases and forward purchase commitments are not expected to
exceed 25% of the value of a Fund's total assets under normal circumstances.
These transactions will not be entered for speculative purposes but only in
furtherance of a Fund's investment objective.
OTHER INVESTMENT COMPANIES. Each Fund may invest in the securities of other
mutual funds that invest in the particular instruments in which a Fund itself
may invest, subject to the requirements of applicable securities laws. When a
Fund invests in another mutual fund, it pays a pro rata portion of the advisory
and other expenses of that fund as a shareholder of that fund. These expenses
are in addition to the advisory and other expenses a Fund pays in connection
with its own operations.
Securities of other investment companies will be acquired by the Funds
within the limits prescribed by the Investment Company Act of 1940, as amended
(the "1940 Act"). Each Fund currently intends to limit these investments so
that, as determined immediately after a securities purchase is made: (a) not
more than 5% of their value of its total assets will be invested in the
securities of any one investment company; (b) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of other
investment companies as a group; (c) not more than 3% of the outstanding voting
stock of any one investment company will be owned by a Fund; and (d) not more
than 10% of the outstanding voting stock of any one closed-end investment
company will be owned in the aggregate by a Fund, other investment portfolios of
Emerald Funds, or any other investment companies advised by the Adviser.
BORROWINGS. Each Fund is authorized to make limited borrowings for
temporary purposes and each Fund may enter into reverse repurchase agreements.
Under such an agreement a Fund sells portfolio securities and then buys them
back later at an agreed-upon time and price. When the Fund enters into a reverse
repurchase agreement it will place in a separate custodial account liquid assets
that have a value at least equal to the price a Fund must pay when it buys back
the securities, and the account will be continuously monitored to make sure the
appropriate value is maintained. Reverse repurchase agreements may be used to
meet redemption requests without selling portfolio securities. Reverse
repurchase agreements involve the possible risk that the value of portfolio
securities the Fund relinquishes may decline below the price a Fund must pay
when the transaction closes. Interest paid by a Fund in a reverse repurchase or
other borrowing transaction will reduce a Fund's income.
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SECURITIES LENDING. Each Fund may lend securities held in its portfolio to
broker-dealers and other institutions as a means of earning additional income.
These loans present risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, securities
loans will be made only to parties the Adviser deems to be of good standing, and
will only be made if the Adviser thinks the possible rewards from such loan
justify the possible risks. A loan will not be made if, as a result, the total
amount of a Fund's outstanding loans exceeds 30% of its total assets. Securities
loans will be fully collateralized.
MANAGING LIQUIDITY. Disposing of illiquid investments may involve
time-consuming negotiations and legal expenses, and it may be difficult or
impossible to dispose of such investments promptly at an acceptable price.
Additionally, the absence of a trading market can make it difficult to value a
security. For these and other reasons a Fund will not knowingly invest more than
10% of its net assets in illiquid securities. Illiquid securities include
repurchase agreements, securities loans and time deposits that do not permit a
Fund to terminate them after seven days notice, GICs, BICs, stripped
mortgage-backed securities issued by private issuers and securities that are not
registered under the securities laws. Certain securities that might otherwise be
considered illiquid, however, such as some issues of commercial paper, variable
amount master demand notes with maturities of nine months or less and securities
for which the Adviser has determined pursuant to guidelines adopted by the Board
of Trustees that a liquid trading market exists (including certain securities
that may be purchased by institutional investors under SEC Rule 144A), are not
subject to this limitation. This investment practice could have the effect of
increasing the level of illiquidity in a Fund during any period that qualified
institutional buyers are no longer interested in purchasing these restricted
securities.
FOREIGN SECURITIES. There are risks and costs involved in investing in
securities of foreign issuers (including foreign governments) that are in
addition to the usual risks inherent in U.S. investments. Investments in foreign
securities may involve higher costs than investments in U.S. securities,
including higher transaction costs as well as the imposition of additional taxes
by foreign governments. In addition, foreign investments may involve risks
associated with less complete financial information about the issuer, less
market liquidity and political instability. Future political and economic
developments, the possible imposition of withholding taxes on interest income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls or the adoption of other governmental
restrictions might adversely affect the payment of principal and interest on
foreign obligations. Additionally, foreign banks and foreign branches of
domestic banks may be subject to less stringent reserve requirements, and to
different accounting, auditing and recordkeeping requirements.
OTHER RISK CONSIDERATIONS. As with an investment in any mutual fund, an
investment in the Funds entails market and economic risks associated with
investments generally. However, there are certain specific risks of which you
should be aware.
Generally, the market value of fixed income securities in the Funds can be
expected to vary inversely to changes in prevailing interest rates. You should
recognize that in periods of declining interest rates the market value of
investment portfolios comprised primarily of fixed income securities will tend
to increase, and in periods of rising interest rates, the market value will tend
to decrease. You should also recognize that in periods of declining interest
rates, the yields of investment portfolios comprised primarily of fixed income
securities will tend to be higher than prevailing market rates and,
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in periods of rising interest rates, yields will tend to be somewhat lower. The
Funds may purchase zero-coupon bonds (i.e., discount debt obligations that do
not make periodic interest payments). Zero-coupon bonds are subject to greater
market fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest. Changes in
the financial strength of an issuer or changes in the ratings of any particular
security may also affect the value of these investments.
In addition, the PRIME TRUST FUND may purchase custodial receipts, tender
option bonds and certificates of participation in trusts that hold municipals or
other types of obligations. A certificate of participation gives a Fund an
individual, proportionate interest in the obligation, and may have a variable or
fixed rate. Because certificates of participation are interests in obligations
that may be funded through government appropriations, they are subject to the
risk that sufficient appropriations for the timely payment of principal and
interest on the obligations may not be made. The NRSRO quality rating of an
issue of certificates of participation is normally based upon the rating of the
obligations held by the trust and the credit rating of the issuer of any letter
of credit and of any other guarantor providing credit support to the issue.
Payment on municipal obligations held by the Prime Trust Fund relating to
certain projects may be secured by mortgages or deeds of trust. In the event of
a default, enforcement of a mortgage or deed of trust will be subject to
statutory enforcement procedures and limitations on obtaining deficiency
judgments. Should a foreclosure occur, collection of the proceeds from that
foreclosure may be delayed and the amount of the proceeds received may not be
enough to pay the principal or accrued interest on the defaulted municipal
obligation.
FUNDAMENTAL LIMITATIONS
The Funds' investment objectives and policies discussed above are not
fundamental limitations and may be changed by the Board of Trustees without
shareholder approval. You will be notified of any material changes, but as a
result, the Funds may have a different investment objective from the one it had
at the time of your investment. However, each Fund also has in place certain
"fundamental limitations" that cannot be changed for a Fund without the approval
of a majority of that Fund's outstanding shares. Some of these fundamental
limitations are summarized below, and all of the Funds' fundamental limitations
are set out in full in the Statement of Additional Information.
1. A Fund may not invest 25% or more of its total assets in one or more
issuers conducting their principal business activities in the same industry.
2. A Fund may not borrow money except for temporary purposes in amounts up
to one-third of the value of its total assets at the time of such borrowing.
Whenever borrowings exceed 5% of a Fund's total assets, the Fund will not make
any investments.
If a percentage limitation is met at the time an investment is made, a
subsequent change in that percentage that is the result of a change in value of
a Fund's portfolio securities does not mean that the limitation has been
violated.
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In order to permit the sale of a Fund's shares in some states, Emerald Funds
may agree to certain restrictions that may be stricter than the investment
policies and limitations discussed above. If Emerald Funds decides that any of
these restrictions is no longer in a Fund's best interest, it may revoke its
agreement to abide by such restriction by no longer selling shares in the state
involved.
-------------------
INVESTING IN EMERALD FUNDS
YOUR MONEY MANAGER
BARNETT CAPITAL ADVISORS, INC. (REFERRED TO AS THE "ADVISER") SERVES AS
INVESTMENT ADVISER TO EACH FUND.
PURCHASE OF SHARES
Shares of the Funds are sold on a continuous basis by Emerald Asset
Management, Inc. (called the "Distributor"). The Distributor is located at 3435
Stelzer Road, Columbus, Ohio 43219-3035.
[Except as noted below, shares of each Fund are sold only to Barnett Bank,
N.A. and its affiliates ("Barnett") acting on their own behalf or on behalf of
their customer accounts (except employee benefit plan accounts) that invest at
least $1 million in a Fund. This minimum investment requirement does not apply
to customer accounts that owned Fund shares on November 30, 1996. In addition,
Fund shares are sold to other institutional investors that invest at least $1
million in a Fund. (These institutions, together with Barnett, are called
"Institutions.") There is no minimum for subsequent purchases.]
All share purchases by customers of an Institution are effected through the
customer's account at the Institution through procedures established in
connection with the requirements of the account, and confirmations of share
purchases and redemptions will be sent by the Funds to the particular
Institution involved. Fund shares will normally be held of record by an
Institution for its customers or in the name of a nominee of an Institution.
Beneficial ownership of Fund shares will be recorded by an Institution for its
customers and reflected in the account statements provided to customers. The
exercise of voting rights and the delivery to customers of shareholder
communications from the Funds will be governed by the customers' account
agreements with the Institution.
Shares are sold at the net asset value per share next determined after
receipt of a purchase order from an Institution by the Funds' transfer agent.
Purchases for shares of the Funds will be effected only on days on which both
the New York Stock Exchange (the "Exchange") and the Funds' Custodian are open
for business ("Business Day") and only when federal funds or other funds are
immediately available to the Funds' transfer agent to make the purchase on the
day it receives the purchase order. Additionally, on days when the Exchange
and/or the Funds' Custodian close early due to a partial holiday or otherwise,
the Funds reserve the right to advance the times at which purchase and
redemption orders must be received in order to be processed that Business Day.
Institutions may transmit purchase orders for either Fund by telephoning the
transfer agent c/o the Distributor at 1-800-367-5905 not later than [3:00 p.m.]
(Eastern time) on any Business Day. If federal funds are not available with
respect to any such order by the close of business on the day the order is
received by the transfer agent, the order will be cancelled. In addition, any
purchase order received by the transfer agent after [3:00 p.m.] (Eastern time)
will not be accepted, and notice thereof will be given to the
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Institution placing the order. Any funds received in connection with late orders
will be returned promptly. Institutions are responsible for transmitting
purchase orders promptly to the Funds in accordance with their agreements with
their customers, and delivering the required funds on a timely basis.
Each Fund observes the following holidays: New Year's Day (observed), Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day (observed), Labor Day, Columbus Day, Veterans Day (observed), Thanksgiving
Day and Christmas Day (observed).
Purchase orders must include the investor's tax identification number.
Emerald Funds reserves the right to reject any purchase order or to waive the
minimum initial investment requirement. Payment for orders which are not
received or accepted will be returned after prompt inquiry. Payment for shares
of a Fund may, at the discretion of the Adviser, be made in the form of
securities that are permissible investments for that Fund. For further
information see "In-Kind Purchases" in the Statement of Additional Information.
The issuance of shares is recorded in the shareholder records of the Funds, and
share certificates are not issued unless expressly requested in writing.
Certificates are not issued for fractional shares.
Neither Emerald Funds nor its service contractors will be responsible for
any loss or expense for acting upon telephone instructions that are believed to
be genuine. In attempting to confirm that telephone instructions are genuine,
Emerald Funds will use procedures considered reasonable. To the extent Emerald
Funds does not use reasonable procedures to form its belief, it and/or its
service contractors may be responsible for instructions that are fraudulent or
unauthorized.
Institutions may charge their customers certain account fees for automatic
investment and other cash management services provided by them. These fees may
include, for example, account maintenance fees, compensating balance
requirements or fees based upon account transactions, assets or income.
Information concerning these minimum account requirements, services and any
charges should be obtained from the particular Institution before a customer
authorizes the purchase of Fund shares, and this Prospectus should be read in
conjunction with any information so obtained.
REDEMPTION OF SHARES
Redemption orders are effected at the net asset value per share next
determined after receipt of the order by Emerald Funds' transfer agent. Shares
held by an Institution on behalf of its customers must be redeemed in accordance
with the instructions and limitations pertaining to the customer accounts. These
procedures will vary according to the type of account and Institution involved,
and customers should consult their account managers in this regard. It is the
responsibility of the Institutions to transmit redemption orders to the Funds'
transfer agent and credit their customers' accounts with the redemption proceeds
on a timely basis.
Institutions may transmit redemption orders by telephoning the transfer
agent c/o the Distributor at 1-800-367-5905. Payment for redemption orders for
either Fund which are received by the transfer agent on a Business Day before
[3:00 p.m.] (Eastern Time) will normally be wired in federal funds the same day.
Payment for redemption orders which are received between [3:00 p.m.] (Eastern
Time) and the close of business or on a non-Business Day will normally be wired
in federal funds on the next Business Day. Emerald Funds reserves the right,
however, to delay the wiring of redemption proceeds for up to seven days after
receipt of a redemption order if, in the judgment of the Adviser, an
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earlier payment could adversely affect either Fund. No charge for wiring
redemption payments is imposed by the Funds, although Institutions may charge
their customer accounts for redemption services. Information relating to such
redemption services and charges, if any, is available from the Institutions. If
all of the shares owned by an Institution in a particular Fund are redeemed, any
declared and unpaid dividends on the redeemed shares will be paid within five
days of redemption. See "Dividends and Distributions."
An investor may be required to redeem shares in a Fund if the investor's
shareholdings drop below the required minimum investment amount stated above
under "Purchase of Shares" due to share redemptions and not market fluctuations
and the shareholder does not increase its balance to at least the required
minimum upon 60 days' written notice. If an Institution requires its customers
to maintain a minimum balance in their customer accounts, and the balance in an
account falls below that minimum, a customer may also be obligated to redeem
shares in the Funds to the extent necessary to maintain the minimum balance
required.
Each Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend the recordation of the transfer of
its shares) for such periods as are permitted under the Investment Company Act
of 1940. Each Fund may also redeem shares involuntarily or make payment for
redemption in securities or other property if it appears appropriate to do so in
light of the Fund's responsibilities under the Investment Company Act of 1940.
See the Statement of Additional Information ("Additional Purchase and Redemption
Information") for examples of when such redemptions might be appropriate. In
those cases, an investor may incur transaction costs in converting securities to
cash.
It is the responsibility of the Institutions to provide their customers with
statements of account with respect to share transactions made for their
accounts.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's shareholders of record are entitled to dividends and net capital
gains distributions arising from net investment income and net realized gains,
if any, earned only on the investments held by the particular Fund. Each Fund's
net investment income is declared daily as a dividend to the persons who are the
record holders of each Fund's shares at the close of business on the day of
declaration. As a result, shares begin earning dividends on the day a purchase
order is executed and continue to earn dividends through and including the day
before shares are redeemed. Dividends and distributions are automatically
reinvested in shares of the Fund that pay the dividends and distributions,
unless a shareholder specifically elects to receive payments in cash by writing
Emerald Funds, 100 First Avenue, Suite 300, Pittsburgh, PA 15222. An election is
effective for dividends and distributions with payment dates after the date the
Funds' transfer agent receives the election. Cash dividends are paid monthly by
wire transfer within five Business Days after the end of each month or within
five Business Days after the redemption of all of a shareholder's shares of a
particular Fund. Any net short-term or long-term capital gains realized by the
Funds will be distributed to shareholders at least annually, after reduction for
capital loss carryforwards, if any.
EXPLANATION OF SALES PRICE
Net asset value per share is determined on each Business Day (as defined
above) at [3:00 p.m.] (Eastern Time) by adding the value of a Fund's
investments, cash and other assets, subtracting the Fund's liabilities, and then
dividing the result by the number of shares in a Fund that are outstanding.
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All securities of each Fund are valued at amortized cost. More information about
valuation can be found in the Funds' Statement of Additional Information, which
you may request by calling 800/637-3759.
OTHER SERVICE PROVIDERS
While the investment advice provided to the Funds is essential, Emerald
Funds would not be able to function without the services of a number of other
companies. Some of these companies are listed below. For further information as
to some of the services these companies provide, as well as more information
regarding investment advisory services, see "The Business of the Funds."
ADMINISTRATOR
BISYS FUND SERVICES LIMITED PARTNERSHIP
("BISYS")
BISYS, a wholly-owned subsidiary of The BISYS Group, Inc., is responsible
for coordinating Emerald Funds' efforts and generally overseeing the operation
of the Funds' business.
DISTRIBUTOR
EMERALD ASSET MANAGEMENT, INC.
Emerald Asset Management, Inc. is a wholly-owned subsidiary of The BISYS
Group, Inc. Mutual funds structured like the Funds sell shares on a continuous
basis. The Funds' shares are sold through the Distributor. Certain officers of
Emerald Funds, namely Messrs. Blundin, Martinez and Tuch, are also officers
and/or directors of the Distributor.
CUSTODIAN
THE BANK OF NEW YORK
The Bank of New York is responsible for holding the investments that the
Funds own.
TRANSFER AGENT
BISYS FUND SERVICES, INC.
BISYS Fund Services, Inc., a wholly-owned subsidiary of The BISYS Group,
Inc., is the transfer agent for shares of the Funds. This means that its job is
to maintain the account records of all shareholders of record in the Funds, as
well as to administer the distribution of any dividends or distributions
declared by the Funds.
THE EMERALD FAMILY OF FUNDS
Emerald Funds was organized as a Massachusetts business trust on March 15,
1988 and is registered with the Securities and Exchange Commission as an
open-end management investment company. The Agreement and Declaration of Trust
authorizes the Board of Trustees to classify and reclassify any unissued shares
into one or more classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of an unlimited number of shares
representing interests in the respective Funds, which are classified as
diversified companies under the Investment Company Act of 1940. The Board of
Trustees has also authorized the issuance of additional classes of
16
<PAGE>
shares representing interests in other investment portfolios of Emerald Funds.
Information regarding these other portfolios offered by Emerald Funds, may be
obtained by contacting the Distributor at the address listed on page 14.
Shareholders are entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held. Shares of all Emerald
Fund portfolios vote together and not by portfolio, except where otherwise
required by law or permitted by the Board of Trustees. All shareholders of a
particular Fund will vote separately on matters pertaining to the investment
advisory agreement applicable to that Fund and on any change in its fundamental
investment limitations. Shares of the Emerald Funds have noncumulative voting
rights and, accordingly, the holders of more than 50% of Emerald Funds'
outstanding shares (irrespective of class) may elect all of the Trustees. Shares
have no preemptive rights and only such conversion and exchange rights as the
Board may grant in its discretion. When issued for payment as described in this
Prospectus, shares will be fully paid and nonassessable by Emerald Funds.
There will normally be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders. If such should occur,
the Trustees then in office will call a shareholders meeting for the election of
Trustees. Except as set forth above, the Trustees shall continue to hold office
and may appoint successor Trustees. The Agreement and Declaration of Trust
provides that meetings of the shareholders of Emerald Funds shall be called by
the Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares entitled to vote. As of September 6, 1996, the Adviser and
its affiliates possessed on behalf of their underlying customer accounts, voting
or investment power with respect to a majority of the outstanding shares of
Emerald Funds. More information about shareholder voting rights can be found in
the Statement of Additional Information under "Description of Shares."
THE BUSINESS OF THE FUNDS
FUND MANAGEMENT
THE BUSINESS AFFAIRS OF EMERALD FUNDS ARE MANAGED UNDER THE GENERAL
SUPERVISION OF THE BOARD OF TRUSTEES.
The following individuals serve as trustees of Emerald Funds:
- Chesterfield H. Smith, Chairman of the Board of Emerald Funds, is a Senior
Partner of the law firm of Holland and Knight.
- John G. Grimsley, President of Emerald Funds, is a Partner of the law firm
of Grimsley Marker & Iseley, P.A.
- Raynor E. Bowditch is the President of Bowditch Insurance Corporation.
- Mary Doyle is a Professor of Law, University of Miami Law School.
- Albert D. Ernest is the President of Albert Ernest Enterprises.
- Harvey H. Holding is the retired Executive Vice President and Chief
Financial Officer of BellSouth Corp.
17
<PAGE>
Emerald Funds has also employed a number of professionals to provide
investment management and other important services to the Funds. BARNETT CAPITAL
ADVISORS, INC. serves as the Funds' adviser and has its principal offices at
9000 Southside Boulevard, Building 100, Jacksonville, Florida 32256. BISYS Fund
Services Limited Partnership, a wholly-owned subsidiary of The BISYS Group,
Inc., located at 3435 Stelzer Road, Columbus, Ohio 43219-3035, serves as the
Funds' administrator. Emerald Asset Management, Inc., also a wholly-owned
subsidiary of The BISYS Group, Inc., located at the same address, is the
registered broker-dealer that sells the Funds' shares. The Funds also have a
custodian, The Bank of New York, located at 90 Washington Street, New York, New
York 10286 and a transfer and dividend paying agent, BISYS Fund Services, Inc.,
located at 100 First Avenue, Suite 300, Pittsburgh, PA 15222.
ADVISER. Barnett is a wholly-owned subsidiary of Barnett Bank, N.A. which,
in turn, is a wholly-owned subsidiary of Barnett Banks, Inc., a registered bank
holding company that has offered general banking services since 1877.
The Adviser manages the investment portfolios of the Funds, including
selecting portfolio investments and making purchase and sale orders. For the
services provided and expenses assumed for its advisory services, the Adviser is
entitled to receive a fee from the Funds, calculated daily and payable monthly,
at the annual rate of .10% of each Fund's average daily net assets. For the
fiscal year ended November 30, 1995 the Adviser did not receive any advisory
fees from the Funds, and the Funds' former Sub-Adviser received fees, after
waivers, at the effective annual rates of .13% and .13% of the average daily net
assets of the Prime Trust and Treasury Trust Funds, respectively, under the
agreements then in effect.
Although expected to be infrequent, the Adviser may consider the amount of
Fund shares sold by broker-dealers and others (including those who may be
connected with Barnett) in allocating orders for purchases and sales of
portfolio securities. This allocation may involve the payment of brokerage
commissions or dealer concessions. the Adviser will not engage in this practice
unless the execution capability of and the amount received by such broker-dealer
or other company is believed to be comparable to what another qualified firm
could offer.
The Adviser may, at its own expense, provide compensation to certain dealers
whose customers purchase significant amounts of shares of a Fund. The amount of
such compensation may be made on a one-time and/or periodic basis, and may be up
to 100% of the annual fees that are earned by the Adviser as investment adviser
to such Fund (after adjustments) and are attributable to shares held by such
customers. Such compensation will not represent an additional expense to the
Funds or their shareholders, since it will be paid from assets of the Adviser or
its affiliates.
ADMINISTRATIVE SERVICES. BISYS Fund Services Limited Partnership (the
"Administrator"), located at 3435 Stelzer Road, Columbus, Ohio 43219-3035,
serves as the Funds' administrator. The Administrator is an Ohio limited
partnership and is a wholly-owned subsidiary of The BISYS Group, Inc.
The Administrator provides a wide range of such services to Emerald Funds,
including maintaining the Funds' offices, providing statistical and research
data, coordinating the preparation of reports to shareholders, calculating or
providing for the calculation of the net asset values of Fund shares, dividends
and capital gain distributions to shareholders, and performing other
administrative functions necessary for the smooth operation of the Funds.
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<PAGE>
The Administrator is entitled to an administration fee calculated daily and
payable monthly at the effective annual rate of .0775% of the first $5 billion
of the aggregate net assets of all of the Emerald Funds, .07% of the next $2.5
billion, .065% of the next $2.5 billion and .05% of all assets exceeding $10
billion. In the event the aggregate average daily net assets for all Funds falls
below $3 billion, the fee will be increased to .08% of the aggregate average
daily net assets of all of the Emerald Funds.
FEE WAIVERS AND EXPENSES
Expenses can be reduced by voluntary fee waivers and expense reimbursements
by Barnett and the Funds' other service providers, as well as by certain
mandatory expense limits imposed by some state securities regulators. The amount
of the waivers may be changed at any time at the sole discretion of the Adviser
and the Funds' other service providers. As to any amounts voluntarily waived or
reimbursed, the service providers retain the ability to be reimbursed by a Fund
for such amounts prior to fiscal year end. Such waivers and reimbursements would
increase the return to investors when made but would decrease the return if a
Fund were required to reimburse a service provider.
TAX IMPLICATIONS
As with any investment, you should consider the tax implications of an
investment in the Funds. The following is only a short summary of the important
tax considerations generally affecting the Funds and their shareholders. You
should consult your tax adviser with specific reference to your own tax
situation.
You will be advised at least annually regarding the federal income tax
treatment of dividends and distributions made to you.
FEDERAL TAXES. Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code (called the "Code"), meaning that to
the extent a Fund's earnings are passed on to shareholders as required by the
Code, the Fund itself generally will not be required to pay federal income
taxes.
In order to so qualify, each Fund will pay as dividends at least 90% of its
investment company taxable income. Investment company taxable income includes
taxable interest, dividends, gains attributable to market discount on taxable as
well as tax-exempt securities, and the excess of net short-term capital gain
over net long-term capital loss. To the extent you receive a dividend based on
investment company taxable income, you must treat that dividend as ordinary
income in determining your gross income for tax purposes, whether you received
it in the form of cash or additional shares. Unless you are exempt from federal
income taxes, the dividends you receive from each Fund will be taxable to you.
Any distribution you receive of net long-term capital gain over net
short-term capital loss will be taxed as a long-term capital gain, no matter how
long you have held Fund shares.
Any dividends declared by a Fund in December of a particular year and
payable to shareholder of record on a date during that month will be deemed to
have been paid by the Fund and received by shareholders on December 31 of that
year, so long as the dividends are actually paid in January of the following
year.
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STATE AND LOCAL TAXES GENERALLY. Because your state and local taxes may be
different than the federal taxes described above, you should see your tax
adviser regarding these taxes. In particular, dividends paid by the Treasury
Trust Fund may be taxable under state or local laws as dividend income, even
though all or part of those dividends come from interest on obligations that
would be free of such taxes if held by you directly.
Except as stated below, shares of the Funds are not expected to qualify for
total exemption from the Florida intangibles tax. Shares of the Treasury Trust
Fund may or may not qualify in any calendar year for this exemption from the
Florida intangible tax. In order to qualify for this exemption, the Treasury
Trust Fund may sell non-exempt assets held in its portfolio (such as repurchase
agreements) during the year and reinvest the proceeds in exempt assets, or hold
cash, prior to December 31. Transaction costs involved in restructuring the
portfolio in this fashion would likely reduce the Fund's investment return and
might exceed any increased investment return the Fund achieved by investing in
non-exempt assets during the year.
MEASURING PERFORMANCE:
- - Performance information provides you with a method of measuring and monitoring
your investments. Each Fund may quote performance in advertisements or
shareholder communications.
UNDERSTANDING PERFORMANCE MEASURES:
- - The yields for the Funds are the income generated over a 7-day period (which
period will be identified in the quotation) and then assumed to be generated
over a 52-week period and shown as a percentage of the investment. In
addition, the Funds may quote an "effective" yield that is calculated
similarly, but the income quoted over a 7-day period is assumed to be
reinvested. Net income used in yield calculations may be different than net
income used for accounting purposes.
PERFORMANCE COMPARISONS:
The Funds may compare their yields to those of mutual funds with similar
investment objectives and to bond, stock or other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance.
Total return and yield as reported in national financial publications such
as MONEY, FORBES, BARRON'S, THE WALL STREET JOURNAL and THE NEW YORK TIMES, as
well as in publications of a local or regional nature, may be used for
comparison.
The yield of the Prime Trust Fund may be compared to the Donoghue's Money
Fund Average, which monitors the performance of money market funds. The yield of
the Treasury Trust Fund may be compared to the Donoghue's Government Money Fund
average. Additionally, each Fund's performance may be compared to data prepared
by Lipper Analytical Service, Inc.
Performance quotations will fluctuate, and you should not consider
quotations to be representative of future performance. You should also remember
that performance is generally a function of the kind and quality of investments
held in a portfolio, portfolio maturity, operating expenses and market
conditions. Fees that Barnett and other Institutions may charge directly to
their customers in connection with an investment in the Funds will not be
included in the Funds' yield.
20
<PAGE>
Inquiries regarding the Funds may be directed to the Distributor at the
address stated on page 14.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION RELATING TO THE FUNDS INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
21
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
-----
<S> <C>
SUMMARY OF EXPENSES AND FINANCIAL INFORMATION...................... 2
Expenses......................................................... 2
Financial Highlights............................................. 3
INVESTMENT PRINCIPLES AND POLICIES................................. 6
Investment Objective and Policies................................ 6
Portfolio Instruments, Practices and Related Risks............... 6
INVESTING IN EMERALD FUNDS......................................... 13
Your Money Manager............................................... 13
Purchase of Shares............................................... 14
Redemption of Shares............................................. 15
Dividends and Distributions...................................... 16
Explanation of Sales Price....................................... 16
Other Service Providers.......................................... 16
THE EMERALD FAMILY OF FUNDS........................................ 17
THE BUSINESS OF THE FUNDS.......................................... 18
Fund Management.................................................. 18
Tax Implications................................................. 19
Measuring Performance............................................ 20
</TABLE>
<PAGE>
EMERALD FUNDS
Statement of Additional Information
for the
*Treasury Trust Fund*
*Prime Trust Fund*
December 1, 1996
TABLE OF CONTENTS
<TABLE>
Caption
Page
----
<S> <C>
EMERALD FUNDS . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . 1
NET ASSET VALUE AND DIVIDENDS . . . . . . . . . . . . . . . . 15
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. . . . . . . . 16
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . 17
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . 19
MANAGEMENT OF EMERALD FUNDS . . . . . . . . . . . . . . . . . 21
INDEPENDENT ACCOUNTANTS/EXPERTS . . . . . . . . . . . . . . . 31
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ADDITIONAL INFORMATION ON YIELD . . . . . . . . . . . . . . . 31
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 32
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 37
APPENDIX A. . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
This Statement of Additional Information is meant to be
read in conjunction with Emerald Funds' Prospectus dated
December 1, 1996 for the Treasury Trust Fund and Prime Trust
Fund, and is incorporated by reference in its entirety into that
Prospectus. Because this Statement of Additional Information is
not itself a prospectus, no investment in shares of the Treasury
Trust Fund or Prime Trust Fund should be made solely upon the
information contained herein. Copies of the Prospectus may be
obtained by calling 800-637-3759. Capitalized terms used but not
defined herein have the same meanings as in the Prospectus.
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BARNETT BANK OR
ANY OTHER BANK AND ARE NOT ISSUED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. EACH FUND SEEKS TO MAINTAIN A NET ASSET
VALUE OF $1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT
IT WILL BE ABLE TO DO SO ON A CONTINUOUS BASIS. INVESTMENT IN
THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL. IN ADDITION, THE DIVIDENDS PAID BY A FUND WILL
FLUCTUATE.
<PAGE>
EMERALD FUNDS
Emerald Funds is a Massachusetts business trust which
was organized on March 15, 1988 as an open-end investment
company. This Statement of Additional Information pertains to
two diversified portfolios of the Emerald Funds -- the Treasury
Trust Fund and the Prime Trust Fund (such portfolios are
sometimes called the "Funds"). Emerald Funds also offers other
investment portfolios which are described in separate
Prospectuses and Statements of Additional Information. For
information concerning these other portfolios contact the
Distributor at the address or telephone number stated on the
cover page of this Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Prospectus, the investment objective
of both the Treasury Trust Fund and the Prime Trust Fund is to
seek a high level of current income, in each case consistent with
liquidity, the preservation of capital and a stable net asset
value. The following policies supplement the Funds' respective
investment objectives and policies as set forth in the
Prospectus.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of
Trustees , Barnett Capital Advisors, Inc. (the "Adviser") is
responsible for, makes decisions with respect to, and places
orders for all purchases and sales of portfolio securities for
each Fund.
Securities purchased and sold by each Fund are gen-
erally traded in the over-the-counter market on a net basis (I.E,
without commission) through dealers, or otherwise involve
transactions directly with the issuer of an instrument. The cost
of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down. With respect to over-the-counter
transactions, the Adviser will normally deal directly with
dealers who make a market in the instruments involved except in
those circumstances where more favorable prices and execution are
available elsewhere.
The Funds may participate, if and when practicable, in
bidding for the purchase of portfolio securities directly from an
issuer in order to take advantage of the lower purchase price
available to members of a bidding group. The Funds will engage
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<PAGE>
in this practice, however, only when the Adviser, in its sole
discretion, believes such practice to be in the Funds' interests.
The Funds do not intend to seek profits from short-term
trading. Because the Funds will invest only in short-term debt
instruments, their annual portfolio turnover rates will be
relatively high, but brokerage commissions are normally not paid
on money market instruments, and portfolio turn-over is not
expected to have a material effect on the net investment income
of any Fund.
In its Advisory Agreement with respect to the Funds,
the Adviser agrees that it will seek to obtain the best overall
terms available in executing portfolio transactions and selecting
brokers or dealers. In assessing the best overall terms
available for any transaction, the Adviser shall consider
factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In addition, the
Advisory Agreement authorizes the Adviser to cause any of the
Funds to pay a broker-dealer which furnishes brokerage and
research services a higher commission than that which might be
charged by another broker-dealer for effecting the same
transaction, provided that the Adviser determines in good faith
that such commission is reasonable in relation to the value of
the brokerage and research services provided by such broker-
dealer, viewed in terms of either the particular transaction or
the overall responsibilities of the Adviser to the Funds. Such
brokerage and research services might consist of reports and
statistics of specific companies or industries, general summaries
of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government
securities markets and the economy.
Supplementary research information so received is in
addition to, and not in lieu of, services required to be
performed by the Adviser and does not reduce the sub-advisory
fees payable to it by the Funds. The Trustees will periodically
review the commissions paid by the Funds to consider whether the
commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Funds. It
is possible that certain of the supplementary research or other
services received will primarily benefit one or more other
investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of
portfolio transactions effected for such other account or
investment company.
-2-
<PAGE>
Portfolio securities will not be purchased from or sold
to (and savings deposits will not be made in and repurchase and
reverse repurchase agreements will not be entered into with) the
Adviser, the Distributor or an affiliated person of any of them
(as such term is defined in the Investment Company Act of 1940)
acting as principal, except as permitted by the Securities and
Exchange Commission. Further, while such allocation is not
expected to occur frequently, the Adviser is authorized to
allocate purchase and sale orders for portfolio securities to
broker/dealers and financial institutions, including, in the case
of agency transactions, broker/dealers and financial institutions
which are affiliated with the Adviser , to take into account the
sale of Fund shares if the Adviser believes that the quality of
the execution of the transaction and the amount of the commission
are comparable to what they would be with other qualified
brokerage firms. In addition, the Funds will not purchase
securities during the existence of any underwriting or selling
group relating thereto of which the Adviser or the Distributor,
or an affiliated person of any of them, is a member, except as
permitted by the Securities and Exchange Commission. In certain
instances, current regulations of the Commission would impose
volume, dollar and price restrictions on purchases by the Funds
during the existence of such a group or prohibit such purchases
altogether.
Investment decisions for the Funds are made
independently from those for other investment companies and
accounts advised or managed by the Adviser . Such other
investment companies and accounts may also invest in the same
securities as the Funds. When a purchase or sale of the same
security is made at substantially the same time on behalf of a
Fund and another investment company or account, the transaction
will be averaged as to price and available investments allocated
as to amount, in a manner which the Adviser believes to be
equitable to the Fund and such other investment company or
account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size
of the position obtained by the Fund. To the extent permitted by
law, the Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other
investment companies or accounts in executing transactions.
Subsequent to its purchase by a Fund, a rated security
may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund. The Board of
Trustees, or the Adviser pursuant to guidelines established by
the Board , will promptly consider such an event in determining
whether the Fund involved should continue to hold the security in
accordance with the interests of the Fund and applicable
regulations of the Securities and Exchange Commission. In
addition, it is possible that unregistered securities purchased
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<PAGE>
by a Fund in reliance upon Rule 144A under the Securities Act of
1933 could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers
become, for a period, uninterested in purchasing these
securities.
ADDITIONAL INVESTMENT LIMITATIONS
Each Fund is subject to the investment limitations
enumerated in this sub-section which may be changed with respect
to a particular Fund only by a vote of the holders of a majority
of such Fund's outstanding shares (as defined under
"Miscellaneous" below).
No Fund may:
1. Purchase or sell real estate, except that each
Fund may purchase securities of issuers which deal in real estate
and may purchase securities which are secured by interests in
real estate.
2. Acquire any other investment company or investment
company security except in connection with a merger,
consolidation, reorganization or acquisition of assets or where
otherwise permitted by the Investment Company Act of 1940.
3. Act as an underwriter of securities within the
meaning of the Securities Act of 1933 except to the extent that
the purchase of obligations directly from the issuer thereof in
accordance with the Fund's investment objective, policies and
limitations may be deemed to be underwriting.
4. Write or sell put options, call options,
straddles, spreads, or any combination thereof, except for
transactions in options on securities, securities indices,
futures contracts and options on futures contracts.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this
investment limitation shall not apply to a Fund's transactions in
futures contracts and related options, and (b) a Fund may obtain
short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
6. Purchase or sell commodity contracts, or invest in
oil, gas or mineral exploration or development programs, except
that each Fund may, to the extent appropriate to its investment
objective, purchase publicly traded securities of companies
engaging in whole or in part in such activities and may enter
into futures contracts and related options.
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<PAGE>
7. Make loans, except that each Fund may purchase and
hold debt instruments and enter into repurchase agreements in
accordance with its investment objective and policies and may
lend portfolio securities.
8. Purchase securities of companies for the purpose
of exercising control.
9. Purchase securities of any one issuer (other than
securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or certificates of deposit for any
such securities) if, immediately after such purchase, more than
15% of its total assets would be invested in certificates of
deposit or bankers' acceptances of any one bank, or more than 5%
of the value of the Fund's total assets would be invested in
other securities of any one bank or in the securities of any
other issuer, or more than 10% of the issuer's outstanding voting
securities would be owned by the Fund or Emerald Funds; except
that up to 25% of the value of a Fund's total assets may be
invested without regard to the foregoing limitations. For
purposes of this limitation, a security is considered to be
issued by the entity (or entities) whose assets and revenues back
the security. A guarantee of a security shall not be deemed to
be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by
the Fund, does not exceed 10% of the value of the Fund's total
assets.
[Note: In accordance with the current regulations of
the Securities and Exchange Commission, the Prime Trust Fund
intends to limit its investments in bankers' acceptances,
certificates of deposit and other securities of any one bank to
not more than 5% of the Fund's total assets at the time of
purchase (rather than the 15% limitation set forth above),
provided that the Fund may invest up to 25% of its total assets
in the securities of any one issuer for a period of up to three
business days. This practice, which is not a fundamental policy
of the Fund, could be changed only in the event that such
regulations of the Securities and Exchange Commission are amended
in the future.]
10. In addition, as summarized in the Prospectus no
Fund may:
Purchase any securities which would cause 25% or more
of the value of the Fund's total assets at the time of purchase
to be invested in the securities of one or more issuers
conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect
to (i) instruments issued or guarantee by the United States, any
state, territory or possession of the United States, the District
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<PAGE>
of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions, (ii) instruments
issued by domestic branches of U.S. banks and (iii) repurchase
agreements secured by the instruments described in clauses (i)
and (ii); (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and
(c) utilities will be divided according to their services, for
example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
[Note: In construing Investment Limitation 10 in accordance with
SEC policy, to the extent permitted, U.S. branches of foreign
banks will be considered to be U.S. banks where they are subject
to the same regulation as U.S. banks.
11. Borrow money or issue senior securities, except
that each Fund may borrow from banks and enter into reverse
repurchase agreements for temporary purposes in amounts up to
one-third of the value of the total assets at the time of such
borrowing or mortgage, pledge or hypothecate any assets, except
in connection with any such borrowing and then in amounts not in
excess of one-third of the value of a Fund's total assets at the
time of such borrowing. No Fund will purchase securities while
its borrowings (including reverse repurchase agreements) in
excess of 5% of its total assets are outstanding. Securities
held in escrow or separate accounts in connection with a Fund's
investment practices described in this Statement of Additional
Information or in the Prospectus are not deemed to be pledged for
purposes of this limitation.
Although the foregoing investment limitations would
permit the Funds to invest in options, futures contracts and
options on futures contracts, the Funds do not currently intend
to trade in such instruments during the next 12 months. Prior to
making any such investments, the Funds would notify their
shareholders and add appropriate descriptions concerning the
instruments to the Prospectus and this Statement of Additional
Information.
TYPES OF OBLIGATIONS, INVESTMENT RISKS AND OTHER INVESTMENT
INFORMATION
REVERSE REPURCHASE AGREEMENTS
At the time a Fund enters into a reverse repurchase
agreement (an agreement under which a Fund sells portfolio
securities and agrees to repurchase them at an agreed-upon date
and price), it will place in a segregated custodial account
liquid assets, such as U.S. Government securities or other liquid
high-grade debt securities having a value equal to or greater
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<PAGE>
than the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that such value is
maintained. Reverse repurchase agreements involve the risk that
the market value of the securities sold by a Fund may decline
below the price of the securities it is obligated to repurchase.
Reverse repurchase agreements are considered to be borrowings
under the Investment Company Act of 1940. Each Fund intends to
limit its borrowings (including reverse repurchase agreements),
during the next 12 months to not more than 5% of its net assets.
VARIABLE AND FLOATING RATE INSTRUMENTS
With respect to the variable and floating rate
instruments that may be acquired by the Funds as described in the
Prospectus, the Adviser will consider the earning power, cash
flows and other liquidity ratios of the issuers and guarantors of
those instruments and, if the instrument is subject to a demand
feature, will monitor their financial status to meet payment on
demand.
In determining average weighted portfolio maturity, an
instrument will usually be deemed to have a maturity equal to the
longer of the period remaining until the next regularly scheduled
interest rate adjustment or the time the Fund involved can
recover payment of principal as specified in the instrument.
Instruments which are U.S. Government obligations and certain
variable rate instruments having a nominal maturity of 397 days
or less, however, will be deemed to have maturities equal to the
period remaining until the next interest rate adjustment.
Variable and floating rate instruments may carry
nominal maturities in excess of a Fund's maturity limitations if
such instruments carry demand features that comply with
conditions established by the Securities and Exchange Commission.
In order to be purchased by a Fund, these instruments must permit
a Fund to demand payment of the principal of the instrument at
least once every 397 days upon not more than 30 days' notice.
REPURCHASE AGREEMENTS
The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by a
Fund plus interest negotiated on the basis of current short-term
rates (which may be more or less than the rate on the securities
underlying the repurchase agreement). Securities subject to
repurchase agreements are held by either the Funds' custodian or
another independent third party acting as sub-custodian for the
Fund involved in the transaction, or in the federal Reserve
Treasury Book-Entry System. Repurchase agreements are considered
to be loans by a Fund under the Investment Company Act of 1940.
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LENDING SECURITIES
When the Treasury Trust Fund or the Prime Trust Fund
lends its securities, it continues to receive interest on the
securities loaned and may simultaneously earn interest on the
investment of the cash loan collateral which will be invested in
readily marketable, high-quality, short-term obligations.
Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans will be
called so that the securities may be voted by a Fund if a
material event affecting the investment is to occur. Portfolio
loans will be continuously secured by collateral equal at all
times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans may
include cash or U.S. Government obligations or additionally, in
the case of the Prime Trust Fund, an irrevocable letter of
credit issued by a bank that meets the credit standards of the
Prime Trust Fund. Collateral for the Treasury Trust Fund is
limited to cash and U.S. Government obligations. There may be
risks of delay in recovering additional collateral or in
recovering the securities loaned or even a loss of rights in the
collateral should the borrower of the securities fail
financially.
OTHER INVESTMENT COMPANIES
In seeking to attain their investment objectives, the
Funds may invest in securities issued by other investment
companies within the limits prescribed by the Investment Company
Act of 1940. Each Fund currently intends to limit its
investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total
assets will be invested in the securities of any one investment
company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment
companies as a group; and (c) not more than 3% of the outstanding
stock of any one investment company will be owned by the Fund or
Emerald Funds as a whole. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its
pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to
the advisory and other expenses that a Fund bears in connection
with its own operations.
U.S. GOVERNMENT OBLIGATIONS
Examples of the types of U.S. Government obligations
that may be held by the Prime Trust Fund include, in addition to
U.S. Treasury bonds, notes and bills, the obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks,
the Federal Housing Administration, Farmers Home Administration,
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Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, Federal
National Mortgage Association, General Services Administration,
Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Tennessee Valley Authority, Resolution
Funding Corporation and Maritime Administration. U.S. Government
obligations also include U.S. Government-backed trusts that hold
obligations of foreign governments and are guaranteed or backed
by the full faith and credit of the United States. Obligations
of certain agencies and instrumentalities of the U.S. Government,
such as those of the Government National Mortgage Association,
are supported by the full faith and credit of the U.S. Treasury;
others, such as the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still
others, such as those of the Student Loan Marketing Association,
are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities
if it is not obligated to do so by law.
ASSET-BACKED SECURITIES
The Prime Trust Fund may invest in securities backed by
installment contracts, credit card receivables and other assets.
Asset-backed securities represent interests in pools of assets in
which payment of both interest and principal on the securities
are made monthly, thus in effect passing through (net of fees
paid to the issuer or guarantor of the securities) the monthly
payments made by the individual borrowers on the assets that
underlie the asset-backed securities.
Non-mortgage asset-backed securities involve certain
risks that are not presented by mortgage-backed securities.
Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral. Credit card
receivables are generally unsecured and the debtors are entitled
to the protection of a number of state and federal consumer
credit laws, many of which have given debtors the right to set
off certain amounts owed on the credit cards, thereby reducing
the balance due. Most issuers of automobile receivables permit
the servicers to retain possession of the underlying obligations.
If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile
receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of the
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automobile receivables may not have an effective security
interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed
collateral may not, in some cases, be able to support payments on
these securities.
MUNICIPAL OBLIGATIONS
Assets of the Prime Trust Fund may be invested in debt
instruments ("municipal obligations") issued by or on behalf of
states, territories and possessions of the United States, the
District of Columbia and their respective authorities, agencies,
instrumentalities and political sub-divisions. These investments
may be advantageous when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities
on a pre-tax basis, is comparable to that of other securities the
Fund may purchase. Municipal obligations include debt
obligations issued by governmental entities to obtain funds for
various public purposes, including the construction of a wide
range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the
extension of loans to public institutions and facilities.
The two principal classifications of municipal
obligations are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the
issuer of the facility being financed.
Private activity bonds (e.g., bonds issued by
industrial development authorities) that are issued by or on
behalf of public authorities to finance various privately-
operated facilities are included within the term "Municipal
Obligations". Private activity bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of
the issuer. Additionally, the principal and interest on these
obligations may or may not be payable from the general revenues
of the users of the facilities involved. The credit quality of
such bonds is usually directly related to the credit standing of
such corporate users. Private activity bonds have been or may be
issued to obtain funds to provide privately operated housing
facilities, pollution control facilities, convention or trade
show facilities, mass transit, airport, port or parking
facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Such bonds may
also be issued on behalf of privately held or publicly owned
corporations in the financing of commercial or industrial
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facilities. State and local governments are authorized in most
states to issue private activity bonds for such purposes in order
to encourage corporations to locate within their communities.
Municipal obligations may also include "moral
obligation" securities, which are normally issued by special
purpose public authorities. If the issuer of moral obligation
securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration
of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
As described in the Prospectus, the Prime Trust Fund
may also invest in municipal leases, which may be considered
liquid under guidelines established by Emerald Funds' Board of
Trustees. The guidelines will provide for determination of the
liquidity and proper valuation of a municipal lease obligation
based on factors including the following: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers
willing to purchase or sell the security and the number of other
potential buyers; (3) the willingness of dealers to undertake to
make a market in the security; and (4) the nature of marketplace
trades, including the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer. The
Adviser, under the supervision of Emerald Funds' Board of
Trustees, will also consider the continued marketability of a
municipal lease obligation based upon an analysis of the general
credit quality of the municipality issuing the obligation and the
importance to the municipality of the property covered by the
lease.
Municipal obligations may include short-term General
Obligation Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper,
Construction Loan Notes and other forms of short-term tax-exempt
loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues. In addition, the Prime Trust Fund
may invest in bonds and other types of tax-exempt instruments
provided they have remaining maturities that meet the Fund's
maturity limitations.
As described in the Prospectus, the Prime Trust Fund
may purchase securities in the form of custodial receipts. These
custodial receipts are known by a number of names, including
"Municipal Receipts," "Municipal Certificates of Accrual on Tax-
Exempt Securities" ("M-CATS") and "Municipal Zero-Coupon
Receipts."
Certain municipal obligations may be insured at the
time of issuance as to the timely payment of principal and
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interest. The insurance policies will usually be obtained by the
issuer of the municipal obligation at the time of its original
issuance. In the event that the issuer defaults on interest or
principal payment, the insurer of the obligation is required to
make payment to the bondholders upon proper notification. There
is, however, no guarantee that the insurer will meet its
obligations. In addition, such insurance will not protect
against market fluctuations caused by changes in interest rates
and other factors.
FOREIGN MONEY MARKET INSTRUMENTS. A Fund will invest
in obligations of foreign banks and commercial paper issued by
foreign issuers as described above only when the Adviser deems
the instrument to present minimal credit risk. Such investments
may nevertheless entail risks that are different from those of
investments in domestic obligations of U.S. banks. Such risks
include future political and economic developments, the possible
imposition of foreign withholding taxes on interest income
payable on such instruments, the possible establishment of
exchange controls, the possible seizure or nationalization of
foreign deposits or the adoption of other foreign government
restrictions which might affect adversely the payment of
principal and interest of such instruments. In addition, foreign
issuers, including foreign banks and foreign branches of U.S.
banks, may be subject to less stringent reserve requirements and
to different accounting, auditing, reporting and recordkeeping
standards than those applicable to domestic issuers, and
securities of foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS
The Funds may purchase securities on a when-issued
basis and purchase or sell securities on a forward commitment
basis. These transactions, which involve a commitment by a Fund
to purchase or sell particular securities with payment and
delivery taking place beyond the normal settlement date, permit a
Fund to lock-in a price or yield on a security it intends to
purchase or sell, regardless of future changes in interest rates.
When-issued and forward commitment transactions involve the risk,
however, that the yield obtained in a transaction may be less
favorable than the yield available in the market when the
securities delivery takes place.
When a Fund agrees to purchase securities on a when-
issued or forward commitment basis, the custodian will set aside
cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the custodian will
set aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund involved may be required subsequently
to place additional assets in the separate account in order that
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the value of the account remains equal to the amount of the
Fund's commitments. It may be expected that the market value of
a Fund's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because a Fund will
set aside cash or liquid assets to satisfy its purchase
commitments in the manner described, that Fund's liquidity and
ability to manage its portfolio might be affected in the event
its forward commitments to purchase securities ever exceeded 25%
of the value of its total assets. The respective forward
purchase commitments of the Treasury Trust Fund and Prime Trust
Fund are not expected to exceed 25% of the value of their
respective total assets, absent unusual market conditions or
periods of unusual purchase or redemption activity in shares of a
Fund such as at calendar year-end or other times; furthermore, a
forward commitment or commitment to purchase when-issued
securities for any Fund is not expected to exceed 45 days.
The Funds do not intend to engage in when-issued
purchases and forward commitments for speculative purposes but
only in furtherance of their investment objectives, and the Funds
will purchase securities on a when-issued or forward commitment
basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed advisable as a
matter of investment strategy, however, a Fund may dispose of or
renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities
are delivered to the Fund on the settlement date. In these cases
the Fund involved may realize a taxable capital gain or loss.
When the Funds engage in when-issued and forward
commitment transactions, they rely on the other party to
consummate the trade. Failure of such party to do so may result
in a Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The market value of the securities underlying a when-
issued purchase or a forward commitment to purchase securities,
and any subsequent fluctuations in their market value, is taken
into account when determining the market value of a Fund involved
in such transactions starting on the day the Fund agrees to pur-
chase the securities. A Fund does not earn interest on the
securities it has committed to purchase until they are paid for
and delivered on the settlement date.
PARTICIPATION INTERESTS AND TRUST RECEIPTS
The Prime Trust Fund may purchase participation
interests and trust receipts as described in its Prospectus.
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Such participation interests and trust receipts may have fixed,
floating or variable rates of interest, and will have remaining
maturities of thirteen months or less (as defined by the
Securities and Exchange Commission). If a participation interest
or trust receipt is unrated, the Adviser will have determined
that the interest or receipt is of comparable quality to those
instruments in which the Prime Trust Fund may invest pursuant to
guidelines approved by the Board of Trustees. For certain
participation interests or trust receipts the Prime Trust Fund
will have the right to demand payment, on not more than 30 days'
notice, for all or any part of the Fund's participation interest
or trust receipt in the securities involved, plus accrued
interest.
GUARANTEED INVESTMENT CONTRACTS
Generally, a guaranteed investment contract ("GIC")
allows a purchaser to buy an annuity with the monies accumulated
under the contract; however, the Prime Trust Fund will not
purchase any such annuities. GICs acquired by the Prime Trust
Fund are general obligations of the issuing insurance company and
not separate accounts. The purchase price paid for a GIC becomes
part of the general assets of the issuer, and the contract is
paid from the general assets of the issuer. The Prime Trust Fund
will only purchase GICs from issuers which, at the time of
purchase, are rated "A+" by A.M. Best Company, have assets of $1
billion or more and meet quality and credit standards established
by the investment adviser pursuant to guidelines approved by the
Board of Trustees. Generally, GICs are not assignable or
transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not
currently exist. Therefore, GICs are considered by the Prime
Trust Fund to be illiquid investments, and will be acquired by
the Fund subject to its limitation on illiquid investments.
RATINGS AND ISSUER'S OBLIGATIONS
The ratings of Nationally Recognized Statistical Rating
Organizations ("NRSROs") represent their opinions as to the
quality of debt securities. It should be emphasized, however,
that ratings are general and are not absolute standards of
quality, and debt securities with the same maturity, interest
rate and rating may have different yields while debt securities
of the same maturity and interest rate with different ratings may
have the same yield.
The payment of principal and interest on most
securities purchased by the Funds will depend upon the ability of
the issuers to meet their obligations. An issuer's obligations
under its debt securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and
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remedies of creditors, such as the Federal Bankruptcy Code, and
laws, if any, which may be enacted by Federal or state
legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement
of such obligations or, in the case of governmental entities,
upon the ability of such entities to levy taxes. The power or
ability of an issuer to meet its obligations for the payment of
interest on, and principal of, its debt securities may be
materially adversely affected by litigation or other conditions.
NET ASSET VALUE AND DIVIDENDS
Net asset value per share of each Fund is calculated by
adding the value of all portfolio securities and other assets
belonging to the particular Fund, subtracting the Fund's
liabilities of the Fund, and dividing the result by the number of
outstanding shares of that Fund. The net asset value per share
for each Fund is calculated separately. Each Fund is charged
with the direct expenses of that Fund, and with a share of the
general expenses of Emerald Funds. Subject to the provisions of
the Agreement and Declaration of Trust, determinations by the
Board of Trustees as to the direct and allocable expenses, and
the allocable portion of any general assets, with respect to a
particular Fund are conclusive.
Emerald Funds uses the amortized cost method of
valuation to value each Fund's portfolio securities, pursuant to
which an instrument is valued at its cost initially and
thereafter a constant amortization to maturity of any discount or
premium is assumed, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This
method may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument. The market value of portfolio
securities held by a Fund can be expected to vary inversely with
changes in prevailing interest rates.
Each Fund attempts to maintain a dollar-weighted
average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share. In this regard,
except for securities subject to repurchase agreements, no Fund
will purchase a security deemed to have a remaining maturity of
more than thirteen months within the meaning of the Investment
Company Act of 1940 nor maintain a dollar-weighted average
maturity which exceeds ninety days. The Board of Trustees has
also established procedures that are intended to stabilize the
net asset value per share of each Fund for purposes of sales and
redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem
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appropriate, of the extent, if any, to which the net asset value
per share of each Fund calculated by using available market
quotations deviates from $1.00 per share. In the event such
deviation exceeds one-half of one percent, the Board will
promptly consider what action, if any, should be initiated. If
the Board believes that the extent of any deviation from a $1.00
amortized cost price per share may result in material dilution or
other unfair results to new or existing investors, it has agreed
to take such steps as it considers appropriate to eliminate or
reduce to the extent reasonably practicable any such dilution or
unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the average portfolio
maturity; withholding or reducing dividends; redeeming shares in
kind; reducing the number of outstanding shares without monetary
consideration; or utilizing a net asset value per share
determined by using available market quotations.
Should Emerald Funds incur or anticipate any unusual
significant expense or loss which might affect disproportionately
the income of a Fund, the Board of Trustees would, at that time,
consider whether to adhere to its present dividend policies with
respect to the Funds, which are described in the Prospectus, or
to revise the policies in order to mitigate, to the extent
possible, the disproportionate effect the expense or loss might
have on the income of a Fund for a particular period.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in Emerald Funds are sold on a continuous basis
by Emerald Asset Management, Inc. [As described in the
Prospectus, except as noted below, shares of the Treasury Trust
Fund and the Prime Trust Fund are sold only to Barnett Bank,
N.A. and its affiliates ("Barnett") acting on their own behalf or
on behalf of their customer accounts (except employee benefit
plan accounts) that invest at least $1 million in a Fund. This
minimum investment amount does not apply to customer accounts
that owned Fund shares on November 30, 1996. In addition, Fund
shares are sold to institutional investors, other than Barnett,
that invest at least $1 million in a Fund.]
Under the Investment Company Act of 1940, Emerald Funds
may suspend the right of redemption or postpone the date of
payment for shares of the Funds during any period when (a)
trading on the New York Stock Exchange (the "Exchange") is
restricted by applicable rules and regulations of the Securities
and Exchange Commission; (b) the Exchange is closed for other
than customary weekend and holiday closings; (c) the Securities
and Exchange Commission has by order permitted such suspension;
or (d) an emergency exists as determined by the Securities and
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Exchange Commission. (Emerald Funds may also suspend or postpone
the recordation of the transfer of its shares upon an occurrence
of any of the foregoing conditions.)
In addition to the situations described in the
Prospectus under "Redemption of Shares," Emerald Funds may redeem
shares involuntarily to reimburse a Fund for any loss sustained
by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the
Prospectus from time to time.
Shares of the Funds are not bank deposits, and are
neither insured by, guaranteed by, obligations of, nor otherwise
supported by the U.S. Government, any governmental agency, the
Adviser or any other bank.
DESCRIPTION OF SHARES
Emerald Funds is a Massachusetts business trust. Under
Emerald Funds' Agreement and Declaration of Trust, the beneficial
interest in Emerald Funds may be divided into an unlimited number
of full and fractional transferable shares. The Agreement and
Declaration of Trust authorizes the Board of Trustees to classify
or reclassify any unissued shares of Emerald Funds into one or
more additional classes by setting or changing, in any one or
more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions,
limitations, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Board of Trustees
has authorized the issuance of thirty-three classes of shares.
Two of these classes represent interests in the Treasury Trust
Fund and the Prime Trust Fund. The remaining classes represent
interests in other investment portfolios of Emerald Funds. The
Trustees may similarly classify or reclassify any particular
class of shares into one or more series.
Each share in the Treasury Trust Fund and the Prime
Trust Fund has a par value of $.001, represents an equal
proportionate interest in the particular Fund involved and is
entitled to such dividends and distributions earned on such
Fund's assets as are declared in the discretion of the Board of
Trustees.
In the event of a liquidation or dissolution of Emerald
Funds or an individual Fund, shareholders of a particular Fund
would be entitled to receive the assets available for
distribution belonging to such Fund, and a proportionate
distribution, based upon the relative net asset values of Emerald
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Funds' respective investment portfolios, of any general assets
not belonging to any particular portfolio which are available for
distribution. Shareholders of a Fund are entitled to participate
in the net distributable assets of a particular Fund involved in
liquidation, based on the number of shares of the Fund that are
held by each shareholder.
Shareholders of the Funds, as well as those of any
other investment portfolio now or hereafter offered by Emerald
Funds, will vote together in the aggregate and not separately on
a Fund-by-Fund basis, except as otherwise required by law or when
permitted by the Board of Trustees. Rule 18f-2 under the
Investment Company Act of 1940 provides that any matter required
to be submitted to the holders of the outstanding voting
securities of an investment company such as Emerald Funds shall
not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding shares of each
Fund affected by the matter. A Fund is affected by a matter
unless it is clear that the interests of each Fund in the matter
are substantially identical or that the matter does not affect
any interest of the Fund. Under the Rule, the approval of an
investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to
a Fund only if approved by a majority of the outstanding shares
of such Fund. However, the Rule also provides that the
ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of
Trustees may be effectively acted upon by shareholders of Emerald
Funds voting together in the aggregate without regard to
particular investment portfolios. Shares of Emerald Funds have
non-cumulative voting rights and, accordingly, the holders of
more than 50% of Emerald Funds' outstanding shares (irrespective
of Fund) may elect all Trustees.
Shares have no preemptive rights and only such
conversion and exchange rights as the Board of Trustees may grant
in its discretion. When issued for payment as described in the
Prospectuses, shares will be fully paid and nonassessable by
Emerald Funds.
There will normally be no meetings of shareholders for
the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been
elected by shareholders. If such should occur, the Trustees then
in office will call a shareholders meeting for the election of
Trustees. Except as set forth above, the Trustees shall continue
to hold office and may appoint successor Trustees. The Agreement
and Declaration of Trust provides that meetings of the
shareholders of Emerald Funds shall be called by the Trustees
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upon the written request of shareholders owning at least 10% of
the outstanding shares entitled to vote.
Emerald Funds' Agreement and Declaration of Trust
authorizes the Board of Trustees, without shareholder approval
(unless otherwise required by applicable law), to: (a) sell and
convey the assets belonging to a class of shares to another
management investment company for consideration which may include
securities issued by the purchaser and, in connection therewith,
to cause all outstanding shares of such class to be redeemed at a
price which is equal to their net asset value and which may be
paid in cash or by distribution of the securities or other
consideration received from the sale and conveyance; (b) sell and
convert the assets belonging to a class of shares into money and,
in connection therewith, to cause all outstanding shares of such
class to be redeemed at their net asset value; or (c) combine the
assets belonging to a class of shares with the assets belonging
to one or more other classes of shares if the Board of Trustees
reasonably determines that such combination will not have a
material adverse effect on the shareholders of any class
participating in such combination and, in connection therewith,
to cause all outstanding shares of any such class to be redeemed
or converted into shares of another class of shares at their net
asset value. However, the exercise of such authority may be
subject to certain restrictions under the Investment Company Act
of 1940. The Board of Trustees may authorize the termination of
any class of shares after the assets belonging to such class have
been distributed to its shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional
tax considerations generally affecting the Funds and their
shareholders that are not described in the Prospectus. No
attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the discussion
here and in the Prospectus is not intended as substitute for
careful tax planning. Investors are advised to consult their tax
advisers with specific reference to their own tax situations.
Investment company taxable income earned by the
Treasury Trust Fund or the Prime Trust Fund will be distributed
by the Funds to their shareholders, and will be taxable to
shareholders as ordinary income whether paid in cash or
additional shares. In general, investment company taxable income
will be a Fund's taxable income subject to certain adjustments
and excluding the excess of any net long-term capital gain for
the taxable year over the net short-term capital loss, if any,
for such year.
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Similarly, while the Funds do not expect to realize
long-term capital gains, any net realized long-term capital gains
will be distributed at least annually, after reduction for
capital loss carryforwards, if any. The Funds will have no tax
liability with respect to such gains and the distributions will
be taxable to shareholders as long-term capital gains, regardless
of how long a shareholder has held Fund shares. Such
distributions will be designated as a capital gains dividend in a
written notice mailed by Emerald Funds to shareholders after the
close of Emerald Funds' taxable year.
A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute specified
percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). The Funds
intend to make sufficient distributions or deemed distributions
of their ordinary taxable income and any capital gain net income
with respect to each calendar year to avoid liability for this
excise tax.
Each Fund is treated as a separate entity for the
purpose of determining the Fund's qualification as a "regulated
investment company" under the Internal Revenue Code. Although
each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all liability for
federal income taxes, depending upon the extent of Emerald Funds'
activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting
business, the Funds may be subject to the tax laws of such states
or localities.
In addition to the foregoing requirements, at the close
of each quarter of its taxable year, at least 50% of the value of
each Fund's assets must consist of cash and cash items, U.S.
Government securities, securities of other regulated investment
companies, and securities of other issuers (as to which a Fund
has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Fund does not hold
more than 10% of the outstanding voting securities of such
issue), and no more than 25% of the value of each Fund's total
assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which such Fund
controls and which are engaged in the same or similar trades or
businesses.
If for any taxable year a Fund does not qualify for the
special federal income tax treatment afforded regulated
investment companies, all of its taxable income will be subject
to federal income tax at regular corporate rates (without any
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<PAGE>
deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable as ordinary income to
shareholders to the extent of the Fund's current and accumulated
earnings and profits and would be eligible for the dividends
received deduction for corporations.
A Fund will be required in certain cases to withhold
and remit to the U.S. Treasury 31% of the taxable dividends or
gross proceeds realized upon sale paid to shareholders who have
failed to provide a correct tax identification number in the
manner required, who are subject to withholding by the Internal
Revenue Service for failure properly to include on their return
payments of taxable interest or dividends, or who have failed to
certify to the Fund that they are not subject to back-up
withholding when required to do so or that they are "exempt
recipients."
MANAGEMENT OF EMERALD FUNDS
TRUSTEES AND OFFICERS
The Trustees and officers of Emerald Funds, their
addresses, principal occupations during the past five years and
other affiliations are as follows:
<TABLE>
<CAPTION>
Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ---------------- ------------- ----------------------------
<S> <C> <C>
Chesterfield H. Smith* Chairman of Senior Partner of the law
Suite 3000 the Board firm of Holland and Knight;
701 Brickell Avenue of Trustees Director, Greenwich Air
Miami, FL 33101 Services, Inc. (an aircraft
Age 78 and engine repair company);
Director, Citrus and Chemical
Bank; Director, Citrus and
Chemical Bancorporation (bank
holding company of Citrus and
Chemical Bank).
Raynor E. Bowditch Trustee President, Bowditch
4811 Beach Blvd. Insurance Corporation (a
Suite 105 general lines independent
Jacksonville, FL 33207 agency); Director, General
Age 62 Truck Equipment and Trailer
Sales; Director, Greater
Jacksonville Fair Association.
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ---------------- ------------- ----------------------------
<S> <C> <C>
Mary Doyle Trustee Professor of Law, University
University of Miami of Miami Law School, 1995
Law School to present; Dean in Residence,
1311 Miller Drive Association of American Law
Coral Gables, FL 33124 Schools, 1994 to date; Dean,
Age 52 University of Miami School of
Law, 1986 to 1994.
Albert D. Ernest* Trustee President, Albert Ernest
1560 Lancaster Terrace Enterprises (personal
Suite 1402 investments), 1991 to date;
Jacksonville, FL 32204 President and Chief Operating
Age 65 Officer, Barnett Banks, Inc.,
1988 to 1991; Director,
Barnett Banks, Inc., 1982 to
1991; Director, Florida Rock
Industries, Inc. (mining and
construction materials);
Director, FRP Properties, Inc.
(transportation, hauling and
real estate development);
Director, Regency Realty,
Inc.; Director, Stein Mart,
Inc. (retail); and Director,
Wickes Lumber Company.
John G. Grimsley* Trustee and Partner of the law firm
50 N. Laura St. President of Grimsley Marker & Iseley,
Suite 3300 P.A.; Member of the law
Jacksonville, FL 32202 firm of Mahoney Adams & Criser,
Age 58 P.A. from 1966 to 1996.
Harvey R. Holding Trustee Retired; Executive Vice
189 Laurel Lane President and Chief Financial
Ponte Vedra Beach, Officer, BellSouth Corp.,
FL 32082 1990 to 1993; Vice Chairman
Age 61 of the Board of BellSouth
Corp., 1991 to 1993; Director,
Golden Poultry Company, Inc.
William B. Blundin Executive Executive Vice President,
125 West 55th Street Vice President BISYS Fund Services, Inc.,
New York, NY 10019 March 1995 to present; Vice
Age 57 President of Emerald Asset
Management, Inc., March 1995
to present; Vice Chairman of
the Board of Concord Holding
Corporation and Distributor,
July 1993 to March 1995;
Director and President of
Concord Holding Corporation
and Distributor, February 1987
to March 1995.
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ---------------- ------------- ----------------------------
<S> <C> <C>
Hugh Fanning Vice President Employee of BISYS Fund
BISYS Fund Services Services, Inc., August 1992
3435 Stelzer Road to present; Director of
Columbus, OH 43219-3035 Marketing, Ketchum
Age 42 Communications, July 1987 to
August 1992
J. David Huber Vice President Employee of BISYS Fund
BISYS Fund Services Services, Inc., June 1987 to
3435 Stelzer Road present.
Columbus, OH 43219-30-35
Age 49
Martin R. Dean Treasurer Employee of BISYS Fund
BISYS Fund Services Services, Inc., May 1994
3435 Stelzer Road to present; Senior Manager
Columbus, OH 43219-3035 at KPMG Peat Marwick prior
Age 32 thereto.
Jeffrey A. Dalke Secretary Partner, Drinker Biddle &
Philadelphia National Reath (law firm).
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Age 46
George Martinez Assistant Senior Vice President and
BISYS Fund Services Secretary Director of Legal and
3435 Stelzer Road Compliance Services, BISYS
Columbus, OH 43218-3035 Fund Services, Inc., March
Age 36 1995 to present; Senior Vice
President, Emerald Asset
Management, Inc., August 1995
to present; Vice President and
Associate General Counsel,
Alliance Capital Management,
June 1989 to March 1995.
William J. Tomko Vice President Employee of BISYS Fund
BISYS Fund Services Services, Inc., April 1987
3435 Stelzer Road to present.
Columbus, OH 43219-3035
Age 36
Robert Tuch Assistant Employee of BISYS Fund
BISYS Fund Services Secretary Services, Inc., June 1991 to
3435 Stelzer Road present; Assistant Secretary,
Columbus, OH 43219-3035 Emerald Asset Management, Inc.,
Age 44 August 1995 to present; Vice
President and Associate General
Counsel with National Securities
Research Corp., July 1990 to June
1991.
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ---------------- ------------- ----------------------------
<S> <C> <C>
Alaina Metz Assistant Chief Administrator,
BISYS Fund Services Secretary Administrative and
3435 Stelzer Road Regulatory Services, BISYS
Columbus, OH 43219-3035 Fund Services, Inc., June 1995
Age 28 to present; Supervisor, Mutual Fund
Legal Department, Alliance Capital
Management, May 1989 to June 1995.
</TABLE>
- ---------------------
*These Trustees may be deemed to be "interested persons" of Emerald Funds
as defined in the Investment Company Act of 1940.
--------------------------------
Each Trustee receives an annual fee of $14,000 plus
$1,500 for each meeting attended and reimbursement of expenses
incurred as a Trustee. Additionally the Chairman and President
of the Board of Trustees each receive an additional annual fee of
$3,500 for service in such capacities. Furthermore, each Trustee
who serves on a special committee appointed by the Board or the
Chairman, or who is assigned a special project by the Board or
the Chairman, receives additional compensation in the amount of
$1,000 per day for each meeting attended or $1,000 for each
assignment to a special project plus reimbursement of out-of-
pocket expenses. Remuneration for services rendered during
Emerald Funds' fiscal year ended November 30, 1995 and
distributed to all Trustees and officers as a group was $99,750.
Drinker Biddle & Reath, of which Mr. Dalke is a partner, receives
legal fees as counsel to Emerald Funds. As of _______, 1996,
the Trustees and officers of Emerald Funds, as a group, owned
less than 1% of the outstanding shares of each Fund and each of
the other investment portfolios of the Trust.
The following chart provides certain information about
the fees received by the Emerald Fund's trustees for their
services as members of the Board of Trustees and Committees
thereof.
-24-
<PAGE>
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM
AGGREGATE RETIREMENT ESTIMATED EMERALD
COMPENSATION BENEFITS ANNUAL FUNDS
FROM THE ACCRUED AS BENEFITS AND FUND
NAME OF PERSON EMERALD PART OF FUND UPON COMPLEX* PAID
AND POSITION FUNDS EXPENSES RETIREMENT TO DIRECTORS
-------------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
Chesterfield H. Smith $20,750 N/A N/A $20,750
Chairman of the Board
of Trustees
John G. Grimsley $26,000 N/A N/A $26,000
President and Trustee
Raynor E. Bowditch $19,000 N/A N/A $19,000
Trustee
Mary Doyle $20,500 N/A N/A $20,500
Trustee
Albert D. Ernest** $13,500 N/A N/A $13,500
Trustee
Harvey R. Holding*** N/A N/A N/A N/A
Trustee
</TABLE>
______________________________
* The "Fund Complex" consists solely of Emerald Funds.
** Mr. Ernest was appointed to the Board of Trustees on May 4, 1995.
*** Mr. Holding was elected to the Board of Trustees on May 29, 1996.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business
trust may, under certain circumstances, be held personally liable
as partners for the obligations of the trust. However, Emerald
Funds' Agreement and Declaration of Trust provides that
shareholders shall not be subject to any personal liability in
connection with the assets of Emerald Funds for the acts or
obligations of Emerald Funds, and that every note, bond,
contract, order or other undertaking made by Emerald Funds shall
contain a provision to the effect that the shareholders are not
personally liable thereunder. The Agreement and Declaration of
Trust provides for indemnification out of the trust property of
any shareholder held personally liable solely by reason of his or
her being or having been a shareholder and not because of his or
her acts or omissions or some other reason. The Agreement and
Declaration of Trust also provides that Emerald Funds shall, upon
request, assume the defense of any claim made against any
shareholder for any act or obligation of Emerald Funds, and shall
-25-
<PAGE>
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which Emerald Funds itself would be
unable to meet its obligations.
The Agreement and Declaration of Trust further provides
that all persons having any claim against the Trustees or Emerald
Funds shall look solely to the trust property for payment; that
no Trustee of Emerald Funds shall be personally liable for or on
account of any contract, debt, tort, claim, damage, judgment or
decree arising out of or connected with the administration or
preservation of the trust property or the conduct of any business
of Emerald Funds; and that no Trustee shall be personally liable
to any person for any action or failure to act except by reason
of his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties as Trustee.
With the exception stated, the Agreement and Declaration of Trust
provides that a Trustee is entitled to be indemnified against all
liabilities and expenses reasonably incurred by him or her in
connection with the defense or disposition of any proceeding in
which he or she may be involved or with which he or she may be
threatened by reason of his or her being or having been a
Trustee, and that the Trustees will indemnify representatives and
employees of Emerald Funds to the same extent that Trustees are
entitled to indemnification.
ADVISORY SERVICES
Barnett Capital Advisors, Inc. (the "Adviser") assumed,
as of June 29, 1996, the responsibilities of Barnett Banks Trust
Company, N.A. ("BBTC") as investment adviser to each Fund. As of
December 1, 1996, the Adviser assumed sole advisory
responsibility for the Funds under a new agreement, and Rodney
Square Management Corporation ("Rodney Square"), a wholly-owned
subsidiary of Wilmington Trust Company , which served as the
Funds' former sub-investment adviser, ceased to provide sub-
investment advisory services to the Funds.
In its Investment Advisory Agreement, the Adviser has
agreed to provide the services described in the Prospectus and to
pay all expenses it incurs in connection with its advisory
activities, other than the cost of securities and other
investments, including brokerage commissions and other
transaction costs, if any, purchased or sold for each Fund.
For the services provided and expenses assumed pursuant
to the Investment Advisory Agreement, Emerald Funds has agreed
to pay the Adviser fees, computed daily and paid monthly, at
the annual rate of .10% of the average net assets of each Fund.
The fees payable to the Adviser are not subject to reduction as
the value of each Fund's net assets increases. From time to
-26-
<PAGE>
time, however, the Adviser may waive fees or reimburse the
Funds for expenses either voluntarily or as required by certain
state securities laws. See "Management of Emerald Funds -
Distribution and Administration Services" below for further
information regarding the waiver of fees and reimbursement of
expenses by the Adviser with respect to the Funds. For the
fiscal years ended November 30, 1995, 1994 and 1993 Rodney
Square was entitled to receive sub-advisory fees from the Funds
at the contractual annual rate of .15% of the average net assets
of each Fund. During these three fiscal years Rodney Square
received (net of waivers and reimbursements) sub-advisory fees
totalling $212,078, $ 194,762 and $244,422, respectively, for the
Treasury Trust Fund and $173,413, $162,403 and $166,258,
respectively, for the Prime Trust Fund. For the fiscal year
ended November 30, 1995, Rodney Square reimbursed sub-advisory
fees totalling $32,074 for the Prime Trust Fund and $32,055 for
the Treasury Trust Fund. For the fiscal years ended November 30,
1994 and 1993 Rodney Square waived sub-advisory fees totalling
$28,256 and $17,525 for the Treasury Trust Fund and $25,863 and
$23,338 for the Prime Trust Fund.
Under the Investment Advisory Agreement, the Adviser
is not liable for any error of judgment or mistake of law or
for any loss suffered by Emerald Funds in connection with the
performance of the Agreement, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Adviser
in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
The Glass-Steagall Act, among other things, prohibits
banks from engaging to any extent in the business of underwriting
securities, although national and state-chartered banks generally
are permitted to purchase and sell securities upon the order and
for the account of their customers. In 1971, the United States
Supreme Court held in INVESTMENT COMPANY INSTITUTE V. CAMP that
the Glass-Steagall Act prohibits a national bank from operating a
fund for the collective investment of managing agency accounts.
Subsequently, the Board of Governors of the Federal Reserve
System (the "Board") issued a regulation and interpretation to
the effect that the Glass-Steagall Act and such decision forbid a
bank holding company registered under the Federal Bank Holding
Company Act of 1956 (the "Holding Company Act") or any non-bank
affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in
the issuance of its shares, but do not prohibit such a holding
company or affiliate from acting as investment adviser, transfer
agent and custodian to such an investment company. In 1981, the
United States Supreme Court held in BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM V. INVESTMENT COMPANY INSTITUTE that the
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<PAGE>
Board did not exceed its authority under the Holding Company Act
when it adopted its regulation and interpretation authorizing
bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment
companies.
The Adviser believes, with respect to its activities as
required by the Investment Advisory Agreement and as
contemplated by the Prospectus and this Statement of Additional
Information, that, if the question were properly presented, a
court should hold that the Adviser may perform such activities
without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. It should be noted, however, that
there have been no cases deciding whether banks may perform
services comparable to those performed by the Adviser and that
future changes in either federal or state statutes and
regulations relating to the permissible activities of banks and
trust companies and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations
of present and future statutes and regulations, could prevent the
Adviser from continuing to perform such services for the Funds.
If the Adviser were prohibited from continuing to perform
advisory services for the Funds, it is expected that the Board
of Trustees would recommend that the Funds enter into another
agreement or would consider the possible termination of the
Funds. Any new advisory agreement would be subject to
shareholder approval.
On the other hand, as described herein, Emerald Funds
is currently distributed by Emerald Asset Management, Inc., and
BISYS Fund Services Limited Partnership provides the Funds with
administrative services. If current restrictions under the
Glass-Steagall Act preventing a bank from sponsoring, organizing,
controlling or distributing shares of an investment company were
relaxed, the Funds expect that the Adviser would consider the
possibility of offering to perform some or all of the services
now provided by BISYS Fund Services Limited Partnership and
Emerald Asset Management, Inc. From time to time, legislation
modifying such restrictions has been introduced in Congress
which, if enacted, would permit a bank holding company to
establish a non-bank subsidiary having the authority to organize,
sponsor and distribute shares of an investment company. The
Funds therefore expect that if this or similar legislation were
enacted, the Adviser's parent bank holding company would consider
the possibility of one of its non-bank subsidiaries offering to
perform additional services now provided by BISYS Fund Services
Limited Partnership and Emerald Asset Management, Inc. In this
regard it may be noted that the Adviser has entered into an
agreement whereunder the Adviser (or an affiliate) may acquire
Emerald Asset Management, Inc. under specified conditions. It is
not possible, of course, to predict whether or in what form such
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<PAGE>
legislation might be enacted or the terms upon which the Adviser
or such a non-bank affiliate might offer to provide services for
consideration by the Board of Trustees.
DISTRIBUTION AND ADMINISTRATION SERVICES
Emerald Funds has entered into a distribution agreement
with Emerald Asset Management, Inc. (the "Distributor") under
which the Distributor, as agent, sells shares of each Fund on a
continuous basis. The Distributor has agreed to use its best
efforts to solicit orders for the sale of shares, although it is
not obliged to sell any particular amount of shares. The
Distributor pays the cost of printing and distributing
prospectuses to persons who are not shareholders of the Funds
(excluding preparation and printing expenses necessary for the
continued registration of the Funds' shares) and of printing and
distributing all sales literature. No compensation is payable by
the Funds to the Distributor for its distribution services.
BISYS Fund Services Limited Partnership (the
"Administrator"), a wholly-owned subsidiary of The BISYS Group,
Inc., serves as administrator to each Fund. In the
administration agreement, the Administrator has agreed to provide
administrative services as described in the Prospectus. The
Administrator has also agreed to pay all expenses incurred by it
in connection with its activities under its agreement except
certain out-of-pocket expenses relating to its fund accounting
responsibilities and as otherwise described in this Statement of
Additional Information and the Prospectus.
Emerald Funds has agreed to pay the Administrator fees
for its services as Administrator, computed daily and paid
monthly, at the effective annual rate of .0775% of the first $5
billion of the aggregate net assets of all portfolios of Emerald
Funds, .07% of the next $2.5 billion, .065% of the next $2.5
billion and .05% of all assets exceeding $10 billion. In the
event the aggregate average daily net assets for all Funds falls
below $3 billion, the fee will be increased to .08% of the
aggregate average daily net assets. From time to time, the
Administrator may waive fees or reimburse the Fund for expenses,
either voluntarily or as required by certain state securities
laws.
For the fiscal years ended November 30, 1995, 1994 and
1993, Concord Holding Corporation, Emerald Funds' prior
administrator which was acquired by The BISYS Group, Inc. in
1995, received (net of waivers and reimbursements) administration
fees totalling $212,078, $194,762 and $244,422, respectively, for
the Treasury Trust Fund and $173,413, $162,403 and $166,258,
respectively, for the Prime Trust Fund. For the fiscal year
ended November 30, 1995, the prior administrator reimbursed
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<PAGE>
administration fees totalling $32,074 for the Prime Trust Fund
and $32,055 for the Treasury Trust Fund. For the fiscal years
ended November 30, 1994 and 1993, the prior administrator waived
administration fees totalling $28,256 and $17,525 respectively,
for the Treasury Trust Fund and $25,863 and $23,338,
respectively, for the Prime Trust Fund.
In addition, if the total expenses borne by either Fund
in any fiscal year exceed the expense limitations imposed by
applicable state securities regulations, Emerald Funds may deduct
from the payments to be made with respect to such Fund to the
Adviser and the Administrator, respectively, or the Adviser and
the Administrator will bear, a portion of the amount of such
excess to the extent required by such regulations in proportion
to the fees otherwise payable to them for such year. The
Adviser's obligation with respect to any Fund, however, is
limited to the amount of its fees from such Fund. Such amounts,
if any, will be estimated and accrued daily and paid on a monthly
basis. As of the date of this Statement of Additional
Information, to the knowledge of Emerald Funds, there were no
state expense limitations applicable to either Fund.
The administration agreement provides that the
Administrator shall not be liable for any error of judgment or
mistake of law or any loss suffered by Emerald Funds in
connection with the performance of the administration agreement,
except a loss resulting from willful misfeasance, bad faith or
negligence in the performance of its duties or from the reckless
disregard by it of its obligations and duties thereunder.
CUSTODIAN AND TRANSFER AGENT
Emerald Funds has appointed The Bank of New York, 90
Washington Street, New York, New York 10286 as custodian for the
Funds. BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus,
Ohio 43219-3035 provides transfer agency and dividend disbursing
services for the Funds.
OPERATING EXPENSES
Operating expenses borne by the Funds include taxes;
interest; fees and expenses of Trustees and officers who are not
also officers, directors, employees or holders of 5% or more of
the outstanding voting securities of the Adviser, the
Administrator or any of their affiliates; Securities and Exchange
Commission fees; state securities registration and qualification
fees; advisory fees; administration fees; charges of the
custodian and of the transfer and dividend disbursing agent;
certain insurance premiums; outside auditing and legal expenses;
costs of preparing and printing prospectuses for regulatory
purposes and for distribution to shareholders; costs of
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<PAGE>
shareholder reports and meetings; and any extraordinary expenses.
The Funds also pay any brokerage fees, commissions and other
transaction charges (if any) incurred in connection with the
purchase and sale of its portfolio securities.
INDEPENDENT ACCOUNTANTS/EXPERTS
Price Waterhouse LLP, independent accountants, 1177
Avenue of the Americas, New York, New York 10036, serve as
independent accountants for Emerald Funds. The financial
statements dated November 30, 1995 which are incorporated by
reference into this Statement of Additional Information have been
included in reliance on the report of Price Waterhouse LLP given
on the authority of said firm as experts in auditing and
accounting.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107,
are counsel to Emerald Funds and will pass upon the legality of
the shares offered by the Prospectus.
ADDITIONAL INFORMATION ON YIELD
The "yields" and "effective yields" of each Fund are
calculated according to formulas prescribed by the Securities and
Exchange Commission. The standardized seven-day yield for each
Fund is computed separately by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-
existing account in the particular Fund involved having a balance
of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
and multiplying the base period return by (365/7). The net
change in the value of an account in a Fund includes the value of
additional shares purchased with dividends from the original
share, and dividends declared on both the original share and any
such additional shares, net of all fees, other than nonrecurring
account or sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period and the
Fund's average account size. The capital changes to be excluded
from the calculation of the net change in account value are
realized gains and losses from the sale of securities and
unrealized appreciation and depreciation. The effective
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<PAGE>
annualized yield for each Fund is computed by compounding a
particular Fund's unannualized base period return (calculated as
above) by adding 1 to the base period return, raising the sum to
a power equal to 365 divided by 7, and subtracting 1 from the
result. The fees which may be imposed by banks or other
financial intermediaries on their customers for cash management
services are not reflected in Emerald Funds' calculations of
yields for the Funds.
The current yield for each of the Funds may be obtained
by calling the Distributor at 800-637-3759. For the seven-day
period ending May 31, 1996, the annualized yields (after fee
waivers) of the Treasury Trust Fund and Prime Trust Fund were
4.92% and 5.06%, respectively, and the effective yields (after
fee waivers) of such Funds were 5.05% and 4.92%, respectively.
From time to time, the Funds may include general
comparative information, such as statistical data regarding
inflation, securities indices or the features or performance of
alternative investments, in advertisements, sales literature and
reports to shareholders. The Funds may also include
calculations, such as hypothetical compounding examples, which
describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of
assumptions and are not indicative of the performance of any
Fund.
In addition, in such communications, the Adviser may
offer opinions on current economic conditions.
MISCELLANEOUS
As used in this Statement of Additional Information and
in the Prospectuses a "majority of the outstanding shares" of a
Fund means the lesser of (1) 67% of the shares of the particular
Fund represented at a meeting at which the holders of more than
50% of the outstanding shares of such Fund are present in person
or by proxy, or (2) more than 50% of the outstanding shares of
such Fund.
As of September ___, 1996, the Adviser and its
affiliated banks owned of record substantially all of the
outstanding shares of the Treasury Trust Fund and Prime Trust
Fund on behalf of their customer accounts. The Adviser and such
affiliated banks were also the beneficial owners of the following
percentages of shares that were also the beneficial owners of the
following percentages of shares that were outstanding on such
date because the Adviser possessed voting or investment
discretion with respect to such shares: Treasury Trust Fund -
Institutional Shares (100%), Prime Trust Fund - Institutional
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<PAGE>
Shares (100%), Treasury Fund - Institutional Shares (91.07%),
Treasury Fund - Service Shares (86.35%), Prime Fund -
Institutional Shares (53.06%), Prime Fund - Service Shares
(99.74%), Tax-Exempt Fund - Institutional Shares (100.00%), Tax-
Exempt Fund - Service Shares (18.25%), Equity Fund -Institutional
Shares (99.55%), Equity Value Fund - Institutional Shares (100%);
Small Capitalization Fund - Institutional Fund (99.67%), Balanced
Fund - Institutional Shares (99.51%), U.S. Government Securities
Fund - Institutional Shares (98.38%), Managed Bond Fund -
Institutional Shares (99.27%), International Equity Fund -
Institutional Shares (100%); Short-Term Fixed Income Fund -
Institutional Shares (100%); and Florida Tax-Exempt Fund -
Institutional Shares (95.16%).
As of September ___, 1996, the name, address and
percentage of the outstanding shares held by other investors who
may have owned of record or beneficially 5% or more of the
outstanding shares of a particular class of a Fund of the Trust
were as follows:
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<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Class of of
Fund Shares Name and Address Ownership
- ------- -------- ---------------- ----------
<S> <C> <C> <C>
Equity Fund Retail National Financial Services 56.16%
Corporation for the Exclusive
Benefit of Our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008
University of West Florida 6.33%
Foundation
11000 University Parkway
Pensacola, FL 32514-5750
Equity Value Fund Retail Emerald Asset Management, Inc. 100.00%
3435 Stelzer Road
Columbus, OH 43219
International Retail Emerald Asset Management, Inc. 100.00%
Equity Fund 3435 Stelzer Road
Columbus, OH 43219
Small Retail National Financial Services 5.08%
Capitalization Corporation for the Exclusive
Fund Benefit of Our Customers and
John T.R. Hayt, John T.R. Hayt
Living Trust,
1169 Queens Harbor Blvd.
Jacksonville, FL 32225
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Class of of
Fund Shares Name and Address Ownership
- ------- -------- ---------------- ----------
<S> <C> <C> <C>
Short-Term Fixed Retail National Financial Services 9.11%
Income Fund Corporation for the Exclusive
Benefit of Our Customers/FBO
John W. Selby
2888 La Concha Dr.
Clearwater, FL 34622
National Financial Services 6.70%
Corporation for the Exclusive
Benefit of Our Customers/
Manley Holdings Ltd.
Ville St. Laurent H4N 1X7
PQ Canada
National Financial Services 13.36%
Corporation for the Exclusive
Benefit of Our Customers/FBO
George A. Zellner
530 Park St.
Jacksonville, FL 32204
U.S. Government Retail Barnett Bank & Trust Company 11.74%
Securities Fund N.A.
Customer Capital Network
Services
P.O. Box 40200
Jacksonville, FL 32203-0200
National Financial Services 53.40%
Corporation for the Exclusive
Benefit of Our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Class of of
Fund Shares Name and Address Ownership
- ------- -------- ---------------- ----------
<S> <C> <C> <C>
Prime Fund Retail National Financial Services 99.42%
Corporation for the Exclusive
Benefit of Our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008
Tax-Exempt Fund Retail National Financial Services 99.31%
Corporation for the Exclusive
Benefit of Our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008
Treasury Fund Institutional Wilmington Trust Company 8.86%
Attn: Margaret Wilhelm
Mutual Funds
1100 N. Market St.
Wilmington, DE 19890
Treasury Fund Service Hare & Co. 13.64%
Attn: Frank Nataro
Attn: STIF/Master Note
One Wall Street, 5th Floor
New York, NY 10286
Prime Fund Institutional Wilmington Trust Company 46.94%
Attn: Margaret Wilhelm
Mutual Funds
1100 N. Market St.
Wilmington, DE 19890
Tax-Exempt Fund Service Hare & Co. 77.39%
Attn: Frank Nataro
Attn: STIF/Master Note
One Wall Street, 5th Floor
New York, NY 10286
</TABLE>
The Prospectus and this Additional Statement do not
contain all the information included in the Registration
-36-
<PAGE>
Statement filed with the SEC under the Securities Act of 1933
with respect to the securities offered by the Funds' Prospectus.
Certain portions of the Registration Statement have been omitted
from the Prospectus and this Additional Statement pursuant to the
rules and regulations of the SEC. The Registration Statement
including the exhibits filed therewith may be examined at the
office of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this
Additional Statement as to the contents of any contract or other
documents referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement of
which the Prospectus and this Additional Statement form a part,
each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
The audited financial statements and related report of
Price Waterhouse LLP, independent auditors, contained in the
Funds' annual report to shareholders for the fiscal year ended
November 30, 1995 (the "Annual Report") and the unaudited
financial statements contained in the Funds' semi-annual report
to shareholders for the period ended May 31, 1996 (the "Semi-
Annual Report") are hereby incorporated herein by reference. No
other parts of the Annual Report or Semi-Annual Report are
incorporated by reference. Copies of the Annual Report and Semi-
Annual Report may be obtained by writing to BISYS Fund Services,
Inc., 3435 Stelzer Road, Columbus, Ohio 43219-3035 or by calling
800-637-3759.
-37-
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market. The following
summarizes the rating categories used by Standard and Poor's for
commercial paper:
"A-1" - Issue's degree of safety regarding timely
payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is
satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely
payment. It is, however, somewhat more vulnerable to the adverse
effects of changes and circumstances than an obligation carrying
a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the
ability of issuers to repay punctually promissory obligations not
having an original maturity in excess of 9 months. The following
summarizes the rating categories used by Moody's for commercial
paper:
"Prime-1" - Issuer or related supporting institutions
are considered to have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment capacity
will normally be evidenced by the following characteristics:
leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset
protection; broad margins in earning coverage of fixed financial
charges and high internal cash generation; and well established
access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions
are considered to have a strong capacity for repayment of short-
A-1
<PAGE>
term promissory obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions
have an acceptable capacity for repayment of short-term
promissory obligations. The effects of industry characteristics
and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is
maintained.
"Not Prime" - Issuer does not fall within any of the
Prime rating categories.
The three rating categories of Duff & Phelps for
investment grade commercial paper are "Duff 1," "Duff 2" and
"Duff 3." Duff & Phelps employs three designations, "Duff 1+,"
"Duff 1" and "Duff 1-," within the highest rating category. The
following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"Duff 1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely
payment. Liquidity factors are excellent and supported by good
fundamental protection factors. Risk factors are minor.
"Duff 1-" - Debt possesses high certainty of timely
payment. Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very small.
"Duff 2" - Debt possesses good certainty of timely
payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk factors are
small.
"Duff 3" - Debt possesses satisfactory liquidity, and
other protection factors qualify issue as investment grade. Risk
factors are larger and subject to more variation. Nevertheless,
timely payment is expected.
A-2
<PAGE>
"Duff 4" - Debt possesses speculative investment
characteristics. Liquidity is not sufficient to ensure against
disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.
"Duff 5" - Issuer has failed to meet scheduled
principal and/or interest payments.
Fitch short-term ratings apply to debt obligations that
are payable on demand or have original maturities of up to three
years. The following summarizes the rating categories used by
Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality.
Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as the
"F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate; however,
near-term adverse changes could cause these securities to be
rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal
degree of assurance for timely payment and are vulnerable to
near-term adverse changes in financial and economic conditions.
"D" - Securities are in actual or imminent payment
default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of
credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the
likelihood of an untimely or incomplete payment of principal or
interest of unsubordinated instruments having a maturity of one
year or less which is issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-
A-3
<PAGE>
dealers. The following summarizes the ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson
BankWatch's highest rating category and indicates a very high
degree of likelihood that principal and interest will be paid on
a timely basis.
"TBW-2" - This designation indicates that while the
degree of safety regarding timely payment of principal and
interest is strong, the relative degree of safety is not as high
as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest
investment grade category and indicates that while the debt is
more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is
regarded as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt
with an original maturity of less than one year which is issued
by bank holding companies and their principal bank subsidiaries.
The following summarizes the rating categories used by IBCA for
short-term debt ratings:
"A1" - Obligations are supported by the highest
capacity for timely repayment. Where issues possess a
particularly strong credit feature, a rating of A1+ is assigned.
"A2" - Obligations are supported by a good capacity for
timely repayment.
"A3" - Obligations are supported by a satisfactory
capacity for timely repayment.
"B" - Obligations for which there is an uncertainty as
to the capacity to ensure timely repayment.
"C" - Obligations for which there is a high risk of
default or which are currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard &
Poor's for corporate and municipal debt:
A-4
<PAGE>
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates
an extremely strong capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong
capacity to pay interest and repay principal and differs from AAA
issues only in small degree.
"A" - Debt is considered to have a strong capacity to
pay interest and repay principal although such issues are
somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated
categories.
"BBB" - Debt is regarded as having an adequate capacity
to pay interest and repay principal. Whereas such issues
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on
balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of
the obligation. "BB" indicates the lowest degree of speculation
and "C" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions.
"BB" - Debt has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability
to default, and is dependent upon favorable business, financial
and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating
A-5
<PAGE>
category is also used for debt subordinated to senior debt that
is assigned an actual or implied "B" or "B-" rating.
"CC" - Debt is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC"
rating.
"C" - Debt is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt
rating. The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are
continued.
"CI" - This rating is reserved for income bonds on
which no interest is being paid.
"D" - Debt is in payment default and is used when
interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless
S & P believes such payments will be made during such grace
period. "D" rating is also used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through
"CCC" may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
The following summarizes the ratings used by Moody's for
corporate and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in "Aaa" securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in
"Aaa" securities.
"A" - Bonds possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
A-6
<PAGE>
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess
one of these ratings provide questionable protection of interest
and principal ("Ba" indicates some speculative elements; "B"
indicates a general lack of characteristics of desirable
investment; "Caa" represents a poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C"
bonds may be in default.
Con. (---) - Bonds for which the security depends upon
the completion of some act or the fulfillment of some condition
are rated conditionally. These are bonds secured by (a) earnings
of projects under construction, (b) earnings of projects
unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or
elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each
generic classification from "Aa" to "B" in its bond rating
system. The modifier 1 indicates that the company ranks in the
higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks at the lower end of its generic rating category.
The following summarizes the long-term debt ratings
used by Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly
more than for risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality.
Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
"A" - Debt possesses protection factors which are
average but adequate. However, risk factors are more variable
and greater in periods of economic stress.
A-7
<PAGE>
"BBB" - Debt possesses below average protection factors
but such protection factors are still considered sufficient for
prudent investment. Considerable variability in risk is present
during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses
one of these ratings is considered to be below investment grade.
Although below investment grade, debt rated "BB" is deemed likely
to meet obligations when due. Debt rated "B" possesses the risk
that obligations will not be met when due. Debt rated "CCC" is
well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating
"DP" represents preferred stock with dividend arrearages.
To provide more detailed indications of credit quality,
the "AA," "A," "BBB," "BB" and "B" ratings may be modified by the
addition of a plus (+) or minus (-) sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used
by Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
"F-1+."
"A" - Bonds considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
A-8
<PAGE>
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" -
Bonds that possess one of these ratings are considered by Fitch
to be speculative investments. The ratings "BB" to "C" represent
Fitch's assessment of the likelihood of timely payment of
principal and interest in accordance with the terms of obligation
for bond issues not in default. For defaulted bonds, the rating
"DDD" to "D" is an assessment of the ultimate recovery value
through reorganization or liquidation.
To provide more detailed indications of credit quality,
the Fitch ratings from and including "AA" to "C" may be modified
by the addition of a plus (+) or minus (-) sign to show relative
standing within these major rating categories.
IBCA assesses the investment quality of unsecured debt
with an original maturity of more than one year which is issued
by bank holding companies and their principal bank subsidiaries.
The following summarizes the rating categories used by IBCA for
long-term debt ratings:
"AAA" - Obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial such that adverse changes
in business, economic or financial conditions are unlikely to
increase investment risk substantially.
"AA" - Obligations for which there is a very low
expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase
investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation
of investment risk. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business,
economic or financial conditions may lead to increased investment
risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of
principal and interest is adequate, although adverse changes in
business, economic or financial conditions are more likely to
lead to increased investment risk than for obligations in higher
categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are
assigned one of these ratings where it is considered that
speculative characteristics are present. "BB" represents the
lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of
A-9
<PAGE>
speculation and indicates that the obligations are currently in
default.
IBCA may append a rating of plus (+) or minus (-) to a
rating to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an
untimely repayment of principal or interest over the term to
maturity of long term debt and preferred stock which are issued
by United States commercial banks, thrifts and non-bank banks;
non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for
long-term debt ratings:
"AAA" - This designation represents the highest
category assigned by Thomson BankWatch to long-term debt and
indicates that the ability to repay principal and interest on a
timely basis is very high.
"AA" - This designation indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
"A" - This designation indicates that the ability to
repay principal and interest is strong. Issues rated "A" could
be more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's
lowest investment grade category and indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB"
are, however, more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC," - These designations are
assigned by Thomson BankWatch to non-investment grade long-term
debt. Such issues are regarded as having speculative
characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term
debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through
"CC" may include a plus or minus sign designation which indicates
where within the respective category the issue is placed.
A-10
<PAGE>
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity
concerns and market access risks unique to notes due in three
years or less. The following summarizes the ratings used by
Standard & Poor's Corporation for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit
very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG")
and variable rate demand obligations are designated Variable
Moody's Investment Grade ("VMIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk.
The following summarizes the ratings by Moody's Investors
Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are
of the best quality, enjoying strong protection by established
cash flows, superior liquidity support or demonstrated broad-
based access to the market for refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are
of high quality, with margins of protection ample although not so
large as in the preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are
of favorable quality, with all security elements accounted for
but lacking the undeniable strength of the preceding grades.
Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are
of adequate quality, carrying specific risk but having protection
commonly regarded as required of an investment security and not
distinctly or predominantly speculative.
"SG" - Loans bearing this designation are of
speculative quality and lack margins of protection.
A-11
<PAGE>
D&P uses the ratings described under Corporate and
Municipal Long-Term Debt Ratings for tax-exempt notes and other
short-term obligations.
Fitch uses the short-term ratings described under
Commercial Paper Ratings for municipal notes.
A-12
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in the Prospectuses or Incorporated
by Reference into the Statements of
Additional Information:
(1) Unaudited Financial Statements:
Financial Highlights for the period ended
May 31, 1996 - Treasury Trust Fund and Prime
Trust Fund.
Statements of Assets and Liabilities for the
period ended May 31, 1996 - Treasury Trust
Fund and Prime Trust Fund.
Portfolios of Investments - May 31, 1996 -
Treasury Trust Fund and Prime Trust Fund.
Statements of Operations for the period ended
May 31, 1996 - Treasury Trust Fund and Prime
Trust Fund.
Statements of Changes in Net Assets for the
period ended May 31, 1996 - Treasury Trust
Fund and Prime Trust Fund.
Notes to Financial Statements - May 31, 1996
- Treasury Trust Fund and Prime Trust Fund.
(2) Audited Financial Statements: Financial
Highlights for the fiscal year ended
November 30, 1995 - Treasury Trust Fund and
Prime Trust Fund.
Statements of Assets and Liabilities -
November 30, 1995 - Treasury Trust Fund and
Prime Trust Fund.
Portfolios of Investments - November 30, 1995
- Treasury Trust Fund and Prime Trust Fund.
Statements of Operations for the fiscal year
ended November 30, 1995 - Treasury Trust Fund
and Prime Trust Fund.
Statements of Changes in Net Assets for the
fiscal year ended November 30, 1995 -Treasury
Trust Fund and Prime Trust Fund.
<PAGE>
Notes to Financial Statements - November 30,
1995 - Treasury Trust Fund and Prime Trust
Fund.
Reports of Independent Accountants -
January 24, 1996 - Treasury Trust Fund and
Prime Trust Fund.
(3) All required financial statements are
included in Parts A and B hereof, or
incorporated by reference. All other
financial statements and schedules are
inapplicable.
(b) Exhibits:
(1) Agreement and Declaration of Trust of the
Registrant dated March 15, 1988 is
incorporated by reference to Exhibit (1) to
Registrant's Registration Statement on Form
N-1A, filed on March 21, 1988.
(2) (a) Registrant's Code of Regulations is
incorporated by reference to Exhibit (2)
to Registrant's Registration Statement
on Form N-1A, filed on March 21, 1988.
(b) Amendment No. 1 to Registrant's Code of
Regulations is incorporated by reference
to Exhibit (2) (b) to Registrant's Post-
Effective Amendment No. 1 to
Registration Statement on Form N-1A,
filed on June 7, 1989.
(c) Amendment No. 2 to Registrant's Code of
Regulations.
(3) None.
(4) (a) Form of Generic Share Certificate for
all portfolios of Emerald Funds is
incorporated by reference to Exhibit (4)
(a) to Registrant's Post-Effective
Amendment No. 13 to Registration
Statement on Form N-1A, filed on
September 16, 1994.
(5) (a) Investment Advisory Agreement between
Registrant and Barnett Banks Trust
Company, N.A. (Treasury Trust Fund and
Prime Trust Fund) is incorporated by
C-2
<PAGE>
reference to Exhibit (5) (a) to
Registrant's Post-Effective Amendment
No. 1 to Registration Statement on Form
N-1A, filed on June 7, 1989.
(b) Investment Advisory Agreement between
Registrant and Barnett Banks Trust
Company, N.A. (Tax-Exempt Trust Fund) is
incorporated by reference to Exhibit (5)
(b) to Registrant's Post-Effective
Amendment No. 1 to Registration
Statement on Form N-1A, filed on June 7,
1989.
(c) Investment Advisory Agreement between
Registrant and Barnett Banks Trust
Company, N.A. (Treasury Fund and Prime
Fund) is incorporated by reference to
Exhibit (5) (e) to Registrant's Post-
Effective Amendment No. 1 to
Registration Statement on Form N-1A,
filed on June 7, 1989.
(d) Investment Advisory Agreement between
Registrant and Barnett Banks Trust
Company, N.A. (Equity Fund, Equity
Income Fund, Short-Term Fixed Income
Fund, U.S. Government Securities Fund,
Florida Tax-Exempt Fund, Tax-Exempt
Target Fund (Maturity 1995), Tax-Exempt
Target Fund (Maturity 2000), and Tax-
Exempt Target Fund (Maturity 2005)) is
incorporated by reference to Exhibit (5)
(h) to Registrant's Post-Effective
Amendment No. 5 to Registration
Statement on form N-1A, filed on
December 20, 1991.
(e) Amended Investment Advisory Agreement
between Registrant and Barnett Banks
Trust Company, N.A. (Tax-Exempt Fund) is
incorporated by reference to Exhibit (5)
(f) to Registrant's Post-Effective
Amendment No. 7 to Registration
Statement on Form N-1A, filed on January
29, 1993.
(f) Sub-Investment Advisory Agreement
between Barnett Banks Trust Company,
N.A. and Rodney Square Management
Corporation (Treasury Trust Fund and
Prime Trust Fund) is incorporated by
C-3
<PAGE>
reference to Exhibit (5) (g) to
Registrant's Post-Effective Amendment
No. 7 to Registration Statement on Form
N-1A, filed on January 29, 1993.
(g) Sub-Investment Advisory Agreement
between Barnett Banks Trust Company,
N.A. and Rodney Square Management
Corporation (Tax-Exempt Fund) is
incorporated by reference to Exhibit (5)
(h) to Registrant's Post-Effective
Amendment No. 7 to Registration
Statement on Form N-1A, filed on January
29, 1993.
(h) Sub-Investment Advisory Agreement
between Barnett Capital Advisors, Inc.
and Brandes Investment Partners, L.P.
(International Equity Fund) is
incorporated herein by reference to
Exhibit (5)(h) to Registrant's Post-
Effective Amendment No. 19 to
Registration Statement on Form N-1A,
filed on August 26, 1996.
(i) Amendment No. 1 to Investment Advisory
Agreement between Registrant and Barnett
Banks Trust Company, N.A. dated January
4, 1994 is incorporated by reference to
Exhibit (5) (i) to Registrant's Post-
Effective Amendment No. 10 to
Registration Statement on Form N-1A
filed on January 28, 1994.
(j) Revised Amendment No. 2 to Investment
Advisory Agreement between Registrant
and Barnett Capital Advisors, Inc. is
incorporated herein by reference to
Exhibit (5)(j) to Registrant's Post-
Effective Amendment No. 19 to
Registration Statement on Form N-1A,
filed on August 26, 1996.
(k) Amendment No. 3 to Investment Advisory
Agreement between Registrant and Barnett
Capital Advisors, Inc.
(6) (a) Distribution Agreement between
Registrant and Emerald Asset Management,
Inc. dated as of January 4, 1994 is
incorporated by reference to Exhibit (6)
(b) to Registrant's Post-Effective
C-4
<PAGE>
Amendment No. 10 to Registration
Statement on Form N-1A filed on
January 28, 1994.
(b) Amendment No. 1 to Distribution
Agreement between Registrant and Emerald
Asset Management, Inc. is incorporated
by reference to Exhibit (6) (b) to
Registrant's Post Effective Amendment
No. 17 to Registration Statement on
Form N-1A, filed on February 1, 1996.
(7) None.
(8) (a) Custody Agreement between Registrant and
The Bank of New York is incorporated by
reference to Exhibit (8) (a) to
Registrant's Post-Effective Amendment
No. 1 to Registration Statement on
Form N-1A, filed on June 7, 1989.
(b) Amendment to Custody Agreement with
respect to the addition of global
custody with respect to the
International Equity Fund is
incorporated herein by reference to
Exhibit (8)(b) to Registrant's Post-
Effective Amendment No. 19 to
Registration Statement on Form N-1A,
filed on August 26, 1996.
(9) (a) Administration Agreement between
Registrant and BISYS Fund Services
Limited Partnership is incorporated by
reference to Exhibit (9)(a) to
Registrant's Post-Effective Amendment
No. 18 to Registration Statement on
Form N-1A filed on June 28, 1996.
(b) Shareholder Processing and Services Plan
and Form of Servicing Agreement for
Emerald Service Shares is incorporated
by reference to Exhibit (9)(a) to
Registrant's Post-Effective Amendment
No. 17 to Registration Statement on
Form N-1A filed on February 1, 1996.
(c) Shareholder Processing Plan and Form of
Servicing Agreement for Retail Shares is
incorporated by reference to Exhibit (9)
(p) to Registrant's Post-Effective
Amendment No. 17 to Registration
C-5
<PAGE>
Statement on Form N-1A filed on
February 1, 1996.
(d) Transfer Agency Agreement between
Registrant and BISYS Fund Services, Inc.
is incorporated by reference to Exhibit (9)(d)
to Registrant's Post-Effective
Amendment No. 18 to Registration
Statement on Form N-1A filed on June 28,
1996.
(e) Cash Management and Related Services
Agreement between Registrant and The
Bank of New York dated as of January 3,
1994 is incorporated by reference to
Exhibit (9)(q) to Registrant's Post-
Effective Amendment No. 10 to
Registration Statement on Form N-1A
filed on January 28, 1994.
(f) Amendment to Cash Management and Related
Services Agreement between Registrant
and the Bank of New York dated as of
May 20, 1996 is incorporated by
reference to Exhibit (9)(f) to
Registrant's Post-Effective Amendment
No. 18 to Registration Statement on
Form N-1A filed on June 28, 1996.
(g) Fund Accounting Agreement between BISYS
Fund Services Limited Partnership and
BISYS Fund Services, Inc is incorporated
by reference to Exhibit (9)(g) to
Registrant's Post-Effective Amendment
No. 18 to Registration Statement on
Form N-1A filed on June 28, 1996.
(10) (a)(1) Opinion and consent of counsel that
shares are validly issued, fully paid
and non-assessable.
(11) (a) Consent of Price Waterhouse LLP.
(b) Consent of Drinker Biddle & Reath.
(12) Emerald Fund, Annual and Semi-Annual Reports to
Shareholders with respect to the Prime Trust and
Treasurey Trust Funds (File No. 811 - 5515, for the
fiscal year ended November 30, 1995 and the
six-month period ended May 31, 1995 as filed with
the Commission on January 29, 1996 and August 9,
1996, respectively, are incorporated herein by
reference.
(13) Purchase Agreement between Registrant and
Hambrecht & Quist Group, Inc. is incorporated
- -----------------------------
(1) Filed under Rule 24f-2 as part of Registrant's Rule 24f-2 Notice.
C-6
<PAGE>
by reference to Exhibit (13) to Registrant's
Post-Effective Amendment No. 1 to
Registration Statement on Form N-1A, filed on
June 7, 1989.
(14) Individual Retirement Account Custodial
Agreement and accompanying Disclosure
Statement is incorporated by reference to
Exhibit (14) to Registrant's Post-Effective
Amendment No. 4 to Registration Statement on
Form N-1A, filed on January 31, 1991.
(15) (a) Form of Broker-Dealer Agreement between
Emerald Asset Management, Inc. and
financial intermediaries (Equity Fund,
Equity Income Fund, Short-Term Fixed
Income Fund, U.S. Government Securities
Fund, Florida Tax-Exempt Fund, Tax-
Exempt Target Fund (Maturity: 1995),
Tax-Exempt Target Fund (Maturity: 2000)
and Tax-Exempt Target Fund (Maturity:
2005)) is incorporated by reference to
Exhibit (15) (c) to Registrant's Post-
Effective Amendment No. 4 to
Registration Statement on Form N-1A,
filed on January 31, 1991.
(b) Combined Amended and Restated
Distribution and Service Plan with
Related Agreement for Retail Shares (All
Funds) is incorporated by reference to
Exhibit (15)(e) to Registrant's Post-
Effective Amendment No. 17 to
Registration Statement on Form N-1A
filed on February 1, 1996.
(16) (a) Schedule for Computation of Performance
Quotations - Treasury Trust Fund is
incorporated by reference to Exhibit (16)(a)
to Registrant's Post-Effective
Amendment No. 6 to Registration
Statement on Form N-1A, filed on
January 31, 1992.
(b) Schedule for Computation of Performance
Quotations - Prime Trust Fund is
incorporated by reference to Exhibit (16)(b)
to Registrant's Post-Effective
Amendment No. 6 to Registration
Statement on Form N-1A, filed
January 31, 1992.
C-7
<PAGE>
(c) Schedule for Computation of Performance
Quotations - Emerald Shares of the
Treasury Fund, Prime Fund and Tax-Exempt
Fund is incorporated by reference to
Exhibit (16) (c) is Registrant's Post-
Effective Amendment No. 6 to
Registration Statement on Form N-1A,
filed January 31, 1992.
(d) Schedule for Computation of Performance
Quotations - Emerald Service Shares of
the Treasury Fund, Prime Fund and Tax-
Exempt Fund is incorporated by reference
to Exhibit (16) (d) to Registrant's
Post-Effective Amendment No. 6 to
Registration Statement on Form N-1A,
filed January 31, 1992.
(e) Schedule for Computation of Performance
Quotations - Investor Shares of the
Treasury Fund, Prime Fund and Tax-Exempt
Fund is incorporated by reference to
Exhibit (16) (e) to Registrant's Post-
Effective Amendment No. 6 to
Registration Statement on Form N-1A,
filed January 31, 1992.
(f) Schedule for Computation of Performance
Quotations - Equity Fund is incorporated
by reference to Exhibit (16) (f) to
Registrant's Post-Effective Amendment
No. 6 to Registration Statement on
Form N-1A, filed on January 31, 1992.
(g) Schedule for Computation of Performance
Quotation - U.S. Government Securities
Fund is incorporated by reference to
Exhibit (16) (g) to Registrant's Post-
Effective Amendment No. 6 to
Registration Statement on Form N-1A,
filed on January 31, 1992.
(h) Schedule for Computation of Performance
Quotations - Florida Tax-Exempt Fund is
incorporated by reference to Exhibit (16)(h)
to Registrant's Post-Effective
Amendment No. 6 to Registration State-
ment on Form N-1A, filed on January 31,
1992.
(i) Schedule for Computation of Performance
Quotations - Small Capitalization Fund
C-8
<PAGE>
is incorporated by reference to Exhibit
(16) (i) to Registrant's Post-Effective
Amendment No. 13 to Registration
Statement on Form N-1A, filed on
September 16, 1994.
(j) Schedules for Computation of Performance
Quotations - Balanced Fund is
incorporated by reference to Exhibit
(16) (j) to Registrant's Post-Effective
Amendment No. 13 to Registration
Statement on Form N-1A, filed on
September 16, 1994.
(k) Schedules for Computation of Performance
Quotations - Short-Term Fixed Income
Fund is incorporated by reference to
Exhibit (16) (k) to Registrant's Post-
Effective Amendment No. 13 to
Registration Statement on Form N-1A,
filed on September 16, 1994.
(l) Schedules for Computation of Performance
Quotations - Managed Bond Fund is
incorporated by reference to Exhibit
(16) (l) to Registrant's Post-Effective
Amendment No. 13 to Registration
Statement on Form N-1A filed on
September 16, 1994.
(m) Schedules for Computation of Performance
Quotations - Equity Value Fund is
incorporated by reference to Exhibit
(16)(m) to Registrant's Post-Effective
Amendment No. 18 to Registration
Statement on Form N-1A filed on June 28,
1996.
(n) Schedules for Computation of Performance
Quotations - International Equity Fund
is incorporated by reference to Exhibit
(16)(n) to Registrant's Post-Effective
Amendment No. 18 to Registration
Statement on Form N-1A filed on June 28,
1996.
(18) (a) Revised Plan pursuant to Rule 18f-3 for
operation of a Multi-Class System is
incorporated by reference to Exhibit
(18)(a) to Registrant's Post-Effective
Amendment No. 18 to Registration
C-9
<PAGE>
Statement on Form N-1A filed on June 28,
1996.
(27) Financial Data Schedules.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Inapplicable.
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of September 1, 1996:
TITLE OF CLASS OF HOLDERS NUMBER OF RECORD HOLDERS
Class A-1 Shares 1
Class B-1 Shares 1
Class C-1 Shares 0
Class D-1 Shares 2
Class D-2 Shares 5
Class D-3 Shares 8
Class E-1 Shares 5
Class E-2 Shares 6
Class E-3 Shares 413
Class F-1 Shares 2
Class F-2 Shares 4
Class F-3 Shares 15
Class G-1 Shares 1310
Class G-3 Shares 656
Class H-1 Shares 693
Class H-3 Shares 320
Class I-1 Shares 975
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<PAGE>
TITLE OF CLASS OF HOLDERS NUMBER OF RECORD HOLDERS
Class I-3 Shares 334
Class J-1 Shares 1133
Class J-3 Shares 754
Class K-1 Shares 66
Class K-3 Shares 397
Class L-1 Shares 105
Class L-3 Shares 325
Class M-1 Shares 436
Class M-3 Shares 125
Class N-1 Shares 2
Class N-3 Shares 19
Class O-1 Shares 1
Class O-3 Shares 6
Item 27. INDEMNIFICATION
Indemnification of Registrant's principal underwriter
against certain losses is provided for in Section V.3. of the
Distribution Agreement incorporated herein by reference as
Exhibit (6) (a) . Indemnification of Registrant's Custodian is
provided for in Article XV, Section 15, of the Custody Agreement
incorporated herein by reference as Exhibit (8) (a).
Indemnification of Registrant's Transfer Agent and Dividend
Disbursing Agent is provided for in Section 9 of the Transfer
Agency Agreement incorporated herein by reference as Exhibit
(9)(d). Indemnification of Registrant's Cash Management Service
Provider is provided for in Article 4 VI, Section 3, of the Cash
Management and Related Services Agreement incorporated by
reference as Exhibit (9)(e). Registrant has obtained from a
major insurance carrier a trustees' and officers' liability
policy covering certain types of errors and omissions. In
addition, Section 9.3 of the Registrant's Agreement and
Declaration of Trust incorporated herein by reference as Exhibit
(1), provides as follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND
EMPLOYEES. The Trust shall indemnify each of its Trustees
C-11
<PAGE>
against all liabilities and expenses (including amounts paid
in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by him
in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, in
which he may be involved or with which he may be threatened,
while as a Trustee or thereafter, by reason of his being or
having been such a Trustee EXCEPT with respect to any matter
as to which he shall have been adjudicated to have acted in
bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties, PROVIDED that as to any matter
disposed of by a compromise payment by such person, pursuant
to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided
unless the Trust shall have received a written opinion from
independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance,
gross negligence or reckless disregard of duty, or the
matter of bad faith had been adjudicated, it would in the
opinion of such counsel have been adjudicated in favor of
such person. The rights accruing to any person under these
provisions shall not exclude any other right to which he may
be lawfully entitled, PROVIDED that no person may satisfy
any right of indemnity or reimbursement hereunder except out
of the property of the Trust. The Trustees may make advance
payments in connection with the indemnification under this
Section 9.3, PROVIDED that the indemnified person shall have
given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled
to such indemnification.
The Trustees shall indemnify representatives and
employees of the Trust to the same extent that Trustees are
entitled to indemnification pursuant to this Section 9.2.
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer
or controlling person of Registrant in the successful defense of
any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
C-12
<PAGE>
expressed in the Act and will be governed by the final
adjudication of such issue.
Section 9.6 of the Registrant's Agreement and
Declaration of Trust, incorporated herein by reference as Exhibit
(1), also provides for the indemnification of shareholders of the
Registrant. Section 9.6 states as follows:
9.6 INDEMNIFICATION OF SHAREHOLDERS. In case any
Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having
been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or
other legal representatives or, in the case of a corporation
or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the classes
of Shares with the same alphabetical designation as that of
the Shares owned by such Shareholder to be held harmless
from and indemnified against all loss and expense arising
from such liability. The Trust shall, upon request by the
Shareholder, assume the defense of any claim made against
any Shareholder for any act or obligations of the Trust and
satisfy any judgment thereon from such assets.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Barnett Capital Advisors, Inc., a Florida
corporation with principal offices in Jacksonville, Florida,
offers investment advisory services in the states of Florida and
Georgia. Barnett Capital Advisors, Inc. is a wholly-owned
subsidiary of Barnett Bank, N.A. which, in turn, is a wholly-
owned subsidiary of Barnett Banks, Inc., a registered bank
holding company.
To Registrant's knowledge, none of the directors or
senior executive officers of Barnett Capital Advisors, Inc.,
except those set forth below, is, or has been at any time during
Registrant's past two fiscal years, engaged in any other
business, profession, vocation or employment of a substantial
nature, except that certain directors and officers of Barnett
Capital Advisors, Inc., also hold various positions with, and
engage in business for, affiliates of Barnett Capital Advisors,
Inc. Set forth below are the names and principal businesses of
the directors and certain of the senior executive officers of
Barnett Capital Advisors, Inc. who are or have been engaged in
any other business, profession, vocation or employment of a
substantial nature.
C-13
<PAGE>
<TABLE>
<CAPTION>
Position with
Barnett
Capital Type of
Name Advisors, Inc. Other Business Connections Business
- ---- -------------- -------------------------- --------
<S> <C> <C> <C>
Donna L. Terry Chairman The Boston Company Advisors, Inc., Investment
Boston MA; The Boston Company Asset Advisor
Management, Inc., Boston MA
Richard H. Jones Director Chief Asset Management Executive, Trust
Barnett Banks, Inc., Jacksonville, FL
Fleet Financial Group, Providence, RI Financial
Services
Rebecca S. Allen Director Chief Executive Officer of Private Trust Company
Client Services, Barnett Banks, Inc.,
Jacksonville, FL
Barnett Bank of Southwest Florida, Bank
Sarasota, FL
Richard A. Anderson Director Regional Banking Executive, North Banking
Region of Barnett Banks, Inc.,
Jacksonville, FL
Barnett Bank of Broward, Banking
Ft. Lauderdale, FL
James S. Loskill Director President and Chief Executive Officer Bank
of Barnett Bank N.A., Naples, FL
Robert K. Mackenzie Director President and Chief Executive Officer, Financial
Barnett Securities, Inc., Services
Jacksonville, FL
Fidelity Investments, New York, NY; Financial
Chicago, IL; Boston, MA Services
Robert L. Nellson Director Executive Director of Deposits and Bank Holding
Insurance, Barnett Banks, Inc., Company
Jacksonville, FL
The New England Boston, MA Mutual
Insurance
Company
Fleet Financial Group, Providence, RI Bank Holding
Company
</TABLE>
C-14
<PAGE>
(b) Rodney Square Management Corporation is a Delaware
corporation organized in 1981 to provide management services to
mutual funds and others, and has been advising mutual funds since
1985.
To the knowledge of Registrant, none of the directors
or officers of Rodney Square Management Corporation, except those
set forth below, is or has been, at any time during the past two
calendar years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that
certain directors and officers of Rodney Square Management
Corporation also hold various positions with, and engage in
business for, Wilmington Trust Company, or other subsidiaries of
Wilmington Trust Company. Set forth below are the names and
principal businesses of the directors and officers of Rodney
Square Management Corporation including those who are engaged in
any other business, profession, vocation or employment of a
substantial nature.
<TABLE>
<CAPTION>
Position with
Rodney Square Other
Management Business Type of
Name Corporation Connections Business
- ---- ------------- ----------- --------
<S> <C> <C> <C>
Leah M. Anderson Accounting N/A N/A
Officer
Rebecca J. Booz Accounting Officer N/A N/A
Cornelius G. Curran Vice President Vice President, Mutual
since October, 1993 Fund Plan Ser- Fund/
vices, Inc., from Services
July 1991 through
October 1993
Scott W. Edmonds Senior Investment Officer, N/A N/A
since September, 1993
Joseph M. Fahey, Jr. Vice President, N/A N/A
Secretary & Director
from 1992; Assistant
Vice President & Director
from 1988 to 1992
Molly Graham Senior Fund Administration Legal Assistant, Law Firm
Officer, since January Clark, Ladner,
1995; Mutual Fund Fortenbaugh &
Administrator, Young, from 1991
since December, 1994 to December, 1993.
Robert C. Hancock Vice President & N/A N/A
Treasurer
John J. Kelley Vice President, since N/A N/A
February, 1995;
Assistant Vice President
from 1989 to 1995
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Position with
Rodney Square Other
Management Business Type of
Name Corporation Connections Business
- ---- ------------- ----------- --------
<S> <C> <C> <C>
Martin L. Klopping President & Director of Rodney broker/
Director Square Distributors dealer
Inc., Rodney Square
North, 1100 N. Market
Street, Wilmington, DE
19890, wholly owned sub-
sidiary of Wilmington
Trust Company and the
distributor of each of
the Rodney Square Family
of mutual funds, since
1993.
Diane D. Marky Senior Funds Adminis- N/A N/A
tration Officer
Robert J. Christian Director Senior Vice President, Banking
Wilmington Trust
Company, Rodney Square
North, 1100 N. Market
Street, Wilmington,
DE 19890; the sole
parent of RSMC.
Director of Rodney broker/
Square Distributors, dealer
Inc.
Carl M. Rizzo Vice President, since N/A N/A
July, 1996
Jody I. Thomas Senior Transfer N/A N/A
Officer, since
January, 1995
Wayne D. Weaver* Vice President, since N/A N/A
February, 1995
Assistant
Vice President,
since August,
1992
M. Martine Slicer Accounting Officer, N/A N/A
since November, 1995
Richard Arthur Morgan Vice President, since Asst. Vice Pres. Mutual
November, 1995 PFPC Inc. June, 1984 Fund
to November, 1995 Services
Lynette Lucille Becker Operations Officer N/A N/A
Jo Michelle Robinson Operations Officer N/A N/A
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
Position with
Rodney Square Other
Management Business Type of
Name Corporation Connections Business
- ---- ------------- ----------- --------
<S> <C> <C> <C>
Louis Craig Schwartz Senior Fund Adminis- Associate Law Firm
tration Officer since Mason, Briody,
November, 1995 Gallagher & Taylor
August, 1993 to
February, 1995
Connie L. Meyers Regulatory Compliance N/A N/A
Officer
James John Palermo Investment Officer N/A N/A
David A. Fischer Accounting Officer Fund Accountant Mutual
PFPC Inc. Fund
November, 1991 to Services
December, 1993
Jeffrey A. Wirosloff Operations Officer Transfer Agent Mutual
Supervisor Fund
PFPC Inc. Services
September, 1992 to
September, 1994
</TABLE>
___________________________
* Except as noted in the table, all Rodney Square Management Corporation
Officers and Directors have been employed solely by Wilmington Trust
Company or an affiliate thereof for the past two years.
(c) Brandes Investment Partners, L.P. is a California
Limited Partnership with principal offices in San Diego,
California.
The list generated by this Item 28 of officers and
directors of Brandes, together with information as to any
business profession, vocation or employment of substantial nature
engaged in by such officers and directors during the past two
years is incorporated herein by reference to Schedule A and D
of Form ADV filed by Brandes pursuant to the Advisers Act (SEC
File No. 801-24896).
Item 29. PRINCIPAL UNDERWRITER
(a) None.
(b) To the best of Registrant's knowledge, the
directors and executive officers of Emerald Asset Management,
Inc., distributor for Registrant, are as follows:
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<PAGE>
Name and Positions and
Principal Offices with Positions and
Business Emerald Asset Offices with
Address Management, Inc. Registrant
- -------- ---------------- -------------
Lynn J. Mangum Chairman None
3435 Stelzer Road
Columbus, OH 43219-3035
Robert J. McMullan Executive Vice President None
3435 Stelzer Road
Columbus, OH 43219-3035
Sean Kelly First Vice President None
3435 Stelzer Road
Columbus, OH 43219-3035
William Blundin Vice President None
3435 Stelzer Road
Columbus, OH 43219-3035
Dennis Sheehan Vice President None
3435 Stelzer Road
Columbus, OH 43219-3035
Catherine T. Dwyer Vice President/Secretary None
3435 Stelzer Road
Columbus, OH 43219-3035
Michael Burns Vice President/Compliance None
3435 Stelzer Road
Columbus, OH 43219-3035
Annamaria Porcaro Assistant Secretary None
3435 Stelzer Road
Columbus, OH 43219-3035
Robert Tuch Assistant Secretary Assistant Secretary
3435 Stelzer Road
Columbus, OH 43219-3035
Stephen G. Mintos Executive Vice President None
3435 Stelzer Road COO
Columbus, OH 43219-3035
George Martinez Senior Vice President Assistant Secretary
3435 Stelzer Road
Columbus, OH 43219-3035
Dale Smith Vice President/CFO None
3435 Stelzer Road
Columbus, OH 43219-3035
Chris Davis Regional Vice President None
3435 Stelzer Road
Columbus, OH 43219-3035
C-18
<PAGE>
(c) None.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
(1) Barnett Capital Advisors, Inc., 9000
Southside Blvd., Building 100, P.O. Box
40200, Jacksonville, Florida 32203-0200
(records relating to its functions as
investment adviser - all portfolios).
(2) Bank of America, NT&SA, 300 South Grand
Avenue, HCP 225, Los Angeles, California
90071 (records relating to its prior
functions as sub-adviser - Treasury Trust
Fund, Prime Trust Fund, Tax-Exempt Trust Fund
and Tax-Exempt Fund).
(3) Rodney Square Management Corporation, Rodney
Square North, Wilmington, Delaware 19890
(records relating to its functions as sub-
adviser - Tax-Exempt Fund and prior
functions as sub-adviser to Treasury Trust
Fund and Prime Trust Fund).
(4) Brandes Investment Partners, L.P., 12750 High
Bluff Drive, San Diego, California 92130
(records relating to its functions as sub-
adviser - International Equity Fund).
(5) BISYS Fund Services Limited Partnership, 3435
Stelzer Road, Columbus, OH 43219-3035
(records relating to its functions as
administrator and accounting services agent -
all portfolios).
(6) Emerald Asset Management, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219-3035 (records
relating to its functions as distributor -all
portfolios).
(7) The Bank of New York, 90 Washington Street,
24th Floor, New York, New York 10286 (records
relating to its functions as custodian for
the Funds - all portfolios).
(8) BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219-3035 (records relating
to its functions as transfer agent and
dividend disbursing agent - all portfolios).
C-19
<PAGE>
(9) Drinker Biddle & Reath, Philadelphia National
Bank Building, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107
(Registrant's Agreement and Declaration of
Trust, Code of Regulations and Minute Books).
Item 31. MANAGEMENT SERVICES
None.
Item 32. UNDERTAKINGS
The Registrant undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.
C-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant has
duly caused this Post-Effective Amendment No. 20 to its
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Jacksonville
and State of Florida on the 30th day of September, 1996.
EMERALD FUNDS
(Registrant)
By /s/ John G. Grimsley
---------------------
John G. Grimsley
President
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the date indicated.
Signature Title Date
- --------- ----- ----
*Chesterfield H. Smith Chairman of the September 30, 1996
- ------------------------- Board of Trustees
Chesterfield H. Smith
/s/ John G. Grimsley President (Chief September 30, 1996
- ------------------------- Executive Officer)
John G. Grimsley and Trustee
*Martin R. Dean Treasurer September 30, 1996
- ------------------------- (Principal Financial
Martin R. Dean and Accounting Officer)
*Raynor E. Bowditch Trustee September 30, 1996
- -------------------------
Raynor E. Bowditch
*Albert D. Ernest Trustee September 30, 1996
- -------------------------
Albert D. Ernest
*Mary Doyle Trustee September 30, 1996
- -------------------------
Mary Doyle
*Harvey R. Holding Trustee September 30, 1996
- -------------------------
Harvey R. Holding
/s/ John G. Grimsley
- -------------------------
* By John G. Grimsley,
Attorney-in-Fact
<PAGE>
EMERALD FUNDS
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Trustees of
Emerald Funds at a meeting held on August 9, 1996 and remains in effect on
the date hereof:
FURTHER RESOLVED, that the trustees and officers of the Trust
who may be required to execute any amendments to the Trust's
Registration Statement be, and each of them hereby is, authorized to
execute a power of attorney appointing John G. Grimsley and William B.
Blundin, and either of them, their true and lawful attorney or
attorneys, to execute in their name, place and stead, in their capacity
as trustee or officer, or both, of the Trust any and all amendments to
the Registration Statement, and all instruments necessary or incidental
in connection therewith, and to file the same with the Securities and
Exchange Commission; and either of said attorneys shall have the power
to act thereunder with or without the other of said attorneys and shall
have full power of substitution and resubstitution; and either of said
attorneys shall have full power and authority to do in the name and on
behalf of said trustees and officers, or any or all of them, in any and
all capacities, every act whatsoever requisite or necessary to be done
on the premises, as fully and to all intents and purposes as each of
said trustees or officers, or any or all of them, might or could do in
person, said acts of said attorneys, or either of them, being hereby
ratified and approved.
EMERALD FUNDS
By: /s/ Jeffrey A. Dalke
--------------------
Jeffrey A. Dalke
Secretary
Dated: September 30, 1996
<PAGE>
EMERALD FUNDS
POWER OF ATTORNEY
-----------------
Harvey R. Holding, whose signature appears below, does hereby
constitute and appoint John G. Grimsley and William B. Blundin, and either of
them, his true and lawful attorneys and agents, with power of substitution
and resubstitution, to do any and all acts and things and to execute any and
all instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Emerald Funds, a
Massachusetts business trust (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all amendments (including post-effective amendments)
to the Fund's Regulation Statement pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
trustee and/or officer of the Fund any and all such amendments filed with the
Securities and Exchange Commission under said Acts, and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
Date: May 29, 1996 /s/ Harvey R. Holding
---------------------
Harvey R. Holding
<PAGE>
EMERALD FUNDS
POWER OF ATTORNEY
Martin R. Dean, whose signature appears below, does hereby constitute
and appoint John G. Grimsley and William B. Blundin, and either of them, his
true and lawful attorneys and agents, with power of substitution and
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Emerald Funds, a
Massachusetts business trust (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
trustee and/or officer of the Fund any and all such amendments filed with the
Securities and Exchange Commission under said Acts, and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Martin R. Dean
- -------------------------------
Date: October 5, 1995
<PAGE>
EMERALD FUNDS
POWER OF ATTORNEY
Chesterfield H. Smith, whose signature appears below, does hereby
constitute and appoint John G. Grimsley and William B. Blundin, and either of
them, his true and lawful attorneys and agents, with power of substitution
and resubstitution, to do any and all acts and things and to execute any and
all instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Emerald Funds, a
Massachusetts business trust (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
trustee and/or officer of the Fund any and all such amendments filed with the
Securities and Exchange Commission under said Acts, and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Chesterfield H. Smith
- -------------------------------
Date: May 10, 1989
<PAGE>
EMERALD FUNDS
POWER OF ATTORNEY
Albert Ernest, whose signature appears below, does hereby constitute
and appoint John G. Grimsley and William B. Blundin, and either of them, his
true and lawful attorneys and agents, with power of substitution and
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Emerald Funds, a
Massachusetts business trust (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
trustee and/or officer of the Fund any and all such amendments filed with the
Securities and Exchange Commission under said Acts, and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Albert Ernest
- -------------------------------
Date: October 5, 1995
<PAGE>
EMERALD FUNDS
POWER OF ATTORNEY
Raynor E. Bowditch, whose signature appears below, does hereby
constitute and appoint John G. Grimsley and William B. Blundin, and either of
them, his true and lawful attorneys and agents, with power of substitution
and resubstitution, to do any and all acts and things and to execute any and
all instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Emerald Funds, a
Massachusetts business trust (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all amendments (including post-effective amendments)
to the Fund's Registration Statement pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a
trustee and/or officer of the Fund any and all such amendments filed with the
Securities and Exchange Commission under said Acts, and any other instruments
or documents related thereto, and the undersigned does hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Raynor E. Bowditch
- ---------------------------------
Date: May 10, 1989
<PAGE>
EMERALD FUNDS
POWER OF ATTORNEY
Mary Doyle, whose signature appears below, does hereby constitute and
appoint John G. Grimsley and William B. Blundin, and either of them, his true
and lawful attorneys and agents, with power of substitution and resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, or either of them, may deem necessary or advisable or
which may be required to enable Emerald Funds, a Massachusetts business trust
(the "Fund"), to comply with the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Fund's Registration Statement
pursuant to said Acts, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and on
behalf of the undersigned as a trustee and/or officer of the Fund any and all
such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/ Mary Doyle
- --------------------------------
Date: October 31, 1990
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- -------- ---------
(2)(c) Amendment No. 2 to Registrant's Code
of Regulations
(11)(a) Consent of Price Waterhouse LLP.
(11)(b) Consent of Drinker Biddle & Reath.
(27) Financial Data Schedules.
<PAGE>
EXHIBIT (2)(c)
EMERALD FUNDS
AMENDMENT NO. 2 TO
CODE OF REGULATIONS
ADOPTED ON MAY 4, 1995
Article I, Section 1.1 of the Trust's Code of Regulations is
amended by adding the following as the last sentence thereof:
A Trustee's term shall cease on the last day of the fiscal year of
the Trust in which he or she attains the age of 72 years; provided
that any person who is a Trustee on May 4, 1995, who is then 72 years
of age or more may continue to serve as Trustee for a period of two
years from said date.
<PAGE>
EXHIBIT (11)(a)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
and Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 20 to the Registration Statement on Form N-1A
(the "Registration Statement") of our report dated January 24, 1996, relating
to the financial statements and financial highlights appearing in the
November 30, 1995 Annual Report to Shareholders of Emerald Prime Trust Fund
and Emerald Treasury Trust Fund (two of the portfolios constituting the
Emerald Funds), which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and under the headings
"Independent Accountants/Experts" and "Financial Statements" in the Statement
of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 26, 1996
<PAGE>
EXHIBIT (11)(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the caption "Counsel" in the Statement of Additional Information
that is included in Post-Effective Amendment No. 20 to the Registration
Statement (File No. 33-20658) on Form N-1A of Emerald Funds under the
Securities Act of 1933 and the Investment Company Act of 1940, respectively.
This consent does not constitute a consent under Section 7 of the Securities
Act of 1933, and in consenting to the use of our name and the references to
our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and
regulations of the Securities and Exchange Commissions thereunder.
/s/ DRINKER BIDDLE & REATH
-----------------------------------
Drinker Biddle & Reath
Philadelphia, Pennsylvania
September 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000831101
<NAME> EMERALD FUNDS
<SERIES>
<NUMBER> 041
<NAME> EMERALD PRIME TRUST FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 146133736
<INVESTMENTS-AT-VALUE> 146133736
<RECEIVABLES> 38334507
<ASSETS-OTHER> 10381
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184478624
<PAYABLE-FOR-SECURITIES> 38068494
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<OTHER-ITEMS-LIABILITIES> 663895
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<NET-ASSETS> 145746235
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3445965
<OTHER-INCOME> 0
<EXPENSES-NET> 231353
<NET-INVESTMENT-INCOME> 3214612
<REALIZED-GAINS-CURRENT> 32
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3214644
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3214612
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 218914382
<NUMBER-OF-SHARES-REDEEMED> 204257047
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14657367
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 9804
<GROSS-ADVISORY-FEES> 92972
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 232841
<AVERAGE-NET-ASSETS> 123030168
<PER-SHARE-NAV-BEGIN> .999
<PER-SHARE-NII> .026
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .026
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> .999
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000831101
<NAME> EMERALD FUNDS
<SERIES>
<NUMBER> 051
<NAME> EMERALD TREASURY TRUST FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 138178017
<INVESTMENTS-AT-VALUE> 138178017
<RECEIVABLES> 109473540
<ASSETS-OTHER> 16961
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 247668518
<PAYABLE-FOR-SECURITIES> 108863368
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 671225
<TOTAL-LIABILITIES> 109534593
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138188916
<SHARES-COMMON-STOCK> 138188917
<SHARES-COMMON-PRIOR> 132855897
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 54991
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 138133925
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3991296
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<EXPENSES-NET> 281091
<NET-INVESTMENT-INCOME> 3710205
<REALIZED-GAINS-CURRENT> (39042)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3671163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3710205
<DISTRIBUTIONS-OF-GAINS> 10266
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 197115907
<NUMBER-OF-SHARES-REDEEMED> 191782888
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5283711
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5683)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 111088
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282804
<AVERAGE-NET-ASSETS> 146606085
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .025
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .025
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
