<PAGE>
The accompanying financial statements, as of May 31, 1996, have not been
audited, and accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus for one of the Emerald Funds
discussed within.
Investments in the Prime Trust and Treasury Trust Funds are neither insured nor
guaranteed by the U.S. Government, and yields will fluctuate. There can be no
assurance that the Funds will be able to maintain a stable net asset value of
$1.00 per share.
Barnett Capital Advisors, Inc. serves as investment advisor to the Emerald Funds
and is unaffiliated with Emerald Asset Management, Inc., the Funds' distributor.
The service contractors for the Emerald Funds may from time to time voluntarily
waive fees or reimburse Fund expenses, which temporarily increases the return to
investors. These fee waivers and reimbursements may be discontinued at any time,
which would reduce performance results.
The Emerald Funds prospectuses contain more complete information, including
charges and expenses. Please read the prospectuses carefully before investing.
MUTUAL FUNDS
- ARE NOT FDIC INSURED
- HAVE NO BANK GUARANTEE
- MAY LOSE VALUE
<PAGE>
ECONOMIC REPORT FROM THE INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
THE ECONOMY: STRONGER THAN EXPECTED
Last winter, investors were concerned about the economy entering a recession.
Corporate profits were expected to flatten and perhaps fall below the high
levels achieved in 1995. But the first half of 1996 has essentially continued
the economic expansion into a sixth straight year. Gross Domestic Product -- a
measurement of the total value of goods and services produced in the U.S. --
rose 2.3% during the first quarter and would have been even higher had there not
been a strike at General Motors. Recession concerns, which were pervasive as
recently as three months ago, have dissipated, giving way to worries of renewed
inflation.
We do not believe that economic growth will accelerate further in the near
future. In fact, the recent increase in interest rates will likely reduce growth
in the second half of 1996. We expect economic growth for all of 1996 to average
about 2.5% -- a continued expansion, but at a slow-to-moderate rate.
INFLATION: EXCLUDING FOOD AND ENERGY, STILL MODEST
For the 12 months ended April 30, 1996, the Consumer Price Index rose 2.9%. In
comparison, the CPI rose 2.5% for the year ended December 31, 1995. However,
excluding food and energy price increases -- which we believe are temporary --
inflation is essentially unchanged.
Our expectation for modest economic growth implies that consumer demand will not
be strong enough to cause prices to rise significantly at the wholesale or
retail level. For each of the past five calendar years, the Consumer Price Index
has ranged from 2.7% to 3.1%. We believe inflation in 1996 will continue to fall
in that range.
INTEREST RATES: UP SHARPLY, BUT EXPECTED TO COOL
There was little change in short-term interest rates during the past six months.
However, intermediate- and long-term interest rates rose considerably. Driven by
market forces rather than the actions of the Federal Reserve Board, the yield on
a 10-year U.S. Treasury bond rose from 6.13% on November 30, 1995, to 7.00% on
May 31, 1996. Rising interest rates increase the cost of doing business and
create a volatile bond market.
We believe, however, that pressures on interest rates will subside as the
economy shows more noticeable signs of softening in the second half of the year.
Nevertheless, it is unlikely that the Federal Reserve will lower short-term
interest rates any time soon.
THE STOCK MARKET: TOUGH AS NAILS
Rising interest rates, downward revisions in corporate profits and inflation
fears would normally be enough to cause a stock market correction. But investors
seem to be looking beyond the current scenario. As overall corporate profit
growth slowed, the stocks of companies that exhibit sustained growth regardless
of economic conditions did the best on Wall Street. Typically, these companies
are not the Fortune 500, but rather the small to midsized businesses that have a
special niche in the market.
In addition, the market for initial public offerings was extremely brisk, as
investors sought to capitalize on new technology such as the Internet. However,
the IPO market's surging strength is often an indication that the overall stock
market is reaching full value. When this happens, the market is likely to react
quickly and negatively to unexpected developments such as higher interest rates
or significantly lower earnings reports. As a result, we expect -- and you
should expect -- some short-term volatility. However, we believe that the
long-term outlook for the market is excellent based on the economy's
slow-growth, low-inflation mode.
1
<PAGE>
- --------------------------------------------------------------------------------
PLEASE READ THE PORTFOLIO MANAGER INTERVIEWS TO
LEARN MORE ABOUT THE STRATEGIES USED TO MANAGE
EACH EMERALD FUND AND ITS PERFORMANCE DURING
THIS PERIOD. REMEMBER, INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL VARY WITH MARKET
CONDITIONS. PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS. AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
2
<PAGE>
INTERVIEW (as of May 31, 1996)
- --------------------------------------------------------------------------------
EMERALD PRIME TRUST AND TREASURY TRUST FUNDS*
Scott Edmonds
PORTFOLIO MANAGER
Rodney Square Management Corp.,
a subsidiary of Wilmington Trust Company
INVESTMENT SUB-ADVISOR
INVESTMENT GOAL
The Emerald Money Market Funds seek to provide a high level of current income
consistent with liquidity,
the preservation of capital and a stable net asset value. Each Fund seeks its
objective by investing in:
PRIME TRUST FUND
A broad range of U.S. Government, bank and corporate short-term money-market
obligations.
TREASURY TRUST FUND
Short-term U.S. Treasury securities and other government obligations, which are
guaranteed full faith and credit by the U.S. Treasury, and repurchase agreements
collateralized by the same.
WHAT FACTORS AFFECTED THE PERFORMANCE OF THE PRIME TRUST AND TREASURY TRUST, AND
WHAT STRATEGIES WERE EMPLOYED TO MAXIMIZE PERFORMANCE RESULTS?
Months of declining short-term interest rates came to an abrupt halt during the
first quarter of 1996. Short-term interest rates were pushed lower one last time
at the end of January as the Federal Reserve Board (Fed) lowered the federal
funds rate -- the rate banks charge each other for overnight loans -- another 25
basis points (0.25 percentage points), but unexpectedly strong economic
indicators in February and March dashed hopes of further easing by the Fed. As a
result, the short-term yield curve resumed its normal upward slope for prime
issuance toward the end of the first quarter, which has allowed us to increase
yield by extending the average maturities of the money market funds. For the
preceding several months the yield curve had been flat, which meant that money
managers did not receive higher yields for investing in securities with longer
maturities, as they normally would. The shift in the yield curve has also
sparked new issuance of one-year/quarterly callable notes, and the purchase of a
small position in these securities is also partially responsible for the Prime
Trust Fund's higher returns and its longer average maturity.
WHAT FACTORS COULD AFFECT THE FUNDS IN THE MONTHS AHEAD?
Since the economy is continuing to show strength, many believe that the Fed may
decide to raise interest rates in the near future. However, since the fall
presidential election is so close, any increase will probably not be more than a
nominal 25 basis points and will likely come at the end of August, well in
advance of the election. If the economy does not slow in the second half of
1996, short-term rates could well rise another 25 basis points before year-end.
This potential rise in rates has not, as yet, been fully priced into the
short-term market, as issuers remain reluctant to pay investors higher rates.
However, many investors are refusing to purchase longer-term securities at their
current rates. Instead, we are placing our excess cash
- ---------------
* Investments in the Emerald Prime Trust and Treasury Trust Funds are neither
insured nor guaranteed by the U.S. Government, and yields will fluctuate.
Although these Funds seek to maintain a stable net asset value (NAV) of $1.00
per share, there is no assurance that they will be able to do so.
3
<PAGE>
- --------------------------------------------------------------------------------
in either overnight or other very short-term securities. This will cause the
average maturities of the money market funds to shorten, which we believe is
beneficial because then we will be in the position to extend our average
maturities and take advantage of higher yields as they become available.
<TABLE>
<CAPTION>
SEC 7-DAY YIELDS AS OF MAY 31, 1996
<S> <C>
Prime Trust Fund 5.06%
Treasury Trust Fund 4.92%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
EMERALD PRIME TRUST FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/ PRINCIPAL AMORTIZED
MOODY'S MATURITY AMOUNT COST
RATINGS RATE DATE (000) (NOTE 2)
--------- ------ --------- --------- ------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 6.9%
Morgan Guaranty* ................................................... A1+/P1 5.42% 6/3/96 $ 5,000 $ 4,998,283
Society National Bank, Cleveland ................................... A1/P1 5.92 5/21/97 5,000 5,000,000
------------
TOTAL BANK NOTES
(AMORTIZED COST $9,998,283).......................................... 9,998,283
------------
BANKERS' ACCEPTANCES -- 6.8%
CoreStates Bank .................................................... A1/P1 5.32 10/1/96 5,000 4,911,333
Mellon Bank ........................................................ A1/P1 5.30 7/10/96 5,000 4,972,764
------------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $9,884,097).......................................... 9,884,097
------------
COMMERCIAL PAPER -- 49.4%
Abbey National, North America ...................................... A1+/P1 5.17 6/19/96 5,000 4,988,511
Akzo Nobel, Inc. ................................................... A1/P1 5.25 6/14/96 5,000 4,991,979
Bass Financial ..................................................... A1/P1 5.29 6/27/96 5,099 5,081,018
C.S. First Boston Corp. ............................................ A1/P1 5.30 6/17/96 5,000 4,989,694
CSR America, Inc. .................................................. A1/P1 5.03 8/27/96 5,000 4,940,618
Daewoo International ............................................... A1+/P1 5.04 6/27/96 5,000 4,983,200
Daimler-Benz, N.A .................................................. A1/P1 5.26 7/10/96 5,000 4,972,970
FPL Fuels, Inc. .................................................... A1/P1 5.37 6/18/96 6,500 6,485,456
International Leasing Finance Corp. ................................ A1/P1 5.32 10/17/96 5,000 4,899,511
Merrill Lynch & Co., Inc. .......................................... A1+/P1 5.31 7/17/96 5,000 4,967,550
PGA Tour Investment Finance, Inc. .................................. A1/P1 5.34 8/12/96 5,000 4,948,083
Queensland Alumina ................................................. A1+/P1 5.30 7/26/96 5,000 4,960,986
Vehicle Services of America, Ltd. .................................. A1/P1 5.35 6/12/96 1,000 998,663
Walt Disney Co. .................................................... A1/P1 5.30 10/11/96 5,000 4,904,306
Zeneca Wilmington, Inc. ............................................ A1/P1 5.30 7/17/96 5,000 4,967,611
------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $72,080,156)......................................... 72,080,156
------------
YANKEE CERTIFICATES OF
DEPOSIT -- 10.3%
Banque Nationale de Paris, San Francisco ........................... A1/P1 5.37 7/1/96 5,000 5,000,000
Canadian Imperial Bank of Commerce, N.Y. ........................... A1+/P1 5.32 6/10/96 5,000 5,000,000
Societe Generale, N.Y. ............................................. A1+/P1 5.37 6/7/96 5,000 5,000,000
------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(AMORTIZED COST $15,000,000)......................................... 15,000,000
------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
S&P/ PRINCIPAL AMORTIZED
MOODY'S MATURITY AMOUNT COST
RATINGS RATE DATE (000) (NOTE 2)
--------- ------ --------- --------- ------------
<S> <C> <C> <C> <C> <C>
TAXABLE MUNICIPAL
OBLIGATIONS -- 4.1%
New York City Taxable Fiscal 1996 Sub-Series A2 .................... A1+/P1 5.40% 8/21/96 $ 1,000 $ 1,000,000
New York City Taxable Series 1993B** ............................... A1+/VMIG1 5.20 8/13/96 5,000 5,000,000
------------
TOTAL TAXABLE MUNICIPAL OBLIGATIONS
(AMORTIZED COST $6,000,000).......................................... 6,000,000
------------
TOTAL INVESTMENTS IN SECURITIES
(AMORTIZED COST $112,962,536)........................................ 112,962,536
------------
REPURCHASE AGREEMENTS -- 22.8%
Merrill Lynch Securities, Inc., dated 5/31/96 with a maturity value
of $33,186,127 (Collateralized by $43,567,596 various U.S.
Government agencies, 0.00% - 7.00%, 6/1/01 - 4/1/26, market value
-- $33,857,426) .................................................. 5.40 6/3/96 33,171 33,171,200
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $33,171,200)......................................... 33,171,200
------------
TOTAL INVESTMENTS
(AMORTIZED COST $146,133,736) (A) -- 100.3%.......................... 146,133,736
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3%)....................... (387,501)
------------
NET ASSETS -- 100.0%.................................................. $145,746,235
------------
------------
</TABLE>
- -------------
Percentages indicated are based on net assets of $145,746,235.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate security. Maturity date reflects the next rate change date.
** Commercial paper.
See Notes to Financial Statements.
6
<PAGE>
EMERALD PRIME TRUST FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (amortized cost $112,962,536)........................ $ 112,962,536
Repurchase agreements (amortized cost $33,171,200)...................................... 33,171,200
Cash.................................................................................... 46
Interest receivable..................................................................... 271,412
Receivable for capital shares issued.................................................... 958,295
Receivable from brokers for investment securities sold.................................. 37,104,800
Prepaid expenses and other.............................................................. 10,335
---------------
Total assets.............................................................................. 184,478,624
---------------
LIABILITIES:
Dividends payable....................................................................... 609,749
Payable to brokers for investment securities purchased.................................. 38,068,494
Accrued expenses and other payables:
Sub-Advisory fees..................................................................... 17,531
Administration fees................................................................... 8,810
Custodian and transfer agent fees..................................................... 13,859
Other................................................................................. 13,946
---------------
Total liabilities......................................................................... 38,732,389
---------------
NET ASSETS................................................................................ $ 145,746,235
---------------
---------------
Shares Outstanding ($0.001 par value, unlimited number of shares authorized).............. 145,756,007
---------------
---------------
Net Asset Value, Offering Price and Redemption Price per share............................ $ 1.00
---------------
---------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par................................................... $ 145,756
Additional paid-in capital.............................................................. 145,610,251
Accumulated net realized losses on investment transactions.............................. (9,772)
---------------
Net Assets, May 31, 1996.................................................................. $ 145,746,235
---------------
---------------
</TABLE>
- -------------
See Notes to Financial Statements.
7
<PAGE>
EMERALD PRIME TRUST FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:,
Interest...................................................................... $ 3,445,965
EXPENSES:
Sub-Advisory fees............................................................. $ 92,972
Administration fees........................................................... 76,655
Transfer agent fees and expenses.............................................. 10,664
Custodian fees and expenses................................................... 21,839
Legal fees.................................................................... 4,195
Audit fees.................................................................... 6,990
Reports to shareholders....................................................... 9,425
Registration fees............................................................. 3,496
Trustees' fees................................................................ 2,841
Insurance expense............................................................. 1,850
Other expenses................................................................ 1,914
------------
232,841
Less: Expense reimbursements.................................................... (1,488) 231,353
------------ -------------
Net Investment Income........................................................... 3,214,612
REALIZED GAINS ON INVESTMENTS:
Net realized gains on securities transactions................................. 32
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 3,214,644
-------------
-------------
</TABLE>
- ------------
See Notes to Financial Statements.
8
<PAGE>
EMERALD PRIME TRUST FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1996 1995
--------------- ----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations
Net investment income............................................... $ 3,214,612 $ 6,474,213
Net realized gains on securities transactions....................... 32 --
--------------- ----------------
Net increase in net assets resulting from operations................ 3,214,644 6,474,213
--------------- ----------------
Dividends to shareholders from net investment income.................. (3,214,612) (6,474,213)
--------------- ----------------
Fund Share Transactions (at $1.00 per share)
Net proceeds from shares subscribed................................. 218,914,382 303,365,881
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions....................................... -- 50,237
Cost of shares redeemed............................................. (204,257,047) (304,085,710)
--------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions...................................................... 14,657,335 (669,592)
--------------- ----------------
Total Increase (Decrease)............................................. 14,657,367 (669,592)
NET ASSETS:
Beginning of period................................................. 131,088,868 131,758,460
--------------- ----------------
End of period....................................................... $ 145,746,235 $ 131,088,868
--------------- ----------------
--------------- ----------------
</TABLE>
- -------------
See Notes to Financial Statements.
9
<PAGE>
EMERALD TREASURY TRUST FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
RATE DATE (000) (NOTE 2)
------ -------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS -- 50.9%
U.S. TREASURY BILL -- 29.7%
U.S. Treasury Bill ........................................................... 4.94%+ 6/6/96 $ 41,000 $ 40,983,133
------------
U.S. TREASURY NOTE -- 21.2%
U.S. Treasury Note ........................................................... 7.88 7/31/96 10,000 10,031,936
U.S. Treasury Note ........................................................... 6.88 2/28/97 15,000 15,173,270
U.S. Treasury Note ........................................................... 8.50 4/15/97 4,000 4,092,578
------------
29,297,784
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(AMORTIZED COST $70,280,917)................................................... 70,280,917
------------
REPURCHASE AGREEMENTS -- 49.1%
Merrill Lynch Securities, Inc., dated 5/31/96, with a maturity of $33,963,494
(Collateralized by $35,005,000 U.S. Treasury Bill, 0.00%, 8/15/96, market
value -- $34,628,347) ...................................................... 5.30 6/3/96 33,949 33,948,500
Prudential Securities, Inc., dated 5/31/96, with a maturity of $33,963,792
(Collateralized by $36,954,585 Government National Mortgage Assoc., 5.00% -
10.00%, 12/15/16 - 5/20/26, market value -- $34,640,946) ................... 5.37 6/3/96 33,949 33,948,600
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $67,897,100)................................................... 67,897,100
------------
TOTAL INVESTMENTS
(AMORTIZED COST $138,178,017) (A) -- 100.0%.................................... 138,178,017
LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0%................................... (44,092)
------------
NET ASSETS -- 100.0%............................................................ $138,133,925
------------
------------
</TABLE>
- -------------
Percentages indicated are based on net assets of $138,133,925.
(a) Cost for federal income tax and financial reporting purposes are the same.
+ Effective yield at date of issuance.
See Notes to Financial Statements.
10
<PAGE>
EMERALD TREASURY TRUST FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (amortized cost $70,280,917)......................... $ 70,280,917
Repurchase agreements (amortized cost $67,897,100)...................................... 67,897,100
Cash.................................................................................... 78
Interest receivable..................................................................... 625,613
Receivable for capital shares issued.................................................... 1,705,027
Receivable from brokers for investment securities sold.................................. 107,142,900
Prepaid expenses and other.............................................................. 16,883
---------------
Total assets.............................................................................. 247,668,518
---------------
LIABILITIES:
Dividends payable....................................................................... 619,990
Payable to brokers for investment securities purchased.................................. 108,863,368
Accrued expenses and other payables:
Sub-Advisory fees..................................................................... 17,690
Administration fees................................................................... 8,637
Custodian and transfer agent fees..................................................... 11,939
Other................................................................................. 12,969
---------------
Total liabilities......................................................................... 109,534,593
---------------
NET ASSETS................................................................................ $ 138,133,925
---------------
---------------
Shares Outstanding ($0.001 par value, unlimited number of shares authorized).............. 138,188,917
---------------
---------------
Net Asset Value, Offering Price and Redemption Price per share............................ $ 1.00
---------------
---------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par................................................... $ 138,189
Additional paid-in capital.............................................................. 138,050,727
Accumulated net realized losses on investment transactions.............................. (54,991)
---------------
Net Assets, May 31, 1996.................................................................. $ 138,133,925
---------------
---------------
</TABLE>
- -------------
See Notes to Financial Statements.
11
<PAGE>
EMERALD TREASURY TRUST FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 3,991,296
EXPENSES:
Sub-Advisory fees............................................................. $ 111,088
Administration fees........................................................... 93,661
Transfer agent fees and expenses.............................................. 10,545
Custodian fees and expenses................................................... 22,903
Legal fees.................................................................... 4,935
Audit fees.................................................................... 7,763
Reports to shareholders....................................................... 10,521
Registration Fees............................................................. 4,474
Trustees' fees................................................................ 3,211
Insurance expense............................................................. 2,035
Other expenses................................................................ 11,668
------------
282,804
Less: Expense reimbursements.................................................... (1,713) 281,091
------------ -------------
Net Investment Income........................................................... 3,710,205
REALIZED LOSSES ON INVESTMENTS:
Net realized losses on securities transactions................................ (39,042)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 3,671,163
-------------
-------------
</TABLE>
- ------------
See Notes to Financial Statements.
12
<PAGE>
EMERALD TREASURY TRUST FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1996 1995
--------------- ----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations
Net investment income............................................... $ 3,710,205 $ 7,770,755
Net realized losses on securities transactions...................... (39,042) (76,579)
--------------- ----------------
Net increase in net assets resulting from operations................ 3,671,163 7,694,176
--------------- ----------------
Dividends to shareholders from net investment income (3,710,205) (7,770,755)
--------------- ----------------
Distributions to shareholders from net realized gains................. (10,266) (113,374)
--------------- ----------------
Fund Share Transactions (at $1.00 per share)
Net proceeds from shares subscribed................................. 197,115,907 291,358,138
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions....................................... -- --
Cost of shares redeemed............................................. (191,782,888) (285,089,050)
--------------- ----------------
Net increase in net assets from Fund share transactions............. 5,333,019 6,269,088
--------------- ----------------
Total Increase........................................................ 5,283,711 6,079,135
NET ASSETS:
Beginning of period................................................. 132,850,214 126,771,079
--------------- ----------------
End of period....................................................... $ 138,133,925 $ 132,850,214
--------------- ----------------
--------------- ----------------
</TABLE>
- -------------
See Notes to Financial Statements.
13
<PAGE>
EMERALD FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Emerald Funds (the "Trust") was organized as a Massachusetts business trust on
March 15, 1988. The Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end, management investment company. The
Trust operates as a series company currently comprising fifteen portfolios. The
accompanying financial statements and notes relate only to the Prime Trust Fund
and Treasury Trust Fund (the "Funds"). 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. Treasury has pledged its
full faith and credit to guarantee the payment of principal and interest.
Barnett Banks Trust Company, N.A. ("Barnett") serves as the Funds'
investment adviser. Effective June 28, 1996, Barnett Capital Advisors, Inc. will
assume the investment advisory responsibilities of Barnett. Rodney Square
Management Corporation (the "Sub-Adviser"), a subsidiary of Wilmington Trust
Company, serves as the Funds' investment sub-adviser. Effective April 1, 1996,
BISYS Fund Services Limited Partnership ("BISYS") became the Funds'
administrator. Emerald Asset Management, Inc. (the "Distributor") serves as the
distributor of the Funds' shares. BISYS is a wholly owned subsidiary and the
Distributor is an indirectly owned subsidiary of The BISYS Group, Inc.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
A)Security Valuation:
Portfolio securities are valued at amortized cost, which approximates market
value. The amortized cost method involves valuing a security at cost on the date
of purchase and thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and initial cost. In
addition, the Funds may not (a) purchase any instrument with a remaining
maturity greater than thirteen months unless such instrument is subject to a
demand feature, or (b) maintain a dollar-weighted average maturity which exceeds
90 days.
B)Securities Transactions and Investment Income:
Securities transactions are recorded on the trade date. Realized gains and
losses on the sales of investments are calculated on the identified cost basis.
Interest income, including accretion of discount and amortization of premium on
investments, is accrued daily.
C)Dividends and Distributions to Shareholders:
Dividends from net investment income are declared daily to shareholders and are
paid monthly. Distributions of net realized gains, if any, will be paid at least
annually. However, to the extent that net realized gains of a Fund can be
reduced by any capital loss carryovers of that Fund, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and
14
<PAGE>
- --------------------------------------------------------------------------------
distributions to shareholders which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income or net
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
D)Repurchase Agreements:
The Trust's custodian and other banks acting in a sub-custodian capacity take
possession of the collateral pledged for investments in repurchase agreements.
The underlying collateral is valued daily on a mark-to-market basis to determine
that the value, including accrued interest, exceeds the repurchase price. In the
event of the seller's default of the obligation to repurchase, the Funds have
the right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral may be subject to legal proceedings.
E)Lending Securities:
If the Prime Trust Fund or the Treasury Trust Fund lends its securities, the
Fund receives from the borrower collateral, in the form of cash or U.S. Treasury
securities or, in the case of the Prime Trust Fund, securities of U.S.
Government agencies or instrumentalities or an irrevocable letter of credit
issued by a bank that meets the credit standards of the Prime Trust Fund, in an
amount at least equal at all times to the market value of the securities loaned.
The Fund continues to receive interest on the securities loaned and may
simultaneously earn interest on the collateral held. The Fund records and values
such collateral at its market value on the date of receipt and marks-to-market
such collateral on a daily basis through maturity date. If the borrower defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the borrower of the security, realization of the
collateral by the Funds may be delayed or limited.
F)Expenses:
The Trust accounts separately for the assets, liabilities and operations of each
Fund. Direct expenses of a Fund are charged to that Fund while general Trust
expenses are allocated among the Trust's respective portfolios.
G)Federal Income Taxes:
For federal income tax purposes, each Fund is treated as a separate entity for
the purpose of determining its qualification as a regulated investment company
under the Internal Revenue Code (the "Code"). It is the policy of each Fund to
meet the requirements of the Code applicable to regulated investment companies,
including the requirement that it distribute substantially all of its taxable
income to shareholders. Therefore, no federal income tax provision is required.
At November 30, 1995, the following Fund had the following capital loss
carryovers:
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATE
----------- -----------
<S> <C> <C>
Prime Trust Fund.................... $ 2,346 2001
7,458 2002
-----------
$ 9,804
-----------
-----------
</TABLE>
These capital loss carryovers may be used to offset any future realized
gains on securities transactions to the extent provided in the regulations under
the Code. To the extent utilized, the Prime Trust Fund will reduce amounts
otherwise payable to shareholders from net realized gains. The Treasury Trust
Fund had no capital loss carryovers at November 30, 1995.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement with Barnett.
Barnett, in turn, has entered into a Sub-Advisory Agreement with the Sub-
Advisor. The Trust has entered into an Administration Agreement with BISYS and a
Distribution Agreement with the Distributor.
Because of state and federal requirements applicable to the fiduciary
accounts whose assets are invested in the Funds, the Investment Advisory
15
<PAGE>
- --------------------------------------------------------------------------------
Agreement for the Funds provides that Barnett is not entitled to any
compensation from the Funds for its advisory services. The Trust has agreed to
pay the Sub-Adviser a fee at an annual rate of 0.15% of the average daily net
assets of each of the Funds. Such fees are accrued daily and paid monthly. The
Sub-Adviser is responsible for all purchases and sales of each Fund's portfolio
securities, subject to the general supervision of both the Board of Trustees and
Barnett. As Administrator, BISYS assists in supervising the operations of the
Funds. For its services, BISYS is entitled to receive a fee at an annual rate of
0.0775% of the first $5 billion of the Trust's aggregate net assets, 0.07% of
the next $2.5 billion, 0.065% of the next $2.5 billion and 0.05% of all assets
exceeding $10 billion. In the event the aggregate average daily net assets falls
below $3 billion, the fee will be increased to 0.08% of the aggregate average
daily net assets of the Trust. Prior to April 1, 1996, Concord Holding
Corporation (the prior administrator), also a wholly owned subsidiary of The
BISYS Group, Inc., received a fee at the effective annual rate of 0.15% of the
average daily net assets of each of the Funds. Such fees are accrued daily and
paid monthly. The Distributor does not receive a fee under the Distribution
Agreement.
The Sub-Adviser and BISYS have voluntarily agreed to reimburse fees payable
to them with respect to each Fund to the extent a Fund's ordinary operating
expenses (including fees payable to the Sub-Adviser and BISYS) exceed 0.40% of
such Fund's average daily net assets. As a result of such expense limitations,
both the Sub-Adviser and BISYS have reimbursed in total, $1,488 of their fees
from the Prime Trust Fund and $1,713 of their fees from the Treasury Trust Fund
for the six months ended May 31, 1996.
Certain officers of the Trust are "affiliated persons" (as defined in the
Act) of BISYS or the Distributor. Each Trustee receives an annual fee of $14,000
and a meeting fee of $1,500 per meeting for services relating to all of the
portfolios constituting the Trust. For the six months ended May 31, 1996, the
Prime Trust Fund and Treasury Trust Fund incurred legal fees of $4,195 and
$4,935, respectively, earned by a law firm, a partner of which serves as
Secretary to the Trust.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Because each Fund has maintained a $1.00 net asset value per share from
inception, the number of shares sold, shares issued to shareholders in
reinvestment of dividends and distributions, and shares redeemed are equal to
the dollar amounts shown in the Statements of Changes in Net Assets for the
corresponding capital share transactions.
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Prime Trust Fund invests substantially all of its assets in a diversified
portfolio of high quality U.S. dollar denominated money market instruments as
disclosed in the Portfolio of Investments by security type. The issuers' ability
to meet their obligations may be affected by domestic and foreign economic,
regional and political developments.
The Prime Trust Fund had the following concentrations by industry sector at
May 31, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
Repurchase Agreements................ 22.7%
Banking.............................. 17.1
Finance Companies.................... 13.5
Chemicals............................ 7.9
Other................................ 7.5
Leisure and Recreation Products...... 6.8
Banking and Finance.................. 6.8
Automobiles and Trucks............... 4.1
Trading Companies.................... 3.4
Investment Management................ 3.4
Metal................................ 3.4
Home Building and Land Development... 3.4
---------
100.0%
---------
---------
</TABLE>
16
<PAGE>
EMERALD PRIME TRUST FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ---------------------------------------------------------------
ENDED MAY 31, NOVEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER
1996 30, 1995 30, 1994 30, 1993 30, 1992* 30, 1991
------------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<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-Advisor (Note 3)..... 0.0000 0.0000 0.0037 0.0000 0.0000 0.0000
------------- ----------- ----------- ----------- ----------- -----------
Net change in net asset
value...................... 0.0000 0.0000 (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%
</TABLE>
- ---------------
* Effective April 22, 1992, Rodney Square Management Corporation, a subsidiary
of Wilmington Trust Company, became the Fund's investment Sub-Adviser.
** 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.
++ Unannualized.
See Notes to Financial Statements.
17
<PAGE>
EMERALD TREASURY TRUST FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ---------------------------------------------------------------
ENDED MAY 31, NOVEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER
1996 30, 1995 30, 1994 30, 1993 30, 1992* 30, 1991
------------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 1.0000 $ 1.0015 $ 0.9999 $ 0.9999 $ 1.0000 $ 1.0000
------------- ----------- ----------- ----------- ----------- -----------
Income from investment
operations:
Net investment income...... 0.0251 0.0551 0.0367 0.0292 0.0367 0.0598
Net realized gains (losses)
on securities............ (0.0003) (0.0006) 0.0016 0.0000 (0.0001) 0.0000
------------- ----------- ----------- ----------- ----------- -----------
Total income from
investment operations.... 0.0248 0.0545 0.0383 0.0292 0.0366 0.0598
------------- ----------- ----------- ----------- ----------- -----------
Less dividends and
distributions:
Dividends from net
investment income........ (0.0251) (0.0551) (0.0367) (0.0292) (0.0367) (0.0598)
Distributions from net
realized gains on
securities............... (0.0001) (0.0009) (0.0000) (0.0000) (0.0000) (0.0000)
------------- ----------- ----------- ----------- ----------- -----------
Total dividends and
distributions............ (0.0252) (0.0560) (0.0367) (0.0292) (0.0367) (0.0598)
------------- ----------- ----------- ----------- ----------- -----------
Net change in net asset
value...................... (0.0004) (0.0015) 0.0016 0.0000 (0.0001) 0.0000
------------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD..................... $ 0.9996 $ 1.0000 $ 1.0015 $ 0.9999 $ 0.9999 $ 1.0000
------------- ----------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- ----------- -----------
Total return................. 2.55%++ 5.74% 3.73% 2.96% 3.74% 6.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s)................... $ 138,134 $ 132,850 $ 126,771 $ 166,410 $ 183,072 $ 184,420
Ratio of expenses to
average net assets....... 0.38%+ 0.40% 0.40% 0.40% 0.40% 0.39%
Ratio of net investment
income to average net
assets................... 5.05%+ 5.54% 3.61% 2.92% 3.72% 6.00%
Ratio of expenses to
average net assets**..... 0.38%+ 0.45% 0.44% 0.42% (a) (a)
Ratio of net investment
income to average net
assets**................. 5.05%+ 5.50% 3.57% 2.90% (a) (a)
</TABLE>
- ---------------
* Effective April 22, 1992, Rodney Square Management Corporation, a subsidiary
of Wilmington Trust Company, became the Fund's investment Sub-Adviser.
** 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.
++ Unannualized.
See Notes to Financial Statements.
18
<PAGE>
EMERALD FUNDS
- --------------------------------------------------------------------------------
Results of Special Shareholder Meeting (Unaudited)
- --------------------------------------------------------------------------------
On May 29, 1996, a special meeting of the shareholders of Emerald Funds was
held to consider the election of six Trustees and the ratification of the
selection of Price Waterhouse LLP as independent accountant for each Fund of
Emerald Funds.
ELECTION OF TRUSTEES--The shareholders of Emerald Funds were requested to
vote for the election of the following individuals to serve as Trustees of
Emerald Funds. The shareholders of Emerald Funds approved each nominee. The
results of such solicitation are as follows:
<TABLE>
<CAPTION>
NOMINEE IN FAVOR OPPOSED ABSTAIN
- ------------------------ --------------- --------- ------------
<S> <C> <C> <C>
Chesterfield H. Smith 3,183,864,467 451,748 21,214,851
Albert D. Ernest 3,183,942,639 373,575 21,214,851
Raynor E. Bowditch 3,183,907,618 408,597 21,214,851
John G. Grimsley 3,183,932,453 383,761 21,214,851
Mary Doyle 3,183,935,679 380,535 21,214,851
Harvey R. Holding 3,183,898,180 418,034 21,214,851
</TABLE>
RATIFICATION OF INDEPENDENT AUDITORS--The shareholders of Emerald Funds
ratified the appointment of Price Waterhouse LLP as independent accountant for
Emerald Funds for the fiscal year ending November 30, 1996 as follows:
<TABLE>
<CAPTION>
IN FAVOR OPPOSED ABSTAIN
--------------- ------------- ------------
<S> <C> <C> <C>
3,179,623,280 12,798,546 13,077,645
</TABLE>
19
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