EMERALD FUNDS, 497, 1996-04-16

EMERALD FUNDS
497, 1996-04-16

Previous: COMSTOCK PARTNERS FUNDS INC, 485APOS, 1996-04-16

Next: HOMEOWNERS GROUP INC, SC 13D/A, 1996-04-16

<PAGE>
EMERALD FUNDS

Statement of Additional Information
*Equity Fund*

*Equity Value Fund*
International Equity Fund*

*Small Capitalization Fund*
*Balanced Fund*
*Short-Term Fixed Income Fund*
*U.S. Government Securities Fund*
*Managed Bond Fund*
*Florida Tax-Exempt Fund*
*Prime Fund*
*Treasury Fund*
*Tax-Exempt Fund*

April 1, 1996

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
EMERALD FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . 3
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . 39
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ADDITIONAL INFORMATION CONCERNING TAXES. . . . . . . . . . . . . . . . . . . 48
MANAGEMENT OF EMERALD FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . 56
INDEPENDENT ACCOUNTANTS/EXPERTS. . . . . . . . . . . . . . . . . . . . . . . 77
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS . . . . . . . . . . . . . 78
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>

<PAGE>

This Statement of Additional Information, which applies to Retail
and Institutional Shares of the Equity, Equity Value, International Equity,
Small Capitalization, Balanced, Short-Term Fixed Income, U.S. Government
Securities, Managed Bond and Florida Tax-Exempt Funds (the "Equity and Fixed
Income Funds") and to Retail Shares of the Prime, Treasury and Tax-Exempt
Funds (the "Money Market Funds"), is meant to be read in conjunction with the
Prospectuses dated April 1, 1996 with respect to Institutional and Retail
Shares of the Equity and Fixed Income Funds and Retail Shares of the Money
Market Funds, and is incorporated by reference in its entirety into those
Prospectuses. Because this Statement of Additional Information is not itself a
prospectus, no investment in Institutional Shares or Retail Shares of the
Equity and Fixed Income Funds or in Retail Shares of the Money Market Funds
should be made solely upon the information contained herein. Copies of the
Prospectuses may be obtained by calling 800-637-3759. Capitalized terms
used but not defined herein have the same meanings as in the Prospectuses.

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 MONEY MARKET 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.

-3-

<PAGE>

EMERALD FUNDS

Emerald Funds (the "Trust") 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 Retail and Institutional
Shares of the Equity and Fixed Income Funds (of which the Equity, Equity Value,
International Equity, Small Capitalization, Balanced, Short-Term Fixed Income,
U.S. Government Securities and Managed Bond Funds are classified as diversified
portfolios and the Florida Tax-Exempt Fund is classified as a non-diversified
portfolio) and to Retail Shares of the Money Market Funds (all of which are
classified as diversified). The Equity and Fixed Income Funds and the Money
Market Funds are sometimes referred to as the "Funds." Emerald Funds also
currently offers other classes of shares in each of the Money Market Funds
(Institutional Shares and Service Shares), as well as shares in other investment
portfolios. These other share classes and portfolios are described in separate
Prospectuses and Statements of Additional Information. For further information,
contact the Distributor at the telephone number stated on the cover page of this
Statement of Additional Information.

INVESTMENT OBJECTIVES AND POLICIES

The Prospectuses for the Funds describe the Funds' investment
objectives. The following policies supplement the Funds' respective investment
objectives and policies as set forth in their Prospectuses.

PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Board of Trustees, Barnett
Banks Trust Company, N.A. (the "Adviser") makes decisions with respect to and
places orders for all purchases and sales of portfolio securities for the Equity
and Fixed Income Funds and for the Prime and Treasury Funds. Rodney Square
Management Corporation (the "Sub-Adviser"), a wholly-owned subsidiary of
Wilmington Trust Company, has similar responsibilities for the Tax-Exempt
Fund subject to the general supervision of both the Board of Trustees and the
Adviser. (The Sub-Adviser does not provide sub-advisory services for any of
the other Funds.)

-4-

<PAGE>

The portfolio turnover rate for the Funds is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities (such as those held
by the Money Market Funds), including options, whose maturities or expiration
dates at the time of acquisition are thirteen months or less. Portfolio
turnover may vary greatly from year to year as well as within a particular year,
and may be affected by cash requirements for redemption of shares and by
requirements which enable the Funds to receive favorable tax treatment. The
portfolio turnover rates for the fiscal years ended November 30, 1994 and
1995 were 113% and 104%, respectively for the Equity Fund; 133% and 89%
respectively for the U.S. Government Securities; and 89% and 89%,
respectively for the Florida Tax-Exempt Fund. The portfolio turnover rates
for the Small Capitalization Fund for the period from January 4, 1994
(commencement of operations) through November 30, 1994 and the fiscal year
ended November 30, 1995 were 118% and 229%. The portfolio turnover rates for
the Balanced, Short-Term Fixed Income and Managed Bond Funds for the period from
April 11, 1994 (commencement of operations) through November 30, 1994 and the
fiscal year ended November 30, 1995 were 33% and 87% for the Balanced Fund;
0% and 33% for the Short-Term Fixed Income Fund; and 83% and 92% for the
Managed Bond Fund. The annual portfolio turnover rates for the Equity Value and
International Equity Funds are not expected to exceed 100%.

Because the Money Market Funds invest only in short-term instruments,
their portfolio turnover rate is expected to be zero for regulatory reporting
purposes. The Money Market Funds do not intend to seek profits from short-term
trading. Because these Funds invest only in short-term debt instruments, their
annual portfolio turnover rates will on an actual basis be relatively high, but
brokerage commissions are normally not paid on money market instruments, and
portfolio turnover is not expected to have a material effect on the net
investment income of the Money Market Funds. Portfolio turnover will not be a
limiting factor in making portfolio decisions for any Fund.

Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. For the fiscal years
ended November 30, 1995, 1994 and 1993, the Equity Fund paid $579,942,
$499,826 and $496,461 in brokerage commissions, respectively. For the fiscal
year ended November 30, 1995 and the period from commencement of operations
(January 4, 1994 for the Small Capitalization Fund and April 11, 1994 for the
Balanced Fund) through November 30, 1994 the Small Capitalization Fund paid
$706,112 and $241,074 and the Balanced Fund paid $138,534 and $54,784 in
brokerage commissions.

-5-

<PAGE>

Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser (or Sub-Adviser for the Tax-Exempt Fund) will normally
deal directly with the dealers who make a market in the instruments involved
except in those circumstances where more favorable prices and execution are
available elsewhere.

Securities purchased and sold by the Short-Term Fixed Income Fund,
U.S. Government Securities Fund, Managed Bond Fund, Florida Tax-Exempt Fund and
Money Market Funds are generally 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 fixed income
securities that the Balanced Fund purchases and sells are also generally traded
in this manner. 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. For
the fiscal years ended November 30, 1995, 1994 and 1993, no Funds other than
the Equity Fund, Small Capitalization Fund (for the period from the commencement
of operations January 4, 1994) and Balanced Fund (for the period from the
commencement of operations April 4, 1994) paid any brokerage commissions.

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.
A Fund will engage in this practice, however, only when the Adviser (or, with
respect to the Tax-Exempt Fund, the Sub-Adviser) believes such practice to be in
the Fund's interests.

In its Advisory Agreements the Adviser agrees with respect to the
Equity and Fixed Income Funds and with respect to the Prime and Treasury Funds,
and in its Sub-Advisory Agreement the Sub-Adviser agrees with respect to the
Tax-Exempt Fund, to 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 and Sub-Adviser will
consider factors they deem 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 respective Agreements authorize the Adviser and Sub-Adviser to cause the
Funds to pay a broker-dealer which furnishes brokerage and research services a
higher

-6-

<PAGE>

commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Adviser (or Sub-Adviser
with respect to the Tax-Exempt Fund) 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 (or
Sub-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.
For the fiscal years ended November 30, 1995, 1994 and 1993 approximately
$397,588,560, $357,702,702 and $201,771,449, respectively, in brokerage
transactions for the Equity Fund (involving the payment of $579,942, $227,951
and $365,618, respectively, in brokerage commissions) were allocated to brokers
because of research services provided. For the fiscal year ended November 30,
1995 and period from the commencement of operations of the Small Capitalization
Fund on January 4, 1994, approximately $323,757,624 and $148,069,898 in
brokerage transactions (involving payment of $3,974 and $16,307 in brokerage
commissions) were allocated to brokers because of research services provided.
For the fiscal year ended November 30, 1995 and the period from the commencement
of operations of the Balanced Fund on April 11, 1994, approximately $108,669,292
and $36,145,647 in brokerage transactions (involving payment of $54,779 and
$22,137, in brokerage commissions) were allocated to brokers because of
research services provided.

Supplemental research information so received is in addition to, and
not in lieu of, services required to be performed by the Adviser (and Sub-
Adviser) and does not reduce the advisory fees payable to the Adviser 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.

-7-

<PAGE>

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 (and Sub-Adviser with respect to the Tax-Exempt
Fund) 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 or the Sub-Adviser, to take into account the sale of
Fund shares if the Adviser (or Sub-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 Distributor, the Adviser or Sub-Advisers, 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
and Sub-Advisers. 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
(Sub-Adviser with respect to the Tax-Exempt Fund) 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 and Sub-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. With respect to a Money Market Fund in such an event, the
Board of Trustees or the Adviser (Sub-Adviser with respect to the Tax-Exempt
Fund), pursuant to guidelines established by the Board, will 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. With respect to an Equity and Fixed
Income Fund, the Adviser

-8-

<PAGE>

anticipates selling such a security in an orderly manner as soon as possible.
In addition, it is possible that unregistered securities purchased 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.

FUNDAMENTAL POLICIES

Each Fund is subject to the fundamental policies enumerated in this
sub-section, which policies 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(s), policies and limitations may be deemed to be underwriting.

4. Except for the International Equity and Equity Value Funds
(which are subject to the limitation stated below), 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. 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 particular 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

-9-

<PAGE>

Additional Information or in the Prospectuses are not deemed to be pledged for
purposes of this limitation.

6. Except for the International Equity and Equity Value Funds
(which are subject to the limitation stated below), 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.

7. Except for the International Equity and Equity Value Funds
(which are subject to the limitation stated below), 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(s), purchase publicly traded securities of companies engaging in whole
or in part in such activities and may enter into futures contracts and related
options.

8. Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective(s) and policies and may lend portfolio securities.

9. Purchase securities of companies for the purpose of exercising
control.

In addition, the Funds, (except the Florida Tax-Exempt Fund) may not:

10. 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, (a) with respect to each of these Funds, except the Prime Fund, more
than 5% of the value of the Fund's total assets would be invested in the
securities of such issuer, or (b) with respect to the Prime Fund, 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 (c) in the case of any of these Funds, 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, with respect to each Fund (except the U.S.
Government Securities Fund) 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

-10

<PAGE>

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 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 that does not exceed three business days. This practice, which is not a
fundamental policy of the Fund, would be changed only in the event that such
regulations of the Securities and Exchange Commission are amended in the
future.]

The Florida Tax-Exempt Fund may not:

11. Purchase securities of any one issuer if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be invested
in securities of such issuer, or more than 10% of the issuer's outstanding
voting securities would be owned by the Fund or Emerald Funds, except that (a)
up to 50% of the value of the Fund's total assets may be invested without regard
to these limitations so long as no more than 25% of the value of the Fund's
total assets are invested in the securities of any one issuer and (b) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or certificates of deposit for
such securities. 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.

In addition, the Prime Fund and the Tax-Exempt Fund may not:

12. 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 guaranteed by the United States, any state, territory
or possession of the United States, the District 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

-11-

<PAGE>

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 Section 12 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.]

The Equity and Fixed Income Funds may not:

13. 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 (as defined in fundamental policy No. 10 above) or
guaranteed by the United States, any state, territory or possession of the
United States, the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions and (ii) repurchase agreements
secured by the instruments described in clause (i); (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.

In addition, the Florida Tax-Exempt Fund and the Tax-Exempt Fund may
not:

14. Invest less than 80% of their net assets in securities the
interest on which is exempt from federal income tax, except during defensive
periods or during periods of unusual market conditions. For purposes of this
fundamental policy, municipal obligations that are subject to federal
alternative minimum tax are considered taxable.

In addition, the International Equity and Equity Value Funds may not:

15. Write or sell put options, call options, straddles, spreads or
any combination thereof, except for transactions in options on securities,
securities indices, futures contracts, options on futures contracts, financial
instruments, currencies, forward currency exchange contracts and swaps, floors
and caps;

16. 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, currencies 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;

-12-

<PAGE>

17. 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; and each Fund may
enter into foreign currency contracts and related options to the extent
permitted by its investment objective and policies.

Although the foregoing fundamental policies would permit the Funds to
invest in options, futures contracts and options on futures contracts, the Money
Market Funds do not currently intend to trade in such instruments during the
next 12 months. Prior to making any such investments, the Money Market Funds
would notify their shareholders and add appropriate descriptions concerning the
instruments to their Prospectuses and this Statement of Additional Information.

In order to permit the sale of shares of the Funds in the State of
Texas, the Trust has agreed to the following additional non-fundamental
restrictions withrespect to the Funds:

1. The Funds will not invest in oil, gas or other mineral leases, nor
will they invest in real estate limited partnerships.

2. The Equity Fund will limit its investment in warrants to 5% of the
Fund's net assets, provided that up to and including 2% of the value of the
Fund's net assets may be invested in warrants that are not listed on the New
York or American Stock Exchange.

Should the Trust determine that the above commitments to the State of
Texas or any other commitments made to permit the sale of a particular class
of a Fund's shares in any state are no longer in the best interests of such
class or Fund, the Trust may revoke the commitment by terminating sales of
that class in the state involved.

TYPES OF OBLIGATIONS, INVESTMENT RISKS AND OTHER INVESTMENT INFORMATION

REVERSE REPURCHASE AGREEMENTS

-13-

<PAGE>

high-grade debt securities having a value equal to or greater 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 Prospectuses, the Adviser (Sub-
Adviser with respect to the Tax-Exempt Fund) will consider the earning power,
cash flows and other liquidity ratios of the issuers and guarantors of such
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 when purchased by the
Fund involved, however, will be deemed to have maturities equal to the period
remaining until the next interest rate adjustment.

Variable and floating rate instruments purchased by the Money Market
Funds may carry nominal maturities in excess of those Funds' 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 Money Market 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
Prospectuses 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 Funds, or in the Federal
Reserve/Treasury Book-

-14-

<PAGE>

Entry System. Repurchase agreements are considered to be loans by a Fund under
the Investment Company Act of 1940.

LENDING SECURITIES

When a Fund lends its securities, it continues to receive interest
(and dividends with respect to the Equity, Equity Value, International Equity,
Small Capitalization and Balanced Funds) 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, U.S. Government
securities, securities of U.S. Government agencies and instrumentalities or an
irrevocable letter of credit issued by a bank that meets the credit standards of
a Fund for short-term instruments, except that collateral for the U.S.
Government Securities Fund is limited to cash and securities of the U.S.
Government and its agencies and instrumentalities and collateral for the
Treasury Fund is limited to cash and U.S. Government securities. There may be
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.

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
voting stock of any one investment company will be owned by the Fund or by
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.

-15-

<PAGE>

U.S. GOVERNMENT OBLIGATIONS

Examples of the types of U.S. Government obligations that may be held
by the Equity and Fixed Income Funds and the Prime 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, 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.

STRIPPED SECURITIES

Although "stripped" securities may not pay interest to holders prior
to maturity, federal income tax regulations require a Fund to recognize as
interest income a portion of the bond's discount each year. This income must
then be distributed to shareholders along with other income earned by the Fund.
To the extent that any shareholders in a Fund elect to receive their dividends
in cash rather than reinvest such dividends in additional Fund shares, cash to
make these distributions will have to be provided from the assets of the Fund or
other sources such as proceeds of sales of Fund shares and/or sales of portfolio
securities. In such cases, the Fund will not be able to purchase additional
income producing securities with cash used to make such distributions and its
current income may ultimately be reduced as a result.

-16-

<PAGE>

ASSET-BACKED SECURITIES

The Balanced, Short-Term Fixed Income, Managed Bond, and Prime Funds
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.
These Funds, as well as the U.S. Government Securities Fund, may also invest in
U.S. Government securities that are backed by adjustable or fixed rate mortgage
loans.

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 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.

As stated in the Prospectuses, certain mortgage-backed securities that
are acquired may be collateralized mortgage obligations ("CMOs") which are
issued in multiple classes. These classes may include accrual certificates
(also known as "Z-Bonds"), which only accrue interest at a specified rate until
other specified classes have been retired and are converted thereafter to
interest-paying securities. They may also include planned amortization classes
("PAC") which generally require, within certain limits, that specified amounts
of principal be applied on each payment date, and generally exhibit less yield
and market volatility than other classes. The Funds will not purchase
"residual" CMO interests, which normally exhibit the greatest price volatility.

-17-

<PAGE>

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 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.

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. The 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 may be required subsequently to
place additional assets in the separate account in order that the value of the
account remains equal to the amount of the Fund's commitments. It may be
expected that the market value of the 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

-18-

<PAGE>

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. Forward purchase commitments are not expected to
exceed 25% of the value of a Fund's 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 or forward
commitments for speculative purposes but only in furtherance of their investment
objectives, and a Fund 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 may realize a taxable capital gain or loss.

When a Fund engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the 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
purchase 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.

CERTAIN SHORT-TERM INVESTMENTS

The Funds (other than the U.S. Government Securities Fund, Treasury
Fund and Tax-Exempt Fund) may make the following short-term investments. The
Adviser expects that during the next twelve months the Florida Tax-Exempt Fund
will not invest more than 5% of its net assets at the time of purchase in
instruments within any single category of the instruments described.

BANK OBLIGATIONS. Bank obligations include U.S. dollar-denominated
certificates of deposit, bankers' acceptances and time deposits, issued or
supported by the credit of U.S. or foreign banks or savings institutions having
total assets at the time of purchase in excess of $1 billion. A Fund may also
invest

-19-

<PAGE>

in certificates of deposit and time deposits of domestic branches of U.S. banks
having total assets less than $1 billion if such certificates of deposit and
time deposits are fully insured by the Federal Deposit Insurance Corporation.
Investments by the Funds in the obligations of foreign banks and foreign
branches of domestic banks may not exceed 25% of the value of the Fund's total
assets at the time of investment. Certain bank obligations of domestic branches
of foreign banks will be considered to be investments in domestic banks as
described above in the section entitled "Fundamental Policies." Investments by
the Florida Tax-Exempt Fund in the obligations of foreign banks and foreign
branches of domestic banks (excluding bank letters of credit, guarantees and
similar forms of credit or liquidity support) normally may not exceed 20% of the
value of the Fund's total assets at the time of investment. These Funds may
also make interest-bearing savings deposits in commercial and savings banks in
amounts not in excess of 5% of the total assets of the Fund.

COMMERCIAL PAPER. Investments by such Funds in commercial paper will
consist of issues with remaining maturities of 13 months or less. Commercial
paper purchased by a Fund may include obligations issued by Canadian
corporations and Canadian counterparts of U.S. corporations, Europaper, which is
U.S. dollar-denominated commercial paper of a foreign issuer and Yankee paper,
which is U.S. dollar-denominated commercial paper issued by foreign issuers in
the United States.

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.

MUNICIPAL OBLIGATIONS

Assets of the two Tax-Exempt Funds may be invested in debt instruments
("municipal obligations") issued by or on behalf of states, territories and
possessions of the United States, the

-20-

<PAGE>

District of Columbia and their respective authorities, agencies,
instrumentalities and political sub-divisions. The Balanced, Short-Term Fixed
Income, Managed Bond, and Prime Funds may also acquire municipal obligations,
which 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 particular 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 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.

As described in the Prospectuses, these Funds 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

-21-

<PAGE>

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. Emerald, 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 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.

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, these Funds may invest in bonds and other types of
tax-exempt instruments provided they have remaining maturities that meet any
applicable maturity limitations.

As described in their Prospectuses, the Balanced, Managed Bond, Short-
Term Fixed Income, Prime and the two Tax-Exempt Funds 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 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. The two Tax-Exempt Funds may, from time to time, invest more
than 25% of their total assets in municipal obligations covered by insurance
policies.

-22-

<PAGE>

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
the interest on municipal obligations. For example, pursuant to federal tax
legislation passed in 1986, interest on certain private activity bonds must be
included in an investor's federal alternative minimum taxable income, and
corporate investors must take all tax-exempt interest into account in
determining certain adjustments for Federal alternative minimum tax purposes.
Emerald Funds cannot, of course, predict what legislation, if any, may be
proposed in the future as regards the income tax status of interest on municipal
obligations, or which proposals, if any, might be enacted. Such proposals,
while pending or if enacted, might materially and adversely affect the
availability of municipal obligations for investment by the two Tax-Exempt Funds
and the liquidity and value of those Funds' portfolios. In such an event,
Emerald Funds would reevaluate the investment objective and policies of the two
Tax-Exempt Funds and consider possible changes in their structure or possible
dissolution.

STAND-BY COMMITMENTS

The two Tax-Exempt Funds may acquire stand-by commitments with respect
to municipal obligations held in their respective portfolios. The amount
payable to a Fund upon its exercise of a "stand-by commitment" is normally (i)
the Fund's acquisition cost of the municipal obligations (excluding any accrued
interest which the Fund paid on their acquisition), less any amortized market
premium or plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period. Stand-by
commitments may be sold, transferred or assigned by a Fund only with the
instruments involved.

The Funds expect that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Funds may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). Where a Fund has paid any
consideration directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized depreciation for the period during which the
commitment was held by the Fund.

The Funds intend to enter into stand-by commitments only with dealers,
banks and broker-dealers which, in the Adviser's or Sub-Adviser's opinion,
present minimal credit risks. In evaluating the creditworthiness of the issuer
of a stand-by commitment, the Adviser or Sub-Adviser will review periodically

-23-

<PAGE>

the issuer's assets, liabilities, contingent claims and other relevant financial
information.

The Tax-Exempt Funds would acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their rights
thereunder for trading purposes. Stand-by commitments acquired by these Funds
would be valued at zero in determining net asset value.

INTEREST RATE SWAPS, FLOORS AND CAPS

The Balanced, Short-Term Fixed Income and Managed Bond Funds may enter
into interest rate swaps and purchase interest rate floors and caps for hedging
purposes and not for speculation. A Fund will only enter into interest rate
swaps or interest rate floor or cap transactions on a net basis, I.E., the two
payment streams are netted out, with the Fund receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these transactions
are entered into for good faith hedging purposes, it is believed that such
obligations do not constitute senior securities as defined in the Investment
Company Act of 1940 and, accordingly, these transactions are not treated as
being subject to a Fund's borrowing restrictions. If there is a default by the
other party to an interest rate swap or interest rate floor or cap transaction,
the Fund involved will have contractual remedies pursuant to other agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid in comparison with markets
for other similar instruments which are traded in the Interbank market.

PARTICIPATION INTERESTS AND TRUST RECEIPTS

The Balanced, Short-Term Fixed Income, Managed Bond, and Prime Funds
may purchase participation interests and trust receipts as described in the
Prospectuses. Such participation interests and trust receipts may have fixed,
floating or variable rates of interest, and when purchased for the Prime Fund,
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 Fund involved
may invest pursuant to guidelines approved by the Board of Trustees. For
certain participation interests or trust receipts a 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.

-24-

<PAGE>

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
Funds will not purchase any such annuities. GICs acquired by the Funds 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
Funds 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 Funds to be illiquid investments, and will
be acquired by the Funds subject to its limitation on illiquid investments.

OPTIONS TRADING

As stated in the Prospectuses, each equity and fixed income Fund may
purchase put and call options listed on a national securities exchange and
issued by the Options Clearing Corporation. Such purchases would be in an
amount not exceeding 5% of a Fund's net assets. Such options may relate to
particular securities or to various indices. This is a highly specialized
activity which entails greater than ordinary investment risks. Regardless of
how much the market price of the underlying security or index increases or
decreases, the option buyer's risk is limited to the amount of the original
investment for the purchase of the option. However, options may be more
volatile than the underlying instruments, and therefore, on a percentage basis,
an investment in options may be subject to greater fluctuation than an
investment in the underlying instruments themselves. Put and call options
purchased by the Funds will be valued at the last sale price or, in the absence
of such a price, at the mean between bid and asked prices.

A listed call option for a particular security gives the purchaser of
the option the right to buy from a clearing corporation, and a writer has the
obligation to sell to the clearing corporation, the underlying security at the
stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is in consideration for undertaking the obligations under the option contract.
A listed put option gives the purchaser the right to sell to a clearing
corporation the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. In contrast to an option on a

-25-

<PAGE>

particular security, an option on an index provides the holder with the right to
make or receive a cash settlement upon exercise of the option. The amount of
this settlement will be equal to the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
dollars, times a specified multiple.

When a Fund writes a call option on a security, the option is
"covered" if the Fund involved owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount as are held in a segregated account by its custodian)
upon conversion or exchange of other securities held by it. For a call option
on an index, the option is covered if the Fund involved maintains with its
custodian cash or cash equivalents equal to the contract value. A call option
is also covered if the Fund involved holds a call on the same security or index
as the call written where the exercise price of the call held is (i) equal to or
less than the exercise price of the call written, or (ii) greater than the
exercise price of the call written provided the difference is maintained by the
Fund in cash or cash equivalents in a segregated account with its custodian. A
secured put option written by a Fund means that the Fund maintains in a
segregated account with the custodian cash or U.S. Government securities in an
amount not less than the exercise price of the option at all times during the
option period.

The principal reason for writing call options on a securities
portfolio is the attempt to realize, through the receipt of premiums, a greater
current return than would be realized on the securities alone. In return for
the premium, the covered option writer gives up the opportunity for profit from
a price increase in the underlying security above the exercise price so long as
his obligation as a writer continues, but retains the risk of loss should the
price of the security decline. Unlike one who owns securities not subject to an
option, the covered option writer has no control over when it may be required to
sell its securities, since it may be assigned an exercise notice at any time
prior to the expiration of its obligation as a writer.

A Fund's obligation to sell a security subject to a covered call
option written by it, or to purchase a security subject to a secured put option
written by it, may be terminated prior to the expiration date of the option by
the Fund's executing a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding

-26-

<PAGE>

option, to prevent an underlying security from being called, to permit the sale
of the underlying security or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. A covered call option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline in the underlying security during such period. A Fund will write
an option on a particular security only if the Adviser believes that a liquid
secondary market will exist on an exchange for options of the same series which
will permit the Fund to make a closing purchase transaction in order to close
out its position.

When a Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently marked-
to-market to reflect the current value of the option written. The current value
of the traded option is the last sale price or, in the absence of a sale, the
average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. Any gain on a
covered call option may be offset by a decline in the market price of the
underlying security during the option period. If a covered call option is
exercised, the Fund involved may deliver the underlying security held by it or
purchase the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received
and the Fund will realize a gain or loss. If a secured put option is exercised,
the amount paid by the Fund for the underlying security will be partially offset
by the amount of the premium previously paid to the Fund. Premiums from expired
options written by a Fund and net gains from closing purchase transactions are
treated as short-term capital gains for federal income tax purposes, and losses
on closing purchase transactions are short-term capital losses.

As noted previously, there are several risks associated with
transactions in options on securities and indices. For

-27-

<PAGE>

example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded over-the-counter
or on a national securities exchange ("Exchange") may be absent for reasons
which include the following: there may be insufficient trading interest in
certain options; restrictions may be imposed by an Exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options or underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on an Exchange; the facilities of an Exchange or the
Options Clearing Corporation may not at all times be adequate to handle current
trading volume; or one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.

A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.

OPTIONS ON FOREIGN STOCK INDEXES -- INTERNATIONAL EQUITY FUND

The effectiveness of purchasing or writing foreign stock index options
as a hedging technique will depend upon the extent to which price movements in
the portion of the securities portfolio of the International Equity Fund
correlate with price movements of the stock index selected. Because the value
of an index option depends upon movements in the level of the index rather than
the price of a particular stock, whether the Fund realizes a gain or loss from
the purchase or writing of options on an index is dependent upon movements in
the level of stock prices in the foreign stock market generally or, in the case
of certain indexes, in an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful use by the Fund of
options on foreign stock indexes will be subject to the Adviser's ability to
predict correctly movements in the direction of the stock market generally or of
a particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks. There can be no assurance
that such judgment will be accurate or that the use of these portfolio
strategies will be successful. The International Equity Fund will engage in
foreign

-28-

<PAGE>

stock index options transactions that are determined to be consistent with its
efforts to control risk.

When the Fund writes an option on a foreign stock index, it will
establish a segregated account with its custodian or with a foreign sub-
custodian in which International Equity will deposit cash or cash equivalents or
a combination of both in an amount equal to the market value of the option, and
will maintain the account while the option is open.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS -- INTERNATIONAL EQUITY FUND

Because the International Equity Fund may buy and sell securities
denominated in currencies other than the U.S. dollar, and receive interest,
dividends and sale proceeds in currencies other than the U.S. dollar, the Fund
may enter into foreign currency exchange transactions to convert United States
currency to foreign currency and foreign currency to United States currency as
well as convert foreign currency to other foreign currencies. The Fund either
enters into these transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or uses forward contracts to
purchase or sell foreign currencies.

A forward foreign currency exchange contract is an obligation by the
Fund to purchase or sell a specific currency at a specified price and future
date, which may be any fixed number of days from the date of the contract.
Forward foreign currency exchange contracts establish an exchange rate at a
future date. These contracts are transferable in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward foreign currency exchange contract generally has no
deposit requirement and is traded at a net price without commission. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Fund's portfolio securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.

The Fund may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. Since consideration of the prospect for
currency parities will be incorporated into the Fund's long-term investment
decisions, the Fund will not routinely enter into foreign currency hedging
transactions with respect to portfolio security transactions; however, it is
important to have the flexibility to enter into foreign currency hedging
transactions when it is determined that the transactions

-29-

<PAGE>

would be in the Fund's best interest. Although these transactions tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time they tend to limit any potential gain that might be realized
should the value of the hedged currency increase. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible because the future value of these securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of currency market movements is extremely
difficult, and the successful execution of a hedging strategy is highly
uncertain.

AMERICAN DEPOSITORY RECEIPTS ("ADRS") AND EUROPEAN DEPOSITORY RECEIPTS ("EDRS")

The Equity, Equity Value, International Equity, Small Capitalization
and Balanced Funds may invest their assets in ADRs, which are receipts issued by
an American bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer, and in EDRs, which are receipts issued by European
financial institutions evidencing ownership of underlying securities issued by a
foreign issuer. ADRs may be listed on a national securities exchange or may
trade in the over-the-counter market. ADR prices are denominated in United
States dollars while EDR prices are generally denominated in foreign currencies.
The securities underlying an ADR or EDR will also normally be denominated in a
foreign currency. The underlying securities may be subject to foreign
government taxes which could reduce the yield on such securities. As discussed
above under "Foreign Money Market Instruments," investments in foreign
securities involve certain inherent risks, such as political or economic
instability of the issuer or the country of issue and the difficulty of
predicting international trade patterns : 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 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.

WARRANTS

Warrants are privileges issued by corporations enabling the owner to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. The prices of warrants do
not necessarily

-30-

<PAGE>

correlate with the prices of the underlying securities. The purchase of
warrants involves the risk that the purchaser could lose the purchase value of
the warrant if the right to subscribe to additional shares is not exercised
prior to the warrant's expiration. Also, the purchase of warrants involves the
risk that the effective price paid for the warrant added to the subscription
price of the related security may exceed the value of the subscribed security's
market price such as when there is no movement in the level of the underlying
security.

CONVERTIBLE SECURITIES

Convertible securities entitle the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the securities
mature or are redeemed, converted or exchanged. Prior to conversion,
convertible securities have characteristics similar to ordinary debt securities
in that they normally provide a stable stream of income with generally higher
yields than those of common stock of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure and
therefore generally entail less risk than the corporation's common stock,
although the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a fixed
income security.

In selecting convertible securities, the Adviser (or the Sub-Adviser)
will consider, among other factors, the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are entitled to the
benefits of sinking funds or other protective conditions; diversification of a
Fund's portfolio as to issuers; and the ratings of the securities. Since credit
rating agencies may fail to timely change the credit ratings of securities to
reflect subsequent events, the (or the Sub-Adviser) will consider whether such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments. A Fund may retain a portfolio security whose rating has
been changed if the (or the Sub-Adviser) deems that retention of such security
is warranted.

As described in the Prospectuses, the Equity, Small Capitalization,
Balanced, Short-Term Fixed Income and Managed Bond Funds may invest a portion of
their assets in convertible securities that are rated below investment grade.
In general, investments in lower-rated securities are subject to a significant
risk of a change in the credit rating or financial condition of the issuing
entity. Investments in such securities are also likely to be subject to greater
market fluctuation and

-31-

<PAGE>

to greater risk of loss of income and principal due to default than investments
of higher rated securities.

In particular, a Fund's investments in lower-rated securities present
the following risk factors:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. The economy and
interest rates can affect lower-rated securities differently from other
securities. For example, the prices of lower-rated securities are more
sensitive to adverse economic changes or individual corporate developments than
are the prices of higher-rated investments. Also, during an economic downturn
or substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals and to obtain additional financing. If the issuer of a
convertible security defaulted, a Fund might incur additional expenses to seek
recovery. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated
securities and of a Fund's net asset value. In general, both the price and
yields of lower-rated securities will fluctuate.

LIQUIDITY AND VALUATION. To the extent that an established
secondary market does not exist and a particular convertible security is
thinly traded, the determination of the security's fair value may be
difficult to determine because of the absence of reliable objective data. As
a result, a Fund's valuation of the security and the price it could obtain
upon its disposition could differ. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower-rated securities held by a Fund, especially in
a thinly traded market. Illiquid or restricted securities held by a Fund may
involve special registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties.

CONGRESSIONAL PROPOSALS. Current laws and legislative proposals
designed to limit the use, or tax and other advantages, of lower-rated
securities, may have a material effect on a Fund's investment in convertible
securities.

CREDIT RATINGS. The credit ratings of S&P, Moody's, D&P and Fitch are
evaluations of the safety of principal and interest payments, not market value
risk, of convertible securities. Also, credit rating agencies may fail to
timely change the credit ratings to reflect subsequent events. Therefore, in
addition to using recognized rating agencies and other sources, the Adviser, (or
the Sub-Adviser), also performs its own analysis of issuers in selecting
convertible securities for a Fund. The Adviser's, (or the Sub-Adviser's)
analysis of

-32-

<PAGE>

issuers may include, among other things, historic and current financial
condition, current and anticipated cash flow and borrowing requirements, value
of assets in relation to historical costs, strength of management,
responsiveness to business conditions, credit standing, and current and
anticipated results of operations. Among other factors which may also be
considered by the Adviser, (or the Sub-Adviser) are anticipated changes in
interest rates, the availability of new investment opportunities and the outlook
for specific industries. Issues of convertible securities rated by S&P,
Moody's, D&P or Fitch at the time of purchase may subsequently cease to be
rated. This event will not require the elimination of such obligations from a
Fund's portfolio, but the Adviser, (or the Sub-Adviser) will consider such an
event in determining whether the Fund should continue to hold such obligations.

SPECIAL CONSIDERATIONS RELATING TO FLORIDA OBLIGATIONS

Some of the significant financial considerations relating to
investments by the Florida Tax-Exempt Fund in Florida Obligations are summarized
below. This summary information is derived principally from official statements
released prior to the date of this Statement of Additional Information relating
to issues of Florida Obligations and does not purport to be a complete
description of any of the considerations mentioned herein. While the Fund has
not independently verified such information, it has no reason to believe such
information is not correct in all material respects.

The financial condition of the State of Florida may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities but also by entities that are not under the control of the
State. Adverse developments affecting the State's financing activities, its
agencies or its political subdivisions could adversely affect the State's
financial condition.

The State's revenues increased from $29,115,034,000 during the
1993-94 fiscal year ended June 30, 1994 to $31,178,025,000 during the fiscal
year ended June 30, 1995. The State's expenses increased from
$27,878,146,000 during the 1993-94 fiscal year ended June 30, 1994 to
$30,775,597,000 during the 1994-95 fiscal year ended June 30, 1995. The
Florida Comptroller also projected non-agricultural jobs to gross 3.2% and
3.0% in fiscal years 1995-96 and 1996-97, respectively.

The Constitution of the State of Florida limits the right of the
State and its local governments to tax. The Constitution requires the State
to have a balanced budget and to raise revenues to defray its operating
expenses. The State may not borrow for the purpose of maintaining ordinary
operating expenses, but may generally borrow for capital improvements.

-33-

<PAGE>

There are a number of methods by which the State of Florida may incur
debt. The State may issue bonds backed by the State's full faith and credit to
finance or refinance certain capital projects authorized by its voters. The
State also may issue certain bonds backed by the State's full faith and credit
to finance or refinance pollution control, solid waste disposal and water
facilities for local governments; county roads; school districts and capital
public education projects without voter authorization. The State may also,
pursuant to specific constitutional authorization, directly guarantee certain
obligations of the State's authorities, agencies and instrumentalities.
Payments of debt service on State bonds backed by the State's full faith and
credit and State-guaranteed bonds and notes are legally enforceable obligations
of the State. Revenue bonds to finance or refinance certain capital projects
also may be issued by the State of Florida without voter authorization.
However, revenue bonds are payable solely from funds derived directly from
sources other than state tax revenues.

The State of Florida currently imposes, among other taxes, an ad
valorem tax on intangible property and a corporate income tax. The Florida
Constitution prohibits the levying of a personal income tax. Certain other
taxes the State of Florida imposes include: an estate or inheritance tax which
is limited by the State's Constitution to an amount not in excess of the amount
allowed to be credited upon or deducted from federal estate taxes or the estate
taxes of another state; and a 6% sales tax on most goods and certain services
with an option for counties to impose up to an additional 1% sales tax on such
goods and services.

The Constitution reserves the right to charge an ad valorem tax on
real estate and tangible personal property to Florida's local governments. All
other forms of taxation are preempted to the State of Florida except as may be
provided by general law. Motor vehicles, boats, airplanes, trailers, trailer
coaches and mobile homes, as defined by law, may be subject to a license tax for
their operation, but may not be subject to an ad valorem tax.

Under the Constitution, ad valorem taxes may not be levied in excess
of the following millage upon the assessed value of real estate and tangible
personal property: for all county purposes, ten mills; for all municipal
purposes, ten mills; for all school purposes, ten mills; for water management
purposes for the northwest portion of the State, .05 mills; for water management
purposes for the remaining portion of the State, one mill; and for all other
special districts a millage authorized by law and approved by referendum. When
authorized by referendum, the above millage caps may be exceeded for up to two
years. Counties, school districts, municipalities, special districts and local
governmental bodies with taxing powers may issue bonds to

-34-

<PAGE>

finance or refinance capital projects payable from ad valorem taxes in excess of
the above millage cap when approved by referendum. It should be noted that
several municipalities and counties have charters that further limit either ad
valorem taxes or the millage that may be assessed.

The Florida legislature has passed a number of mandates which limit or
place requirements on local governments without providing the local governments
with compensating changes in their fiscal resources. The Florida legislature
enacted a comprehensive growth management act which forces local governments to
establish and implement comprehensive planning programs to guide and control
future development. This legislation prohibits public or private development
that does not conform with the locality's comprehensive plan. Local governments
may face greater requirements for services and capital expenditures than they
had previously experienced if their locality experiences increased growth or
development. The burden for funding these potential services and capital
expenditures which has been left to the local governments may be quite large.

The State of Florida enacted an amendment to the Florida Constitution
("Amendment 10") which limits ad valorem taxes on homestead real property,
effective as of January 1994. Beginning in 1995, Amendment 10 limits the
assessed value of homestead real property for ad valorem tax purposes to the
lower of (A) three percent (3%) of the assessed value for the prior year; or
(B) the percentage change in the Consumer Price Index for the preceding calendar
year. In addition, no such assessed value shall exceed "just value" and such
just value shall be reassessed (notwithstanding the 3% cap) as of January 1 of
the year following a change of ownership of the assessed real property.

The payment on most Florida Obligations held by the Fund will depend
upon the issuer's ability to meet its obligations. If the State or any of its
political subdivisions were to suffer serious financial difficulties
jeopardizing their ability to pay their obligations, the marketability of
obligations issued by the State or localities within the State, and the value of
the Fund's portfolio, could be adversely affected.

NET ASSET VALUE

The net asset value per share of each class of shares in a particular
Fund is calculated by adding the value of all portfolio securities and other
assets belonging to the Fund that are attributable to the class, subtracting the
Funds' liabilities that are attributable to the class, and dividing the result
by

-35-

<PAGE>

the number of outstanding shares in the class. The net asset value per share
for each Fund and for each class of shares within a 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 or share class
are conclusive. With respect to the Equity and Fixed Income Funds, the
liabilities that are charged to a Fund are borne by each share of the Fund,
except for certain miscellaneous "class expenses" and payments that are borne
solely by Retail Shares pursuant to the Combined Amended and Restated
Distribution and Service Plan and the Shareholder Processing Plan for Retail
Shares (the "Retail Plans") as described in the Prospectus for such Shares.
Similarly, with respect to the Money Market Funds, the liabilities that are
charged to a Fund are borne by each share of such Fund, except for certain
miscellaneous "class expenses" and payments that are borne solely by Retail
Shares under the Retail Plans described in the Prospectuses for such Shares
and certain "plan" payments that are borne solely by Service Shares as
described in the Prospectus for those Shares.

VALUATION OF THE MONEY MARKET FUNDS

Emerald Funds uses the amortized cost method of valuation to value
each Money Market 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 Money Market Fund can be
expected to vary inversely with changes in prevailing interest rates.

Each Money Market 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 Money Market 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
that exceeds ninety days. The Board of Trustees has also established procedures
that are intended to stabilize the net asset value per share of each Money
Market Fund for purposes of sales and redemptions at $1.00.

-36-

<PAGE>

These procedures include the determination, at such intervals as the Trustees
deem appropriate, of the extent, if any, to which the net asset value per share
of each Money Market 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 Money
Market Fund, the Board of Trustees would, at that time, consider whether to
adhere to its present dividend policies with respect to the Money Market Funds,
which are described in the Prospectuses for those Funds, 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.

VALUATION OF THE EQUITY FUND, EQUITY VALUE, INTERNATIONAL EQUITY, SMALL
CAPITALIZATION FUND, BALANCED FUND, SHORT-TERM FIXED INCOME FUND, U.S.
GOVERNMENT SECURITIES FUND AND MANAGED BOND FUND

Securities of the Equity Fund, Equity Value, International Equity,
Small Capitalization Fund, Balanced Fund, Short-Term Fixed Income Fund, U.S.
Government Securities Fund and Managed Bond Fund (other than debt securities
with remaining maturities of 60 days or less) are valued at the last sales price
on the securities exchange on which such securities are primarily traded or at
the last sales price on the national securities market. Securities not listed
on an exchange or the national securities market, or securities for which there
were no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available. Restricted
securities and securities for which market quotations are not readily available
are valued at fair value, using methods determined by the Board of Trustees.
Valuation of options is described above under "Investment Objectives and
Policies -- Options Trading." Valuation of futures contracts and related
options is described in Appendix B.

-37-

<PAGE>

Debt securities with remaining maturities of 60 days or less are
valued on an amortized cost basis, which approximates market value and is
described further under "Valuation of the Money Market Funds."

The International Equity Fund's portfolio securities which are
primarily traded on foreign securities exchanges are valued at the preceding
closing values of such securities on their respective exchanges, except when an
occurrence subsequent to the time a value was so established is likely to have
changed such value, then the fair value of those securities will be determined
through consideration of other factors by or under the direction of the Board of
Trustees. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. For valuation purposes, quotations of foreign securities in
foreign currency are converted to U.S. dollars equivalent at the prevailing
market rate on the date of valuation. An option is generally valued at the last
sale price or, in the absence of a last sale price, the last offer price. All
other securities are valued at the last current bid quotation if market
quotations are available, or at fair value as determined in accordance with
policies established in good faith by the Board of Trustees.

Certain of the securities acquired by the International Equity Fund
may be traded on foreign exchanges or over-the-counter markets on days on which
the Fund's net asset value is not calculated. In such cases, the net asset
value of the Fund's shares may be significantly affected on days when investors
can neither purchase nor redeem shares of the Fund.

A pricing service may be used to value certain portfolio securities
where the prices provided are believed to reflect the fair value of such
securities. In valuing a Fund's securities the pricing service would normally
take into consideration such factors as yield, risk, quality, maturity, type of
issue, trading characteristics, special circumstances and other factors it deems
relevant in determining valuations for normal institutional-sized trading units
of debt securities and would not rely on quoted prices. The methods used by the
pricing service and the valuations so established will be utilized under the
general supervision of the Board of Trustees of Emerald Funds.

VALUATION OF THE FLORIDA TAX-EXEMPT FUND

The assets of the Florida Tax-Exempt Fund are valued for purposes of
pricing sales and redemptions of the shares of the Fund each business day by an
independent pricing service (the "Service") approved by the Board of Trustees of
Emerald Funds. When, in the judgment of the Service, quoted bid prices for

-38-

<PAGE>

portfolio securities are readily available and are representative of the bid
side of the market, these investments are valued at the mean between quoted bid
prices (as obtained by the Service from dealers in such securities) and asked
prices (as calculated by the Service based upon its evaluation of the market for
such securities). Other investments are carried at fair value as determined by
the Service, based on methods which include consideration of yields or prices of
municipal bonds of comparable quality, coupon, maturity and type; indications as
to values from dealers; and general market conditions. The Service may also
employ electronic data processing techniques and matrix systems to determine
value. Securities with maturities of 60 days or less are normally valued at
amortized cost, which approximates market value and is described further under
"Valuation of the Money Market Funds."

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

SUPPLEMENTARY PURCHASE INFORMATION

As described in the Prospectuses for such Shares, Retail Shares may be
purchased directly from the Distributor or by clients of certain financial
institutions such as broker-dealers that have entered into selling and/or
servicing agreements with the Distributor ("Service Organizations").
Institutional Shares may be purchased by clients of the Adviser and its
affiliates through qualified accounts and by certain institutions acting on
behalf of themselves and persons maintaining qualified accounts at such
institutions, as described in the Prospectuses for such Shares. Individuals may
not purchase Institutional Shares directly. The Adviser, Service Organizations
and other institutions may impose minimum customer account and other
requirements in addition to those imposed by Emerald Funds and described in the
Prospectuses. Depending on the terms of the particular account, these entities
may charge their customers fees for automatic investment, redemption and other
services. Such fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. The Adviser, Service Organizations or other institutions are
responsible for providing information concerning these services and any charges
to any customer who must authorize the purchase of shares prior to such
purchase.

Purchase orders will be effected only on business days. Persons
wishing to purchase shares through their accounts at a Service Organization (for
Retail Shares), or at the Adviser or another institution (for Institutional
Shares), should contact such entity directly for appropriate instructions.
Clients of Barnett Banks Trust Company, N.A. interested in purchasing
Institutional Shares may call their

-39-

<PAGE>

administrative officer. Other interested investors may call
800-637-3759.

An investor desiring to purchase Retail Shares directly from Emerald
Funds by wire should request his or her bank to transmit immediately available
funds by wire to Emerald Funds; call 800-637-3759 for wiring instructions, for
purchase of shares in the investor's name. It is important that the wire
include the investor's name, address, and taxpayer identification number,
indicate whether a new account is being established or a subsequent payment is
being made to an established account and indicate the name of the Fund and the
class of shares being purchased. If a subsequent payment is being made, the
investor's Fund account number should be included. An investor in Retail
Shares must have completed and forwarded to the Transfer Agent an Account
Registration Form, including any required signature guarantees, before any
redemptions of shares purchased by wire may be processed.

The Adviser and/or Distributor may charge certain fees for acting as
Custodian for IRAs or 401k retirement plans, payment of which could require the
liquidation of shares. Consult the appropriate form for a description of these
fees. Purchases for IRA accounts or 401k retirement plans will be effective
only when payments received by the Transfer Agent are converted into federal
funds. Purchases for these plans may not be made in advance of receipt of
funds.

SUPPLEMENTARY REDEMPTION INFORMATION

An investor whose shares are purchased through accounts at the
Adviser, a Service Organization or another institution may redeem all or part of
his or her shares in accordance with instructions pertaining to such accounts.
Shares in the Equity and Fixed Income Funds for which orders placed by the
Adviser, a Service Organization, another institution or individual investor for
wire redemption are received on a business day before the close of regular
trading hours on the New York Stock Exchange (currently 4:00 p.m. Eastern time)
will be redeemed as of the close of regular trading on such Exchange and the
proceeds of redemption will normally be wired in federal funds on the next
business day to the commercial bank specified by the individual investor on the
Account Registration Form (or other bank of record on the investor's file with
the Transfer Agent), or to the Service Organization or other institution through
which the investment was made. Retail Shares in the Money Market Funds for
which orders for wire redemption are received on a business day before 2:00 p.m.
(12:00 noon with respect to the Tax-Exempt Fund) Eastern Time will be redeemed
as of that time and the proceeds of redemption will normally be wired in federal
funds on the same business day to the commercial bank specified by the investor
on the Account Registration Form (or other bank of

-40-

<PAGE>

record on the investor's file with the Transfer Agent). To qualify to use the
wire redemption privilege with Emerald Funds, the payment for shares must be
drawn on, and redemption proceeds paid to, the same bank and account as
designated on the Account Registration Form (or other bank of record as
described above). If the proceeds of a particular redemption are to be wired to
another bank, the request must be in writing and signature guaranteed. Shares
in the Equity and Fixed Income Funds for which orders for wire redemption are
received by Emerald Funds after the close of regular trading hours on the New
York Stock Exchange or on a non-business day will be redeemed as of the close of
regular trading on such Exchange on the next day on which shares of the
particular Fund are priced and the proceeds will normally be wired in federal
funds on the next business day thereafter. Retail Shares in each Money Market
Fund for which orders for wire redemption are received by Emerald Funds on a
business day between 2:00 p.m. (12:00 noon with respect to the Tax-Exempt Fund)
Eastern Time and the close of regular trading hours on the New York Stock
Exchange (currently 4:00 p.m. Eastern Time), and shares for which orders for
wire redemption are received by Emerald Funds after the close of regular trading
hours on the New York Stock Exchange or on a non-business day, will be priced as
of 2:00 p.m. (12:00 noon with respect to the Tax-Exempt Fund) Eastern Time on
the next day on which shares of the particular Fund are priced and the proceeds
will normally be wired in federal funds on the day the shares are priced.
Redemption proceeds will be wired to a correspondent member bank if the
investor's designated bank is not a member of the Federal Reserve System.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account. Proceeds of less than $1,000 will be mailed to the investor's address.

To change the commercial bank or account designated to receive
redemption proceeds from Retail Shares, a written request must be sent to
Emerald Funds, c/o BISYS Fund Services, Inc. P.O. Box 182697, Columbus, Ohio
43219-3035. Such request must be signed by each shareholder, with each
signature guaranteed as described in the Funds' Prospectuses. Guarantees must
be signed by an authorized signatory and "signature guaranteed" must appear with
the signature.

For processing redemptions or to change wiring instructions with
Emerald Funds, the Transfer Agent may request further documentation from
corporations, executors, administrators, trustees or guardians. The Transfer
Agent will accept other suitable verification arrangements from foreign
investors, such as consular verification.

Investors should be aware that if they have selected the TeleTrade
privilege, any request for a wire redemption will

-41-

<PAGE>

be effected as a TeleTrade transaction through the Automated Clearing House
(ACH) system unless more prompt transmittal specifically is requested.
Redemption proceeds of a TeleTrade transaction will be on deposit in the
investor's account at the ACH member bank normally two business days after
receipt of the redemption request.

EXCHANGE PRIVILEGE

Emerald Funds offers an exchange privilege whereby investors may
exchange all or part of their Retail Shares for Retail Shares of other
Equity and Fixed Income Funds and Retail Shares of the Money Market Funds.
By use of this exchange privilege, the investor authorizes the Transfer Agent to
act on telephonic or written exchange instructions from any person representing
himself or herself to be the investor and reasonably believed by the Transfer
Agent to be genuine. The Transfer Agent's records of such instructions are
binding. The exchange privilege may be modified or terminated at any time upon
notice to shareholders.

Exchange transactions will be made on the basis of the relative net
asset values per share of the investment portfolios involved in the transaction.
Exchange requests received on a business day prior to the time shares of the
investment portfolios involved in the request are priced will be processed on
the date of receipt. "Processing" a request means that shares in the investment
portfolios from which the shareholder is withdrawing an investment will be
redeemed at the net asset value per share next determined on the date of
receipt. Shares of the new investment portfolio into which the shareholder is
investing will also normally be purchased at the net asset value per share next
determined coincident to or after the time of redemption. Exchange requests
received on a business day after the time shares of the investment portfolios
involved in the request are priced will be processed on the next business day in
the manner described above.

MISCELLANEOUS

Certificates for shares will not be issued unless expressly requested
in writing and will not be issued for fractional shares.

Depending on the terms of the customer account at the Adviser, Service
Organization or other institution, certain purchasers of the Equity and Fixed
Income Funds may arrange with

-42-

<PAGE>

the Funds' transfer agent for sub-accounting services paid by Emerald Funds
without direct charge to the purchaser.

With respect to the Money Market Funds, a "business day" for purposes
of processing share purchases and redemptions received by the Transfer Agent at
its Columbus, Ohio office is a day on which the New York Stock Exchange and the
Funds' Custodian are open, except that a "business day" with respect to the
Money Market Funds does not include Martin Luther King, Jr. Day, Columbus Day or
Veterans Day (observed). With respect to the Equity and Fixed Income Funds, a
"business day" is a day on which the New York Stock Exchange is open for
trading, and includes Martin Luther King, Jr. Day, Columbus Day and Veterans Day
(observed). The holidays on which the New York Stock Exchange is closed are:
New Year's Day (observed), President's Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day
(observed).

Emerald Funds may suspend the right of redemption or postpone the date
of payment for shares 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 Exchange Commission. (Emerald Funds may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)

Emerald Funds reserves the right to require a shareholder to redeem
involuntarily shares in an account (other than an IRA or Qualified Retirement
Plan account) if the balance held of record by the shareholder drops below
$1,000 and such shareholder does not increase such balance to $1,000 or more
upon 30 days' notice. Emerald Funds will not require a shareholder to redeem
shares of a Fund if the balance held of record by the shareholder is less than
$1,000 solely because of a decline in the net asset value of the Fund's shares
or because the shareholder has made an initial investment in a lower amount as
provided for in the Funds' Prospectuses. Emerald Funds may also redeem shares
involuntarily if such redemption is appropriate to carry out Emerald Funds'
responsibilities under the Investment Company Act of 1940.

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

-43-

<PAGE>

Fund shares as provided in the Funds' Prospectuses from time to time.

IN-KIND PURCHASES

Payment for shares of a Fund may, in the discretion of the Adviser, be
made in the form of securities that are permissible investments for the Fund as
described in the Prospectuses. For further information about this form of
payment, contact the Adviser. In connection with an in-kind securities payment,
a Fund will require, among other things, that the securities be valued on the
day of purchase in accordance with the pricing methods used by the Fund and
that the Fund receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form for transfer to the Fund; and that adequate information be provided
concerning the basis and other tax matters relating to the securities.

So long as shares in the Equity, Equity Value, International Equity,
Small Capitalization, Balanced, Short-Term Fixed Income, U.S. Government
Securities, Managed Bond and Florida Tax-Exempt Funds are offered or sold in
Texas, any securities that are accepted as payment for shares in the portfolios
will be limited to securities that are issued in transactions that involve a
bona fide reorganization or statutory merger, or will be limited to other
acquisitions of portfolio securities (except for municipal debt securities
issued by state political sub-divisions or their agencies or instrumentalities)
that: (a) meet the investment objectives and policies of the portfolio; (b) are
acquired for investment and not for resale; (c) are liquid securities that are
not restricted as to transfer either by law or by liquidity of market; and (d)
have a value that is readily ascertainable (and not established only by
evaluation procedures) as evidenced by a listing on the American Stock Exchange,
New York Stock Exchange or NASDAQ, or as evidenced by their status as U.S.
Government securities, bank certificates of deposit, banker's acceptances,
corporate and other debt securities that are actively traded, money market
securities and other like securities with a readily ascertainable value.

REDEMPTIONS IN-KIND

If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, Emerald
Funds may make payment wholly or partly in securities or other property. Such
redemptions will only be made in "readily marketable" securities. In such an
event, a shareholder would incur transaction costs in selling the securities or
other property. Each Fund may commit that it will pay all redemption requests
by a shareholder of record in cash,

-44-

<PAGE>

limited in amount with respect to each shareholder during any ninety-day period
to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period.

DESCRIPTION OF SHARES

Emerald Funds is a Massachusetts business trust. Under Emerald Funds'
Agreement and Declaration of Trust, the beneficial interests 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
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. Eighteen of these classes
represent interests in the Equity and Fixed Income Funds and nine other classes
represent interests in the Money Market Funds. 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.

The Fund's separate share classes have formal legal designations;
however, to assist the public in more readily identifying and understanding the
nature of the share classes, they are commonly referred to in the Funds'
Prospectuses and this Statement of Additional Information, as well as certain of
the Fund's advertising and other literature, by less technical names. For
example, Classes G-1, H-1, I-1, J-1, K-1, L-1, M-1, N-1 and O-1 of the Equity
and Fixed Income Funds are known as "Retail Shares"; Classes G-3, H-3, I-3,
J-3, K-3, L-3, M-3, N-3 and O-3 of the Equity and Fixed Income Funds are known
as "Institutional Shares"; Classes D-3, E-3 and F-3 of the Money Market Funds
are known as "Retail Shares"; Classes D-2, E-2 and F-2 of the Money Market
Funds are known as "Service Shares"; and Classes D-1, E-1 and F-1 of the
Money Market Funds are known as "Institutional Shares."

Except as noted in the Prospectuses with respect to certain
miscellaneous "class expenses" and below with respect to the Retail Plans,
shares of the Equity and Fixed Income Funds bear the same types of ongoing
expenses with respect to the Fund to which they belong. Similarly, except
as noted in the Prospectuses with

-45-

<PAGE>

respect to certain miscellaneous "class expenses" and below with respect to the
Retail Plans and the Shareholder Processing and Services Plan (the "Service
Plans") for Service Shares, shares of a Money Market Fund bear the same types of
expenses. 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 the Fund, and a proportionate
distribution, based upon the relative net asset values of Emerald 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 the
particular Fund involved on liquidation, based on the number of shares of the
Fund that are held by each shareholder, except that Retail Shares of a
particular Equity, Fixed Income and Money Market Fund will be solely for that
Fund's payments pursuant to the Retail Plans, and each Money Market Fund's
Service Shares will be solely responsible for such Fund's payments to Service
Organizations pursuant to the Service Plan adopted for such Shares. In addition,
each class of shares will be responsible for the other miscellaneous "class
expenses" attributable to the class as described in the Prospectuses.

Holders of all outstanding shares of a particular Fund will vote
together in the aggregate and not by class on all matters, except that only
Retail Shares of an Equity, Fixed Income and Money Market Fund will be
entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's Retail Plans, and only Service Shares of a Money Market Fund will
be entitled to vote on matters submitted to a vote of shareholders pertaining
to the Fund's Service Plan. (See "The Emerald Family of Funds" in the
Prospectuses.) Further, shareholders of all 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

-46-

<PAGE>

affect any interest of the Fund. Under the Rule, the approval of an investment
advisory agreement or 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 noncumulative voting rights and, accordingly, the holders of more than 50%
of Emerald Funds' outstanding shares (irrespective of Fund or class) may elect
all of the 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. Shares of each Fund have a par value of $.001.

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.

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 Fund 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 Fund 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 Fund into money and, in connection
therewith, to cause all outstanding shares of such Fund to be redeemed at their
net asset value; or (c) combine the assets belonging to a Fund with the assets
belonging to one or more other funds if the Board of Trustees reasonably
determines that such combination will not have a material adverse effect on the
shareholders of any fund participating in such combination and, in connection
therewith, to cause all outstanding shares of any such Fund to be redeemed or
converted into shares of another fund at their net asset value. However, the
exercise of such

-47-

<PAGE>

authority may be subject to certain restrictions under the Investment Company
Act of 1940. The Board of Trustees may authorize the termination of any Fund
after the assets belonging to such Fund have been distributed to its
shareholders.

ADDITIONAL INFORMATION CONCERNING TAXES

FEDERAL -- ALL FUNDS

Each Fund will be treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
as a "regulated investment company." By following this policy, each Fund
expects to eliminate or reduce to a nominal amount the federal income taxes to
which it may be subject. If for any taxable year a Fund does not qualify for
the special federal tax treatment afforded regulated investment companies, all
of the Fund's taxable income would be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, the Fund's dividend distributions (including amounts derived from
interest on municipal obligations) to shareholders would be taxable as ordinary
income, to the extent of the current and accumulated earnings and profits of the
particular Fund, and would be eligible for the dividends received deduction for
corporate shareholders.

Qualification as a regulated investment company under the Code
requires, among other things, that each Fund distribute to its shareholders each
taxable year an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its tax-exempt income net of certain
deductions. In general, a Fund's investment company taxable income will be its
taxable income, including dividends, interest, and short-term capital gains (the
excess of net short-term capital gain over net long-term capital loss), 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 for such year. A
Fund will be taxed on its undistributed investment company taxable income. To
the extent such income is distributed by a Fund (whether in cash or additional
shares), it will be taxable to shareholders as ordinary income.

A Fund will not be treated as a regulated investment company under the
Code if 30% or more of the Fund's gross income for a taxable year is derived
from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the Investment Company Act of 1940); (2) options,
futures and forward contracts (other than those on foreign currencies); and (3)
foreign currencies (and options, futures and forward contracts on foreign
currencies) that are not directly

-48-

<PAGE>

related to a Fund's principal business of investing in stock and securities (and
options and futures with respect to stocks and securities) (the "Short-Short
test"). Interest (including original issue discount and accrued market
discount) received by a Fund upon maturity or disposition of a security held for
less than three months will not be treated as gross income derived from the sale
or other disposition of such security within the meaning of this requirement.
However, any other income that is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of securities
for this purpose. With respect to covered call options, if the call is
exercised by the holder, the premium and the price received on exercise
constitute the proceeds of sale, and the difference between the proceeds and the
cost of the securities subject to the call is capital gain or loss. Premiums
from expired call options written by a Fund and net gains from closing purchase
transactions are treated as short-term capital gains for federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses. See "Financial Instruments" below, for a general discussion of the
federal tax treatment of futures contracts and related options thereon,
including their treatment under the Short-Short test.

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 issuer), 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 such Fund controls and that are engaged in the same or similar trades
or businesses.

Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain,
regardless of how long the shareholder has held the distributing Fund's shares
and whether such gains are received in cash or additional Fund shares. The Fund
will designate such a distribution as a capital gain dividend in a written
notice mailed to shareholders within 60 days after the close of the Fund's
taxable year. It should be noted that, upon the sale or exchange of Fund
shares, if the shareholder has not held such shares for more than six months,
any loss on the sale or exchange of those shares will be treated as long-term
capital loss to the extent of the capital gain dividends received with respect
to the shares.

-49-

<PAGE>

Ordinary income of individuals is taxable at a maximum marginal rate
of 39.6% but, because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate of
tax for some taxpayers may be higher. An individual's long-term capital gains
are taxable at a maximum marginal rate of 28%. For corporations, long-term
capital gains and ordinary income are both taxable at a maximum marginal rate of
35% (or at a maximum marginal rate of 39% in the case of corporations having
taxable income between $100,000 and $335,000).

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). Each Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.

Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or of gross sale proceeds 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, when required to do so,
to the Fund that they are not subject to backup withholding or that they are
"exempt recipients."

FOREIGN TAXES

Income received by the International Equity Fund from sources within
foreign countries may be subject to withholding and other foreign taxes. The
payment of such taxes will reduce the amount of dividends and distributions paid
to the Fund's shareholders. If the Fund qualifies as a regulated investment
company, certain distribution requirements are satisfied, and more than 50% of
the value of the Fund's assets at the close of the taxable year consists of
stock or securities of foreign corporations, the Fund may elect, for U.S.
federal income tax purposes, to treat foreign income taxes paid by the Fund as
income taxes under U.S. income tax principles as paid by its shareholders. The
Fund may qualify for and make this election in some, but not necessarily all, of
its taxable years. If the Fund were to make an election, an amount equal to the
foreign income taxes paid by a Fund would be included in the income of its
shareholders and each shareholder would be entitled either (i) to credit their
portions of this amount against their U.S. tax due, if any, or (ii) to deduct
such portion from their U.S taxable

-50-

<PAGE>

income, if any. Shortly after any year for which it makes such an election, the
Fund will report to its shareholders, in writing, the amount per share of such
foreign tax that must be included in each shareholder's gross income and the
amount which will be available for deduction or credit. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions.
Certain limitations are imposed on the extent to which the credit (but not the
deduction) for foreign taxes may be claimed. Because of these limitations,
shareholders may be unable to claim a credit for the full amount of their
proportionate shares of the foreign income taxes paid by the Fund.

The Fund may be subject to U.S. federal income tax on a portion of any
"excess distribution" or a gain from the disposition of passive foreign
investment companies even if it distributes the income to its shareholders.

FINANCIAL INSTRUMENTS

Special rules govern the federal income tax treatment of financial
instruments that may be held by the Fund. These rules may have a particular
impact on the amount of income or gain that a Fund must distribute to its
shareholders to comply with the 90% distribution requirement, on the income or
gain qualifying under the 90% gross income test and on their ability to comply
with the 30% test described above.

Generally, certain foreign currency contracts entered into by the Fund
(as described above) at the close of its taxable year are treated for federal
income tax purposes as sold for their fair market value on the last business day
of such year, a process known as "mark-to-market." Forty percent of any gain or
loss resulting from such constructive sales will be treated as short-term
capital gain or loss and 60% of such gain or loss will be treated as long-term
capital gain or loss without regard to the period the Fund has held the
contracts ("the 40%-60% rule"). The amount of any capital gain or loss actually
realized by the Fund in a subsequent sale or other disposition of those
contracts is adjusted to reflect any capital gain or loss taken into account by
the Fund in a prior year as a result of the

-51-

<PAGE>

constructive sale of the contracts. Losses with respect to certain foreign
currency contracts, which are regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific securities held by
the Fund, are subject to certain loss deferral rules, which limit the amount of
loss currently deductible on either part of the straddle to the amount thereof
that exceeds the unrecognized gain (if any) with respect to the other part of
the straddle, and to certain wash sales regulations. Under short sales rules,
which also are applicable, the holding period of the securities forming part of
the straddle (if they have not been held for the long-term holding period) will
be deemed not to begin prior to termination of the straddle. With respect to
certain contracts, deductions for interest and carrying charges may not be
allowed. Notwithstanding the rules described above, with respect to certain
foreign currency contracts that are properly identified as such, the Fund may
make an election which will exempt (in whole or in part) those identified
foreign currency contracts from the Rules of Section 1256 of the Code including
"the 40%-60% rule" and "mark-to-market," but gains and losses will be subject to
such short sales, wash sales and loss deferral rules and the requirement to
capitalize interest and carrying charges. Under Temporary Regulations, the Fund
would be allowed (in lieu of the foregoing) to elect either (1) to offset gains
or losses from portions which are part of a mixed straddle by separately
identifying each mixed straddle to which such treatment applies, or (2) to
establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under either
election, "the 40%-60% rule" will apply to the net gain or loss attributable to
the contracts, but in the case of a mixed straddle account election, not more
than 50% of any net gain may be treated as long-term and no more than 40% of any
net loss may be treated as short-term.

With respect to futures contracts and other financial instruments
subject to the mark-to-market rules, the Internal Revenue Service has ruled
in private letter rulings that for purposes of the Short-Short test a gain
realized from such a futures contract or financial instrument will be treated
as being derived from a security held for three months or more (regardless of
the actual period for which the contract or instrument is held) if the gain
arises as a result of a constructive sale under the mark-to-market rules, and
will be treated as being derived from a security held for less than three
months only if the contract or instrument is terminated (or transferred)
during the taxable year (other than by reason of marking-to-market) and less
than three months have elapsed between the date the contract or instrument is
acquired and the termination date. In determining whether the Short-Short
test is met for a taxable year, increases and decreases in the value of each
Fund's futures contracts and other investments that qualify as part of a
"designated hedge," as defined in the Code, may be netted.

A foreign currency contract must meet the following conditions in
order to be subject to the mark-to-market rules described above: (1) the
contract must require delivery of a foreign currency of a type in which
regulated futures contracts are traded or upon which the settlement value of the
contract depends; (2) the contract must be entered into at arm's length at a
price determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under the provisions respecting foreign
currency contracts. As of the date of this Statement of Additional Information,
the Treasury Department has not issued any such regulations. Other foreign
currency contracts entered into by the Fund may result in the creation of one or
more straddles for federal income tax purposes, in which case certain loss
deferral, short sales, and wash sales rules and the requirement to capitalize
interest and carrying charges may apply.

-52-

<PAGE>

Some of the non-U.S. dollar denominated investments that the Fund may
make, such as foreign securities, European Depository Receipts and foreign
currency contracts, may be subject to the provisions of Subpart J of the Code,
which govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S dollar. The
types of transactions covered by these provisions include the following: (1) the
acquisition of, or becoming the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations, preferred stock);
(2) the accruing of certain trade receivables and payables; and (3) the entering
into or acquisition of any forward contract, futures contract, option and
similar financial instrument. The disposition of a currency other than the U.S.
dollar by a U.S. taxpayer also is treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations,
certain transactions that are part of a "Section 988 hedging transaction" (as
defined in the Code and Treasury regulations) may be integrated and treated as a
single transaction or otherwise treated consistently for purposes of the Code.
"Section 988 hedging transactions" are not subject to the mark-to-market or loss
deferral rules under the Code. Gain or loss attributable to the foreign
currency component of transactions engaged in by the Fund, which is not subject
to the special currency rules (such as foreign equity investments other than
certain preferred stocks), is treated as capital gain or loss and is not
segregated from the gain or loss on the underlying transaction.

FEDERAL -- TAX-EXEMPT FUNDS

As described above and in the Prospectuses, the Tax-Exempt Funds are
designed to provide investors with current tax-exempt interest income. These
Funds are not intended to

-53-

<PAGE>

constitute a balanced investment program and are not designed for investors
seeking capital appreciation or maximum tax-exempt income irrespective of
fluctuations in principal. Shares of the Tax-Exempt Funds may not be suitable
for tax-exempt institutions, or for retirement plans qualified under Section 401
of the Internal Revenue Code, H.R. 10 plans and individual retirement accounts
because such plans and accounts are generally tax-exempt and, therefore, not
only would not gain any additional benefit from the Funds' dividends being tax-
exempt, but such dividends would be ultimately taxable to the beneficiaries when
distributed to them. In addition, the Tax-Exempt Funds may not be appropriate
investments for entities that are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a non-exempt person who
regularly uses a part of such facilities in his or her trade or business and
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, who occupies more than 5% of the usable area of such
facilities, or for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, a partnership and its partners
and an S Corporation and its shareholders. Each shareholder is advised to
consult his or her tax adviser with respect to whether exempt-interest dividends
would be excludable from his or her gross income under Section 103(a) of the
Internal Revenue Code.

The percentage of total dividends paid by the Tax-Exempt Funds with
respect to any taxable year that qualifies as federal exempt-interest dividends
will be the same for all shareholders of such a Fund receiving dividends for
such year. In order for such a Fund to pay exempt-interest dividends for any
taxable year, at the close of each quarter of its taxable year at least 50% of
the aggregate value of the Fund's portfolio must consist of federal tax-exempt
interest obligations. In addition, the Fund must distribute an amount that is
at least equal to the sum of 90% of the aggregate net tax-exempt interest income
and 90% of the investment company taxable income earned by the Fund for the
taxable year. Not later than 60 days after the close of its taxable year, the
Fund will notify each shareholder of the portion of the dividends paid by the
Fund to the shareholder with respect to such taxable year that constitutes an
exempt-interest dividend. However, the aggregate amount of dividends so
designated cannot exceed the excess of the amount of interest exempt from tax
under Section 103 of the Code received by the Fund during the taxable year over
any amounts disallowed as deductions under Sections 265 and 171(a)(2) of the
Code.

Interest on indebtedness incurred by a shareholder to purchase or
carry shares of the Tax-Exempt Fund generally is

-54-

<PAGE>

not deductible for federal income tax purposes. If a shareholder holds Tax-
Exempt Fund or Florida Tax-Exempt Fund shares for six months or less, any loss
on the sale or exchange of those shares will be disallowed to the extent of the
amount of exempt-interest dividends earned with respect to the shares. The
Treasury Department, however, is authorized to issue regulations reducing the
six-month holding requirement to a period of not less than the greater of 31
days or the period between regular distributions where the investment company
regularly distributes at least 90% of its net tax-exempt interest. No such
regulations had been issued as of the date of this Statement of Additional
Information.

Income itself exempt from federal income taxation may be considered in
addition to adjusted gross income when determining whether Social Security
payments received by a shareholder are subject to federal income taxation.

FLORIDA TAXES

The State of Florida does not currently impose an income tax on
individuals. Thus individual shareholders of the Florida Tax-Exempt Fund will
not be subject to any Florida income tax on distributions received from the
Fund. However, Florida does currently impose an income tax on certain
corporations. Consequently, distributions may be taxable to corporate
shareholders.

The State of Florida currently imposes an "intangibles tax" at the
annual rate of 2 mills or 0.20% on certain securities and other intangible
assets owned by Florida residents. With respect to the first mill, or first
.10%, of the intangibles tax, every natural person is entitled each year to an
exemption of the first $20,000 of the value of the property subject to the tax.
A husband and wife filing jointly will have an exemption of $40,000. With
respect to the last 1 mill, or last .10%, of the intangibles tax, every natural
person is entitled each year to an exemption of the first $100,000 of the value
of the property subject to the tax. A husband and wife filing jointly will have
an exemption of $200,000. Notes, bonds and other obligations issued by the
State of Florida or its municipalities, counties, and other taxing districts, or
by the United States Government, its agencies and certain U.S. territories and
possessions (such as Guam, Puerto Rico and the Virgin Islands) as well as cash
are exempt from this intangibles tax. If on December 31 of any year the
portfolio of the Florida Tax-Exempt Fund consists solely of such exempt assets,
then the Fund's shares will be exempt from the Florida intangibles tax payable
in the following year.

In order to take advantage of the exemption from the intangibles tax
in any year, the Florida Tax-Exempt Fund must sell any non-exempt assets held in
its portfolio during the year

-55-

<PAGE>

and reinvest the proceeds in exempt assets including 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.

OTHER INFORMATION

Depending upon the extent of 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, a Fund
may be subject to the tax laws of such states or localities.

Outside the State of Florida, income distributions may be taxable to
shareholders under state or local law as dividend income even though all or a
portion of such distributions may be derived from interest on tax-exempt
obligations or U.S. Government obligations which, if realized directly, would be
exempt from such income taxes. Shareholders are advised to consult their tax
advisers concerning the application of state and local taxes.

The foregoing discussion is a general and abbreviated summary of
certain provisions of federal and Florida law and is based on tax laws and
regulations which are in effect on the date of this Statement of Additional
Information. Such laws and regulations may be changed by legislative or
administrative action. This discussion is only a summary of some of the
important tax considerations generally affecting purchasers of shares of the
Funds. No attempt is made to present a detailed explanation of the federal
income tax treatment of the Funds or their shareholders, and this discussion is
not intended as a substitute for careful tax planning. Accordingly, potential
purchasers of shares of the Funds should consult their tax advisers with
specific reference to their own tax situation.

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:

-56-

<PAGE>

<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.

Mary Doyle Trustee Professor of Law, University
University of Miami of Miami Law School, 1995 to
Law School 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, 1986-1994.

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 Member of the law firm of
50 N. Laura St. President Mahoney Adams & Criser,
Suite 3300 P.A. since 1966.
Jacksonville, FL 32202
Age 57

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>

-57-
<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
3435 Stelzer Road to present.
Columbus, OH 43219-3035
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 31 thereto.

Jeffrey A. Dalke Secretary Partner, Drinker Biddle &
Philadelphia National Reath (law firm).
Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Age 45

George Martinez Assistant Senior Vice President and
BISYS Fund Services Secretary Director of Legal and
3435 Stelzer Road Compliance Services, BISYS
Columbus, OH 43219-3035 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.

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.

-58-

<PAGE>

-------------------------------

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 January 10, 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 Funds' trustees for their services as members of the
Board of Trustees and Committees thereof.

-59-

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
TOTAL
COMPENSATION
RETIREMENT ESTIMATED FROM
AGGREGATE BENEFITS ANNUAL REGISTRANT
COMPENSATION ACCRUED AS BENEFITS AND FUND
FROM EMERALD PART OF FUND UPON COMPLEX* PAID
NAME OF PERSON 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
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

______________________________

* The "Fund Complex" consists solely of Emerald Funds.

** Mr. Ernest was appointed to the Board of Trustees on May 4, 1995.

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 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.

-60-

<PAGE>

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 AND SUB-ADVISORY AGREEMENTS

Barnett Banks Trust Company, N.A. (the "Adviser") serves as investment
adviser to each Fund. In addition, Rodney Square Management Corporation , a
wholly-owned subsidiary of Wilmington Trust Company ("WTC"), serves as
sub-investment adviser to the Tax-Exempt Fund. In rendering sub-advisory
services, the Sub-Adviser may occasionally consult, on an informal basis, with
personnel from the investment department of WTC; however, WTC will take no part
in determining the investment policies of the Tax-Exempt Fund, respectively,
or in deciding which securities are to be purchased or sold by the respective
Funds.

In their Investment Advisory and Sub-Advisory Agreements, the Adviser
and Sub-Advisers have agreed to pay all expenses incurred by them in
connection with their advisory and sub-advisory services 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 advisory agreements, Emerald Funds
has agreed to pay the Adviser fees, computed daily and paid monthly, at the
annual rate of 1.00% of the average daily net assets of the International Equity
and Small Capitalization Funds, 0.60% of the respective average daily net
assets of each of the Equity, Equity Value and Balanced Funds; 0.40% of the
respective average daily net assets of each of the Short-Term Fixed Income Fund,
U.S.

-61-

<PAGE>

Government Securities Fund, Managed Bond Fund and Florida Tax-Exempt Fund; and
0.25% of the respective average net assets of each Money Market Fund. Under the
terms of the agreements, the fees payable to the Adviser are not subject to
reduction as the value of each Fund's net assets increases; however, the Adviser
has informed Emerald Funds of its intention to reduce the annual rate of its
advisory fees with respect to the Treasury Fund and the Prime Fund to the
following rates: .25% of the first $600 million of each Fund's net assets; .23%
of each Fund's net assets over $600 million but not exceeding $1 billion; .21%
of the next $1 billion of each Fund's net assets; and .19% of each Fund's net
assets over $2 billion. The Adviser has agreed to pay the Tax-Exempt Fund's
Sub-Adviser a sub-advisory fee at the rate of .15% of the Fund's net assets.
The sub-advisory fees paid by the Adviser to the Sub-Adviser is borne entirely
by the Adviser and has no effect on the advisory fees payable by the Tax-Exempt
Fund. Emerald Funds has been advised that, until further notice, the Adviser has
voluntarily agreed to waive all advisory fees with respect to the Tax-Exempt
Fund in excess of the sub-advisory fees payable by it to the Sub-Adviser.

The Adviser and Sub-Adviser have made certain additional voluntary
and contractual undertakings to waive their fees. See "Management of Emerald
Funds - Administration Services" below for further information regarding the
waiver of fees and reimbursement of expenses by the Adviser and Sub-Adviser with
respect to the Funds. For the fiscal years ended November 30, 1995, 1994 and
1993, the Adviser received (net of waivers) advisory fees totalling
$1,155,425, $1,156,911 and $916,787, respectively, for the Equity Fund;
$400,689, $497,815 and $206,848, respectively, for the U.S. Government
Securities Fund; and $557,888, $740,873 and $409,497, respectively, for the
Florida Tax-Exempt Fund. For the fiscal year ended November 30, 1995 and the
period from January 4, 1994 (commencement of operations) through November 30,
1994, the Adviser received (net of fee waivers) advisory fees totalling
$742,502 and $427,853 for the Small Capitalization Fund. For the fiscal year
ended November 30, 1995 and the period April 11, 1994 (commencement of
operations) through November 30, 1994, the Adviser received (net of fee waivers)
advisory fees totalling $371,499 and $0, $84,074 and $0 and $266,371 and $0,
respectively, for the Balanced, Short-Term Fixed Income and Managed Bond Funds.
The Equity Value and International Equity Funds were not operational during
these periods. For the same time periods, the Adviser waived advisory fees and
reimbursed expenses in the amount of $13,355, $0 and $0, respectively, for
the Equity Fund; $17,957, $0 and $207,103, respectively, for the U.S.
Government Securities Fund; $33,887, $0 and $248,901, respectively, for the
Florida Tax-Exempt Fund; $53,824 and $0 for the Small Capitalization Fund;
$526,354 and $170,207 for the Balanced Fund; $278,214 and $53,025 for the
Short-Term Fixed Income Fund; and $380,759 and $177,688 for the Managed Bond
Fund.

-62-

<PAGE>

For the fiscal years ended November 30, 1995, 1994 and 1993, the
Adviser received (net of waivers) advisory fees totalling $3,677,324, $3,243,600
and $4,752,234, respectively, for the Prime Fund; $1,914,250, $2,231,677 and
$2,207,189, respectively, for the Treasury Fund; and $506,689, $222,183 and
$150,753, respectively, for the Tax-Exempt Fund. Of the advisory fee received
by the Adviser with respect to the Tax-Exempt Fund for the fiscal years ended
November 30, 1995, 1994 and 1993, the entire fee was paid to the Sub-Adviser,
Rodney Square Management Corporation. In addition, the Adviser waived an
additional $202,676, $186,758 and $131,253 in advisory fees with respect to
the Tax-Exempt Fund for the fiscal years ended November 30, 1995, 1994 and 1993,
respectively. For the fiscal year ended November 30, 1995, the Adviser
waived fees totalling $358,950 and $134,960 for the Prime Fund and Treasury
Fund, respectively. For the fiscal years ended November 30, 1994 and 1993,
the Adviser did not waive any advisory fees for the Prime Fund and the
Treasury Fund. For the fiscal years ended November 30, 1995, 1994 and 1993,
the Tax-Exempt Fund's Sub-Adviser waived sub-advisory fees totalling
$53,487, $55,868 and $57,955 with respect to the Tax-Exempt Fund .

Under the Investment Advisory and Sub-Advisory Agreement for the
Funds, the Adviser and Sub-Adviser are 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 such agreements, 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 or Sub-Adviser in the performance of their duties or from their
reckless disregard of their duties and obligations under the agreements.

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 Board did not

-63-

<PAGE>

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 Agreements and as contemplated by the Prospectuses and
this Statement of Additional Information, and the Sub-Adviser believes, with
respect to their activities as required by the Sub-Advisory Agreement, and
as contemplated by the Prospectuses and this Statement of Additional
Information, that, if the question were properly presented, a court should hold
that the Adviser or Sub-Adviser, as the case may be, may each 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 Sub-Advisers and that future changes in either
federal or state statutes and regulations relating to permissible activities of
banks or 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 and Sub-Adviser
from continuing to perform such services for the Funds. If the Adviser or Sub-
Adviser were prohibited from continuing to perform advisory and sub-advisory
services for the Funds, it is expected that the Board of Trustees would
recommend that the Funds affected enter into a new agreement or would consider
the possible termination of such Funds. Any new advisory or sub-advisory
agreement would be subject to shareholder approval.

On the other hand, as described herein, Emerald Funds are 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 that or a similar bill 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

-64-

<PAGE>

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 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.

ADMINISTRATION AGREEMENT

BISYS Fund Services Limited Partnership (the "Administrator"), a
wholly-owned subsidiary of The BISYS Group, Inc., serves as administrator to
each Fund. In its administration agreement, the Administrator has agreed
among other things to provide among other things the following administrative
services: payment of the costs of maintaining the Funds' offices; statistical
and research data, Fund data processing services, and clerical, accounting and
bookkeeping services; preparation or coordination of such preparation of reports
to shareholders of the Funds, tax returns and reports to the Securities and
Exchange Commission; maintaining the registration or qualification of Fund
shares for sale under state securities laws; maintenance of the books and
records of the Funds; calculation or providing for the calculation of the net
asset value of Fund shares and calculation or providing for the calculation of
dividends and capital gains distributions to shareholders; and generally the
provision of the facilities and personnel to carry out administrative services
required for the operation of the business of the Funds other than those
delegated by Emerald Funds pursuant to other agreements or arrangements. The
Administrator has also agreed to pay all expenses incurred by it in connection
with its activities under these agreements 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.

As compensation for its services under the agreements described above
(which became effective April 1, 1996), the Administrator is entitled to
receive a fee, computed daily and payable 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 its fees or reimburse
the Funds for expenses under the agreements described above, either voluntarily
or as required by certain state securities laws.

-65-

<PAGE>

For the fiscal years ended November 30, 1995, 1994 and 1993,
Concord Holding Corporation, the Trust's prior administrator which was
acquired by The BISYS Group, Inc. in 1995 received administrative fees (net of
waivers) under the respective administration agreements then in effect for
those Funds (which provided the different administrative fee rates than those
currently in effect) totalling $96,285, $121,409 and $74,400, respectively,
for the Equity Fund; $50,152, $113,986 and $74,400, respectively, for the
U.S. Government Securities Fund; and $69,736, $230,514 and $74,400,
respectively, for the Florida Tax-Exempt Fund. For the fiscal year ended
November 30, 1995 and the period from commencement of operations (January 4,
1994 for the Small Capitalization Fund, and April 11, 1994 for the Balanced,
Short-Term Fixed Income and Managed Bond Funds, the prior administrator
received administration fees (net of waivers) totalling $37,116 and $19,776
for the Small Capitalization Fund; $30,958 and $0 for the Balanced Fund;
$10,509 and $0 for the Short-Term Fixed Income Fund; and $33,391 and $0 for
the Managed Bond Fund. For the same time periods, the prior administrator
waived administration fees and reimbursed expenses in the amount of $4,451,
$48,972 and $204,619, respectively, for the Equity Fund; $9,052, $48,561 and
$142,213, respectively, for the U.S. Government Securities Fund; $16,016,
$92,309 and $226,738, respectively, for the Florida Tax-Exempt Fund; and
$9,992 and $4,179, $0 and $15,246, $0 and $6,747, and $0 and $22,818,
respectively, for the Small Capitalization, Balanced, Short-Term Fixed Income
and Managed Bond Funds.

For the fiscal years ended November 30, 1995, 1994 and 1993, the
prior administrator received administration fees (net of waivers) totalling
$1,451,222, $1,273,698 and $1,820,903, respectively, for the Prime Fund;
$797,128, $885,278 and $876,466, respectively, for the Treasury Fund; and
$304,013, $211,853 and $222,183, respectively, for the Tax-Exempt Fund. For
the same time periods, the prior administrator waived administration fees
totalling $53,487, $55,868 and $57,955 for the Tax-Exempt Fund. During these
periods, the prior administrator did not waive any administration fees for the
Prime and Treasury Funds.

In addition, if the total expenses borne by an Equity and Fixed Income
Fund, the Prime Fund or the Treasury 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, the amount of such excess to the extent required by such regulations in
proportion to the fees otherwise payable to them for such year pursuant to the
Investment Advisory Agreements and administration agreements. If the total
expenses borne by the Tax-Exempt Fund in any

-66-

<PAGE>

fiscal year exceed applicable state expense limitations, the Adviser and
Sub-Adviser have agreed to make reimbursements, to the extent required by law,
for half of such excess expenses, and the Administrator has agreed to bear the
other half, provided that the Sub-Adviser's obligation with respect to such
reimbursement is limited to the amount of each of their sub-advisory fees. 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, the most
restrictive expense limitation that may be applicable to the Funds limits
aggregate annual expenses with respect to each Fund, including management and
advisory fees but excluding interest, taxes, brokerage commissions, distribution
plan expenses, foreign custody costs, and certain other expenses, to 2-1/2% of
the first $30 million of its average net assets, 2% of the next $70 million,
and 1-1/2% of its remaining average net assets.

The administration agreements provide 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 agreements, 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.

DISTRIBUTION AGREEMENT

Emerald Asset Management, Inc. (the "Distributor"), a wholly-owned
subsidiary of The BISYS Group, Inc., acts as distributor of the Funds' shares.
The Distributor has agreed to use its best efforts to solicit orders for the
sale of Fund 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 Equity and Fixed Income Funds' shares) and of printing and distributing all
sales literature.

SALES CHARGES; DISTRIBUTION AND OTHER PLANS

The Board of Trustees of Emerald Funds voted to eliminate the front-
end sales charge on Retail Shares (formerly called "Class A" Shares) and the
contingent deferred sales charge on Class B Shares for all share purchases and
redemptions made on or after February 5, 1996 and to convert Class B Shares into
Retail Shares on March 9, 1996.

Through the fiscal year ended November 30, 1995, however, the
Distributor was entitled to payment of a front-end sales charge on the sale of
Class A Shares of the Equity and Fixed Income Funds. For the fiscal years ended
November 30, 1995, 1994 and 1993, the Distributor received front-end sales
charges in connection with Class A Share purchases as follows: Equity Fund

-67-

<PAGE>

- -- $36,840, $257,556 and $100,580, respectively; U.S. Government Securities
Fund -- $14,369, $572,054 and $196,820, respectively; and Florida Tax-Exempt
Fund -- $121,393, $579,867 and $439,220, respectively. For the fiscal year
ended November 30, 1995 and the period from commencement of operations
(January 4, 1994 for the Small Capitalization Fund, and April 11, 1994 for
the Balanced, Short-Term Fixed Income and Managed Bond Funds) to November 30,
1994 the Distributor received front-end sales charges in connection with
Class A Share purchases of $10,759 and $17,401, respectively, for the Small
Capitalization Fund; $14,299 and $10,000, respectively, for the Balanced
Fund; $4,628 and $1,500, respectively, for the Short-Term Fixed Income Fund;
and $9,447 and $8,000, respectively for the Managed Bond Fund. Of these
amounts, the Distributor retained $1,113, $5,750 and $46,935, respectively,
and the Adviser and its affiliates retained $11,904, $10,623 and $46,042,
respectively, with respect to the Equity Fund; the Distributor retained $466,
$15,739 and $134,143, respectively, and the Adviser and its affiliates
retained $3,567, $28,164 and $59,025, respectively, with respect to the U.S.
Government Securities Fund; the Distributor retained $793, $55,688 and
$321,238, respectively, and the Adviser and its affiliates retained $7,261,
$76,543 and $82,580, respectively, with respect to the Florida Tax-Exempt
Fund; the Distributor retained $199 and $2,457 and the Adviser and its
affiliates retained $11,041 and $696 with respect to the Small Capitalization
Fund; the Distributor retained $859 and $361 and the Adviser and its
affiliates retained $21,641 and $400 with respect to the Balanced Fund; the
Distributor retained $426 and $146 and the Adviser and its affiliates
retained $1,571 and $30 with respect to the Short-Term Fixed Income Fund; and
the Distributor retained $165 and $1,491 and the Adviser and its affiliates
retained $7,289 and $520 with respect to the Managed Bond Fund.

During these periods, the Distributor was also entitled to the
payment of a contingent deferred sales charge upon redemption of Class B Shares
of the Equity and Fixed Income Funds. For the fiscal year ended November 30,
1995 and the period from their initial offering date (March 1, 1994 for the
Equity, Small Capitalization, U.S. Government Securities and Florida Tax-Exempt
Funds or commencement of operations (April 11, 1994) for the Balanced, Short-
Term Fixed Income and Managed Bond Funds) through November 30, 1994, the
Distributor received contingent deferred sales charges in connection with
Class B redemptions as follows: Equity Fund -- $15,319 and $62,366; U.S.
Government Securities Fund -- $14,490 and $61,800; Florida Tax-Exempt-Fund --
$22,167 and $259,483 ; Small Capitalization Fund -- $13,269 and $71,180 ;
Balanced Fund -- $10,005 and $51,329 ; Short-Term Fixed Income Fund --
$2,873 and $0; and Managed Bond Fund --$3,306 and $19,889. Of these amounts,
the Distributor

-68-

<PAGE>

retained: Equity Fund -- $15,319 and $2,495; U.S. Government Securities
Fund $14,490 and $2,472; Florida Tax-Exempt Fund -- $22,167 and $10,379;
Small Capitalization Fund -- $13,269 and $2,847; Balanced Fund -- $10,005
and $2,053; Short Term Fixed Income Fund -- $2,873 and $0; and Managed
Bond Fund $3,306 and $796, respectively.

The following table shows all sales charges, commissions and other
compensation received by the Distributor directly or indirectly from the
existing Equity and Fixed Income Funds during the fiscal year ended November 30,
1995:

<TABLE>
<CAPTION>
Brokerage
Net Underwriting Compensation on Commissions in
Discounts and Redemption and Connection with Other
Commissions(1) Repurchase(2) Fund Transactions Compensation(3)
----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Equity Fund $ 4,066 $15,319 $ 0 $ 99,146

Small Capitalization
Fund $ 1,195 $13,269 $ 0 $ 30,794

Balanced Fund $ 1,547 $10,005 $ 0 $ 21,460

Short-Term Fixed
Income Fund $ 972 $ 2,873 $ 0 $ 2,131

U.S. Government
Securities Fund $ 1,574 $14,490 $ 0 $127,570

Managed Bond Fund $ 1,027 $ 3,306 $ 0 $ 10,818

Florida Tax-Exempt
Fund $24,001 $22,167 $ 0 $490,374
</TABLE>

____________________

(1) Represents amounts received from front-end sales charges on Class A Shares.
(2) Represents amounts received from contingent deferred sales charges on
Class B Shares. The basis on which such sales charges are paid is described
in the Prospectus relating to Class B Shares. No Class B Shares were offered
during the time period covered by this table.
(3) Represents the total of (i) amounts paid to the Administrator for
administrative services provided to the respective Equity and Fixed Income
Funds (see "Management of Emerald Funds-Administration Agreements" above) and
(ii) payments made under the Distribution and Shareholder and Administrative
Services Plans that were in effect for the respective Funds (see discussion
in the following paragraphs).

____________________

Securities dealers, financial institutions or other industry
professionals, ("Service Organizations") may receive payments by the Trust for
distribution under the Combined Amended and Restated Distribution and Service
Plan and the Shareholder Processing Plan for Retail Shares both of which became
effective on April 1, 1996. Under the Combined Amended and Restated
Distribution and Service Plan the Trust pays for distribution assistance and/or
the provision of shareholder liason services to one or more Service
Organizations (which may include the Distributor itself). These payments are
based on the average

-69-

<PAGE>

daily value of the Trust's Retail Shares beneficially owned
by persons ("Clients") for whom the Service Organization is the dealer of record
or with whom the Service Organization has a servicing relationship.

The shareholder liaison services provided by Service Organizations
pursuant to the Combined Amended and Restated Distribution and Service Plan
for Retail Shares include, but are not limited to: (i) answering Client
inquiries regarding account status and history, the manner in which purchases,
exchanges and redemptions of shares may be effected and certain other matters
pertaining to the Clients' investments; (ii) assisting Clients in designating
and changing dividend options, account designations and addresses; and (iii)
providing such other similar services as your Client may reasonably request.

Shareholder processing services provided by Service Organizations
pursuant to the Shareholder Processing Plan may include some or all of the
following: (i) providing necessary personnel and facilities to establish and
maintain shareholder accounts and records for Clients; (ii) assisting in
aggregating and processing purchase, exchange and redemption transactions;
(iii) placing net purchase and redemption orders with the Trust's
distributor; (iv) arranging for wiring of funds; (v) transmitting and
receiving funds in connection with Client orders to purchase or redeem
Retail Shares; (vi) processing dividend payments; (vii) verifying and
guaranteeing Client signatures in connection with redemption orders and
transfers and changes in Client-designated accounts, as necessary; (viii)
providing periodic statements showing a Client's account balance and, to the
extent practicable, integrating such information with other Client
transactions otherwise effected through or with us; (ix) furnishing (either
separately or on an integrated basis with other reports sent to a Client)
periodic statements and confirmations of purchases, exchanges and
redemptions; (x) transmitting on behalf of the Funds, proxy statements,
annual reports, updating prospectuses and other communications from the
Funds to Clients; (xi) receiving, tabulating and transmitting to the Funds
proxies executed by Clients with respect to shareholder meetings; (xii)
providing the information to the Funds necessary for accounting or
subaccounting; and (xiii) providing other similar services.

Payments made out of or charged against the assets of the Retail
Shares of a particular Fund must be in payment for expenses incurred on
behalf of that class. (The Combined Amended and Restated Distribution and
Service Plan permits, however, joint distribution financing by the Funds or

-70-

<PAGE>

other investment portfolios or companies that are affiliated persons of the
Funds, affiliated persons of such a person, or affiliated persons of the
Distributor, in accordance with applicable regulations of the Securities and
Exchange Commission.)

Previously, the Distributor was entitled to payment by the Trust
for distribution services under distribution plans for Retail and Class B Shares
in addition to the sales charges then in effect as described above. These
plans were replaced with the Combined Amended and Restated Distribution and
Service Plan described above. The distribution plans in effect from March
1, 1994 through March 31, 1996 for Retail Shares provided that the
Distributor was entitled to receive distribution payments on a monthly basis
at an annual rate not exceeding .25% of the average daily net assets during
such month of the outstanding Shares to which a particular Plan related.

The distribution plan in effect for Class B Shares for the period
from March 1, 1994 through March 9, 1996 provided that the Distributor
was entitled to receive distribution payments on a monthly basis at an annual
rate not exceeding 1.00% of the average daily net assets during such month of
the outstanding Shares to which such Plan related. Not more than 0.25% of such
net assets were to be used to compensate Service Organizations for personal
services provided to Class B shareholders and/or the maintenance of such
shareholders' accounts and not more than 0.75% of such net assets were to be
used for promotional and other primary distribution activities.

For fiscal year 1993 and for the period December 1, 1993 through
February 28, 1994 a Combined Distribution and Shareholder Plan was in effect.
On March 1, 1994 this Plan was replaced in connection with adoption of the
distribution plans for Retail and Class B Shares just described.

For the fiscal years ended November 30, 1995, 1994 and 1993,
pursuant to the respective distribution plans for Retail Shares, the Equity
Fund was charged $49,877, $131,931 and $381,995, of which $0, $0 and $0,
$18,625, $0 and $0, and $0, $0 and $0 were paid to the Distributor, the
Adviser and affiliates of the Adviser, respectively; the U.S. Government
Securities Fund was charged $70,145, $174,243 and $296,219, of which $0, $0
and $0; $14,792, $0 and $0; and $0, $0 and $0 were paid to the Distributor,
the Adviser and affiliates of the Adviser, respectively; and the

-71-

<PAGE>

Florida Tax-Exempt Fund was charged $251,826, $389,107 and $411,499, of which
$0, $0 and $0; $44,307, $0 and $0 and $0; $0 and $0 were paid to the
Distributor, the Adviser and affiliates of the Adviser, respectively. For
the fiscal year ended November 30, 1995 and the period from commencement of
operations (January 4, 1994 for the Small Capitalization Fund and April 11,
1994 for the Balanced, Short-Term Fixed Income and Managed Bond Funds) to
November 30, 1994, the Small Capitalization Fund was charged $4,747 and
$1,939 of which $0 and $0; $1,074 and $0; and $0 and $404 was paid to the
Distributor, the Adviser and affiliates of the Adviser, respectively; the
Balanced Fund was charged $1,836 and $489 of which $0 and $0; $521 and $0;
and $0 and $96 was paid to the Distributor, the Adviser and affiliates of the
Adviser, respectively; the Short-Term Fixed Income Fund was charged $681 and
$177 of which $0 and $0; $152 and $0; and $0 and $15 was paid to the
Distributor, the Adviser and affiliates of the Adviser respectively; and the
Managed Bond Fund was charged $2,539 and $550 of which $0 and $0; $976 and
$0; and $0 and $128 was paid to the Distributor, the Adviser and affiliates
of the Adviser, respectively.

For the fiscal years ended November 30, 1995, 1994 and 1993, the
Distributor and various brokers of record waived $0, $61,965 and $323,780
for the Equity Fund; $0, $27,775 and $148,971, respectively for the U.S.
Government Securities Fund; and $0, $21,715 and $107,504, respectively, for
the Florida Tax-Exempt Fund. Bond Fund.

For the fiscal years ended November 30, 1995, 1994 and 1993,
pursuant to the respective distribution plans for Retail Shares then in
effect, the Prime Fund was charged $1,523,956, $902,581 and $837,010, of
which amount $154,828, $89,233 and $2,282, $6,626, $83,701 and $1,321 and
$2,710, $302,417 and $1,084 was earned by the Distributor, the Adviser, and
affiliates of the Adviser, respectively; the Treasury Fund was charged
$200,869, $142,700 and $89,259, of which amount $20,170, $14,261 and $9,425,
$0, $8,926 and $177 and $339, $18,613 and $931 was earned by the Distributor,
the

-72-

<PAGE>

Adviser and affiliates of the Adviser, respectively; and the Tax-Exempt Fund
was charged $188,796, $198,481 and $195,143, of which amount $18,722, $19,269
and $1,795, $0, $19,514 and $3,205 and $1,247, $44,430 and $1,566 was earned
by the Distributor, the Adviser and affiliates of the Adviser, respectively.

Class B Shares were initially offered by the Equity, Small
Capitalization, U.S. Government Securities and Florida Tax-Exempt Funds on
March 1, 1994. Additionally, the Balanced, Short-Term Fixed Income and
Managed Bond Funds commenced operations on April 11, 1994. For the fiscal
year ended November 30, 1995 and the period from their respective dates of
initial offering or commencement of operations through November 30, 1994, the
Distributor received distribution payments under the Distribution Plan for
Class B Shares, in the amounts of $16,820 and $8,264; $20,053 and $9,982;
$16,107 and $5,072; $898 and $73; $13,340 and $7,819; $5,219 and $1,832; and
$76,047 and $30,051 from the Equity, Small Capitalization, Balanced,
Short-Term Fixed Income, U.S. Government Securities, Managed Bond and Florida
Tax-Exempt Funds, respectively. For the same time periods the Distributor and
various broker dealers waived $0 and $3,982; $0 and $0; $0 and $0; $0 and $0;
$0 and $1,308; $0 and $0; and $0 and $1,746 respectively, for the Equity, Small
Capitalization, Balanced, Short-Term Fixed Income, U.S. Government Securities,
Managed Bond and Florida Tax-Exempt Funds.

Prior to April 1, 1996, Emerald Funds maintained Shareholder and
Administrative Services Plans for Retail Shares and Class B Shares. The
shareholder and administrative support services provided by the Funds' prior
administrator pursuant to these Plans were services designed particularly for
retail investors. For these services, the prior administrator received payments
in an amount not exceeding (on an annual basis) a specified percentage (.15% in
the case of the Equity and Fixed Income Funds and .25% in the case of the Money
Market Funds) of the average daily net asset value of the Shares to which a
particular Shareholder and Administrative Services Plan related.

-73-

<PAGE>

For the fiscal year ending November 30, 1995 and the period March 1,
1994 (effective date of the initial Shareholder and Administrative Services
Plans) through November 30, 1994, pursuant to the Shareholder and Administrative
Service Plan For Retail Shares, the Equity Fund was charged $29,926 and
$25,053, of which $29,926 and $22,106 was paid the prior administrator; the
Small Capitalization Fund was charged $2,916 and $1,163, of which $2,916 and
$1,138 was paid to the prior administrator; the U.S. Government Securities Fund
was charged $42,088 and $54,294, of which $42,088 and $46,973 was paid to the
prior administrator; and the Florida Tax Exempt Fund was charged $151,096 and
$156,105 of which $151,896 and $136,763 was paid to the prior administrator. For
the fiscal year ended November 30, 1995 and the period April 11, 1994
(commencement of operations) through November 30, 1994 the Balanced Fund was
charged $1064 and $294 of which $1,064 and $0 was paid to the prior
administrator; the Short-Term Fixed Income Fund was charged $408 and $106 of
which $408 and $0 was paid to the prior administrator and the Managed Bond
Fund was charged $2,021 and $330 of which $2,021 and $0 was paid to the prior
administrator, and the Prime, Treasury and Tax-Exempt Funds were charged
$1,523,904 and $902,581; $200,689 and $142,700; and $188,796 and $198,481,
respectively, of which $1,523,904 and $89,233; $200,689 and $14,261; and
$188,791 and $19,269, respectively, was paid to the prior administrator.

For the same fiscal year or period, pursuant to the Shareholder and
Administrative Plan for Class B Shares, the Equity, Small Capitalization, U.S.
Government Securities, Florida Tax-Exempt, Balanced, Short-Term Fixed Income and
Managed Bond Funds were charged $2,523 and $1,272, $3,078 and $1,399; $1,996
and $848; $11,406 and $4,164; $2,453 and $768; $144 and $13; and $1,039 and
$277, respectively, of which $2,523 and $1,122; $3,078 and $1,370; $1,196 and
$734; $11,406 and $3,648; $2,453 and $0; $144 and $0; and $1,039 and $0,
respectively, was paid to the prior administrator.

MATTERS PERTAINING TO COMBINED DISTRIBUTION AND SERVICE PLAN FOR RETAIL SHARES

Payments for distribution expenses under the Combined Distribution
and Services Plan are subject to Rule 12b -1 (the "Rule") under the Investment
Company Act of 1940. The Rule defines distribution expenses to include the cost
of "any activity which is primarily intended to result in the sale of [Trust]
shares." The Rule provides, among other things, that an investment company may
bear such expenses only pursuant to a plan adopted in accordance with the Rule.
In accordance with the Rule, the Plan provides that a report of the amounts
expended under the respective Plans, and the purposes for which such
expenditures were incurred, will be made to the

-74-

<PAGE>

Board of Trustees for its review at least quarterly. The Combined
Distribution and Service Plan provides that any type of material amendment must
be approved by a majority of the Board of Trustees, and by a majority of the
Trustees who are neither "interested persons" (as defined in the Investment
Company Act of 1940) of Emerald Funds nor have any direct or indirect financial
interest in the operation of the Plan being amended or in any related
agreements, by vote cast in person at a meeting called for the purpose of
considering such amendments (the "Disinterested Trustees").

Emerald Funds' Board of Trustees has concluded that there is a
reasonable likelihood that the Combined Distribution and Services Plan will
benefit the Equity, Fixed Income and Money Market Funds and their Retail
Shareholders. The Plan is subject to annual re-approval by a majority of the
Disinterested Trustees of the Plan and is terminable at any time with respect to
any Fund by a vote of a majority of such Trustees or by vote of the holders of
a majority of the Retail Shares of the Fund involved. Any agreement entered
into pursuant to the Combined Distribution and Service Plan with a Service
Organization is terminable with respect to any Fund without penalty at any time
by vote of a majority of the Disinterested Trustees, by vote of the holders of
a majority of the Retail Shares of such Fund, by the Distributor or by the
Service Organization. An agreement will also terminate automatically in the
event of its assignment.

Banks may act as Service Organizations and receive payments under the
Combined Distribution and Service Plan and the Shareholder Processing Plan as
described. The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in the business of underwriting securities.
If a bank were prohibited from acting as a Service Organization, changes in the
operation of the Funds might occur and a shareholder serviced by such bank might
no longer be able to avail itself of any automatic investment or other services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of these occurrences.

As long as the Combined Distribution and Service Plan for Retail
Shares is in effect, the nomination of the Trustees who are not interested
persons of Emerald Funds (as defined in the Investment Company Act of 1940) must
be committed to the non-interested Trustees.

Emerald Funds understands that the Adviser and/or some Service
Organizations or other institutions may charge their clients a direct fee for
services in connection with their

-75-

<PAGE>

investments in the Funds. These fees would be in addition to any amounts which
might be received under the Retail Plans. Small, inactive long-term accounts
involving such additional charges may not be in the best interest of
shareholders.

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.

Until May 18, 1996, DST Systems, Inc. will serve as transfer agent
of Emerald Funds. As of May 18, 1996, BISYS Fund Services, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219-3035 will provide transfer agency and dividend
disbursing services for the Emerald Funds.

INDEPENDENT ACCOUNTANTS/EXPERTS

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, serves 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

-76-

<PAGE>

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 19107-3496, is counsel to Emerald
Funds and will pass upon the legality of the shares offered by the Funds'
Prospectuses.

ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS

From time to time, the yields and the total returns of the Funds may
be quoted in advertisements, shareholder reports or other communications to
shareholders. Performance information with respect to these Funds is generally
available by calling 800-637-3759. In addition to the publications listed
in the Funds' Prospectuses, yields and total returns as reported in the
following publications may be used to compare the performance of the Funds or
any one of them to that of other mutual funds with similar investment objectives
and to stock and other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds: BOCA RATON NEWS, BRADENTON HERALD, CHARLOTTE SUN
HERALD, COCOA TODAY, DAYTONA BEACH NEWS-JOURNAL, DELAND SUN NEWS, FORT
LAUDERDALE NEWS AND SUN SENTINEL, FORT MYERS NEWS, FORT PIERCE NEWS TRIBUNE,
GAINESVILLE SUN, JACKSONVILLE TIMES UNION, MIAMI HERALD, ORLANDO SENTINEL,
PENSACOLA NEWS JOURNAL, SANFORD HERALD, SARASOTA HERALD-TRIBUNE, ST. PETERSBURG
TIMES, STUART NEWS, TALLAHASSEE DEMOCRAT, TAMPA TRIBUNE, VERO BEACH PRESS
JOURNAL, and WEST PALM BEACH POST TIMES.

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 communication, the Adviser may offer opinions on
current economic conditions.

PERFORMANCE CALCULATIONS FOR THE EQUITY AND FIXED INCOME FUNDS

YIELD CALCULATIONS. The yields for the respective share classes of an
Equity and Fixed Income Fund are calculated separately by dividing the net
investment income per share (as described below) earned by a class during a 30-
day (or one month) period by the maximum offering price per share, on the last
day

-77-

<PAGE>

of the period and analyzing the result on a semi-annual basis by adding one to
the quotient, raising the sum to the power of six, subtracting one from the
result and then doubling the difference. The Fund's net investment income per
share earned during the period with respect to a particular class is based on
the average daily number of shares outstanding in the class during the period
entitled to receive dividends and includes dividends and interest earned during
the period attributable to that class minus expenses accrued for the period
attributable to the class, net of reimbursements. This calculation can be
expressed as follows:

a-b
Yield = 2 [(----- + 1)6 - 1]
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d = maximum offering price per share on the last day of the
period.

For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Except as noted below,
interest earned on debt obligations held by a Fund is calculated by computing
the yield to maturity of each obligation held by the Fund based on the market
value of the obligation (including actual accrued interest) at the close of
business on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest),
and dividing the result by 360 and multiplying the quotient by the market value
of the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by the Fund. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.

-78-

<PAGE>

Interest earned on tax-exempt obligations that are issued without
original issue discount and have a current market discount is calculated by
using the coupon rate of interest instead of the yield to maturity. In the case
of tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt obligations that are issued with original
issue discount but which have the discounts based on current market value that
are less than the then-remaining portion of the original issue discount (market
premium), the yield to maturity is based on the market value.

With respect to mortgage or other receivables-backed obligations which
are expected to be subject to monthly payments of principal and interest ("pay
downs"), (a) gain or loss attributable to actual monthly pay downs are accounted
for as an increase or decrease to interest income during the period; and (b) a
Fund may elect either (i) to amortize the discount and premium on the remaining
security, based on the cost of the security, to the weighted average maturity
date, if such information is available, or to the remaining term of the
security, if any, if the weighted average maturity date is not available, or
(ii) not to amortize discount or premium on the remaining security.

Undeclared earned income will be subtracted from the maximum offering
price per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared and
paid as a dividend shortly thereafter.

The Florida Tax-Exempt Fund's "tax-equivalent" yield for a particular
share class is computed by (a) dividing the portion of the Fund's yield for a
particular class (calculated as above) that is exempt from federal income taxes
by one minus a stated federal income tax rate; and (b) adding the quotient to
that portion, if any, of such yield that is not exempt from federal income tax.

Based on the foregoing calculations, the yields for Retail Shares of
the Short-Term Fixed Income, U.S. Government Securities, Managed Bond and
Florida Tax-Exempt Funds (after fee waivers and expense reimbursements) for the
30-day period ended November 30, 1995 were as follows: 5.18%; 5.99%; 5.81%; and
4.28%, respectively.

-79-

<PAGE>

The yields for Retail Shares for the same period before fee waivers
and expense reimbursements were (5.11)% for the Short-Term Fixed Income Fund;
5.99% for the U.S. Government Securities Fund; 2.93% for the Managed Bond Fund;
and 4.28% for the Florida Tax-Exempt Fund.

The Florida Tax-Exempt Fund's "tax-equivalent" yield for its Retail
Shares was 6.69% after fee waivers and expense reimbursements, and 6.69%
before fee waivers and expense reimbursements, for the 30-day period ended
November 30, 1995, based on a federal tax rate of 36%.

TOTAL RETURN CALCULATIONS. The Equity and Fixed Income Funds compute
their average annual total returns separately for their separate share classes
by determining the average annual compounded rates of return during specified
periods that equate the initial amount invested in a particular share class to
the ending redeemable value of such investment in the class. This is done by
dividing the ending redeemable value of a hypothetical $1,000 initial payment by
$1,000 and raising the quotient to a power equal to one divided by the number of
years (or fractional portion thereof) covered by the computation and subtracting
one from the result. This calculation can be expressed as follows:

ERV
T = [(-----) 1/n - 1]
P

Where: T = average annual total return.

ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed in terms
of years.

The Equity and Fixed Income Funds compute their aggregate total
returns separately for their separate share classes by determining the aggregate
rates of return during specified periods that likewise equate the initial amount
invested in a particular share class to the ending redeemable value of such
investment in the class. The formula for calculating aggregate total return is
as follows:

-80-

<PAGE>

ERV
aggregate total return = [(----- - 1)]
P

The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations.

Based on the foregoing calculations, the average annual total
returns for Retail Shares for the twelve months ended November 30, 1995 and
the period from their respective commencement dates to November 30, 1995 were
as follows: Equity Fund -- 34.82% and 11.43%, respectively; Small
Capitalization Fund --32.19% and 11.87%, respectively; Balanced Fund -- 27.45%
and 15.64%, respectively; U.S. Government Securities Fund -- 13.85% and 8.36%,
respectively; Short-Term Fixed Income Fund -- 10.25% and 6.55%, respectively;
Managed Bond Fund -- 18.47% and 10.64%, respectively; and the Florida
Tax-Exempt Fund -- 18.17% and 8.53%, respectively. The aggregate total
returns for Retail Shares of the Equity, Small Capitalization, Balanced,
Short-Term Fixed Income, Managed Bond Funds, U.S. Government Securities, and
Florida Tax-Exempt, for the fiscal year ended November 30, 1995 were 35.27%,
28.86%, 26.51%, 13.13%, 10.06%, 17.88% and 14.70%, respectively. During the
periods indicated fee waivers and expense reimbursements were in effect;
without these waivers and reimbursements the Funds' total returns would have
been lower.

YIELD CALCULATIONS FOR THE MONEY MARKET FUNDS

The "yields" and "effective yields" of each Money Market Fund are
calculated according to formulas prescribed by the Securities and Exchange
Commission. The standardized seven-day yields for the respective share classes
of each Money Market Fund are computed separately for each class 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

-81-

<PAGE>

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 front-end 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 annualized yields for
each Money Market Fund are computed by compounding a particular Fund's
unannualized base period returns (calculated as above) by adding 1 to the base
period returns, raising the sums to a power equal to 365 divided by 7, and
subtracting 1 from the results. In addition, the Tax-Exempt Fund may quote a
standardized "tax-equivalent yield" of each of its classes of shares, which is
computed by: (a) dividing the portion of the Fund's yield (as calculated above)
for such class that is exempt from federal income tax by one minus a stated
federal income tax rate; and (b) adding the figure resulting from (a) above to
that portion, if any, of the Fund's yield for such class of shares that is not
exempt from federal income tax. The fees that may be imposed by institutional
investors directly on their customers for cash management and other services are
not reflected in Emerald Funds' calculations of yields for the Funds.

For the seven-day period ended November 30, 1995, the annualized
yields (after fee waivers) of Retail Shares in the Treasury Fund, Prime Fund
and Tax-Exempt Fund were 4.91%, 5.05% and 2.98%, respectively, the effective
yields (after fee waivers) of Retail Shares in such Funds were 4.91%, 5.04%
and 2.94%, respectively, and the tax-equivalent yield (after fee waivers) of
Retail Shares in the Tax-Exempt Fund was 4.59% (assuming a Federal income tax
rate of 36%).

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.

-82-

<PAGE>

MISCELLANEOUS

As used in this Statement of Additional Information and in the
Prospectuses a "majority of the outstanding shares" of a Fund or class means the
lesser of (1) 67% of the shares of the particular Fund or class represented at a
meeting at which the holders of more than 50% of the outstanding shares of such
Fund or class are present in person or by proxy, or (2) more than 50% of the
outstanding shares of such Fund or class.

As of January 8, 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 outstanding on such date because the Adviser
possessed voting or investment discretion with respect to such shares: Treasury
Trust Fund (98.35%), Prime Trust Fund (98.82%), Treasury Fund (15.81%), Prime
Fund (11.74%), Tax-Exempt Fund (88.47%), Equity Fund - Institutional Shares
(99.80%), Small Capitalization Fund - Institutional Shares (99.90%), Balanced
Fund - Institutional Shares (99.80%), Short-Term Fixed Income Fund -
Institutional Shares (91.90%), U.S. Government Securities Fund - Institutional
Shares (95.0%), Managed Bond Fund - Class A Shares (5.43%), Managed Bond Fund -
Institutional Shares (99.40%) Florida Tax Exempt Fund - Class A Shares (0.10%),
and Florida Tax-Exempt Fund - Institutional Shares (94.90%) As of January 8,
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 Fund of the Trust were as follows: Equity
Fund - Class A Shares - National Financial Services Corporation, Attn: Sal
Macca, 200 Liberty Street, One World Financial Center, New York, NY 10281
(54.67%); University of West Florida Foundation, 11000 University Parkway,
Pensacola, FL 32514 (7.95%); Equity Fund - Class B Shares - National Financial
Services Corporation/FMTC IRA FBO Jerry E. Handy, 839 Cape Haze Lane, Naples, FL
33942 (5.22%); Harvey R. Gelman, 2226 N.W. 60th Street, Boca Raton, FL 33496
(5.18%); Small Capitalization Fund - Class A Shares - John G. Grimsley, P.O. Box
4099, Jacksonville, FL 32201 (5.59%); National Financial Services
Corporation/FMTC Custodian FBO Randall W. Hall IRA, 2954 Jeanette Cove, Oviedo,
FL 32765 (11.00%); Small Capitalization Fund - Class B Shares - Spencer C.
Whitehead & Janet A. Whitehead JTWROS, 225 East Maine Avenue, Longwood, FL
32750 (8.58%); Balanced Fund - Class A Shares - Turpin W. Barrett Jr. & Mary D.
Barrett JTWROS, 2926 Forest Brook Drive East, Lakeland, FL 33811 (7.13%); Susan
A. Fairbank Trustee, Fairbank Revocable Trust, 85 N. Pizarro Point, Lecanto, FL
34461 (7.82%); Katie M. Loeding and Mary Ellen Ash and Claudia May Clark JTWROS,
1659 Calvin Circle, Kissinmee, FL 34746 (8.05%); Therese A. Gaudreau, 623 S.W.
Palmetto Cove, Port St. Lucie, FL 34986 (5.38%); Short-Term Fixed Income Fund -
Class A Shares - National Financial Services Company/FMTC Custodian FBO Simon
Brennan IRA, 2858 S.E. Eagle Drive, Port St. Lucie, FL 34984 (24.24%); W. B.
Marks, P.O. Box 963, Lecanto, FL 34460

-83-

<PAGE>

(6.09%); Robert J. Haggstrom Trust U/A, 1222 Oakmont Drive, Niceville, FL 32578
(5.91%); Joan Marie Haggstrom Trust U/A, 1222 Oakmont Drive, Niceville, FL 32578
(6.96%); National Financial Services Corporation for the Exclusive Benefit of
our Customers, Attn: Sal Macca, 200 Liberty Street, One World Financial Center,
New York, NY 10281 (5.18%); Robert D. Blake & Frances S. Blake JTWROS, P.O. Box
772, Pensacola, FL 32501 (18.51%); Short-Term Fixed Income Fund - Class B Shares
- - Ellie R. Lee and Woodrow W. Lee and Barbara Moseley & James W. Lee TEN COMM,
5929 Duchess Road, Pensacola, FL 32503 (17.15%); Josephine H. Johnson, 1700
North L Street, Apt. 102, Pensacola, FL 32501 (23.19%); Mel S. Swauger & Irene
B. Swauger JTWROS, 1570 Monica Joy Circle, Longwood, FL 32779 (58.38%); Short-
Term Fixed Income Fund - Institutional Shares - Harris Trust & Savings Bank,
Custodian CSR America Inc., P/S 401k Plan, Attn: Tony Kwilosz, 111 W. Monroe
Floor 5 East, Chicago, IL 60603 (66.91%); U.S. Government Securities Fund -Class
A Shares - National Financial Services Corporation for the Exclusive Benefit of
our Customers, Attn: Sal Macca, 200 Liberty Street, One World Financial Center,
New York, NY 10281 (55.93%); U. S. Government Securities Fund - Class B Shares -
Raymond M. Jones & Janet J. Bell JTWROS, 7100 Ulmerton Road, Lot 125, Rancho
Village, Largo, FL 34641 (10.14%); National Financial Services Corporation for
the Exclusive Benefit of our Customers, Attn: Mr. Sal Macca, 200 Liberty Street,
One World Financial Center, New York, NY 10281 (13.44%); Susan A. Fairbank
Trustee, Fairbank Revocable Trust, 85 N. Pizarro Point, Lecanto, FL 34461
(11.90%); Anita J. Doyle, 7252 Windy Way, Brookville, FL 34601 (6.34%); National
Financial Services Corporation for the Exclusive Benefit of our Customers, Attn:
Mr. Sal Macca, 200 Liberty Street, One World Financial Center, New York, NY
10281 (6.72%); Managed Bond Fund - Class B Shares - Torben Jensen & Bodil Jensen
JTWROS, 6120 N. Misty Oak Terrace, Beverly Hills, FL 34465 (5.67%); Hazel L.
Lickliter, 327 Dania Street, Lehigh Acres, FL 33936 (6.64%); Ruby B. Henson and
Betty J. Carroll and David Carroll JTWROS, 768 N.E. Maranta Terrado, Jensen
Beach, FL 34958 (13.47%); Charles O. Reid and Carolyn N. Reid JTWROS, 2454
Australia Way East, Unit 28, Clearwater, FL 34623 (5.34%); Ernest P. and Muriel
C. Wood, Trustees, Ernest P. and Muriel C. Wood Revocable Trust, 1675 Algonquin
Drive, Clearwater, FL 34615 (8.75%); Florida Tax-Exempt Fund - Class A Shares -
National Financial Services Corporation for the Exclusive Benefit of our
Customers, Attn: Sal Macca, 200 Liberty Street, One World Financial Center, New
York, NY 10281 (59.37%); Florida Tax-Exempt Fund - Class B Shares, David S.
Miller, Trustee, The David S. Miller Trust, 4687 Oak Leaf Drive, Naples, FL
33999 (5.83%); Emerald Treasury Fund - Emerald Service Shares - Concord
Financial Services, Inc., Attn: Linda Zerbe, First and Market Building, 100
First Avenue, Suite 300, Pittsburgh, PA 15222 (96.30%); Emerald Treasury Fund -
Emerald Investor Shares - National Financial Service Corporation for the
Exclusive Benefit of our Customers, Attn: Mike McLaughlin, 9 New York, 200
Liberty Street, New York, NY 10281 (99.74%); Emerald Prime Fund - Emerald
Service Shares - Concord Financial Services, Inc., Attn: Linda Zerbe, First and
Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222 (15.63%);
Concord Financial Services, Inc.,

-84-

<PAGE>

Attn: Linda Zerbe, First and Market Building, 100 First Avenue, Suite 300,
Pittsburgh, PA 15222 (84.10%); Emerald Prime Fund - Emerald Investor Shares -
National Financial Service Corporation for the Exclusive Benefit of our
Customers, Attn: Mike McLaughlin, 9 New York, 200 Liberty Street, New York, NY
10281 (98.92%); Emerald Tax-Exempt Fund - Emerald Service Shares - Concord
Financial Services, Inc., Attn: Linda Zerbe, First and Market Building, 100
First Avenue, Suite 300, Pittsburgh, PA 15222 (22.53%); Concord Financial
Services, Inc., Linda Zerbe, First and Market Building, 100 First Avenue, Suite
300, Pittsburgh, PA 15222 (77.46%); Emerald Tax-Exempt Fund -Emerald Investor
Shares - National Financial Service Corporation, Attn: Mike McLaughlin, 9 New
York, 200 Liberty Street, New York, NY 10281 (95.12%). At such date, Hambrecht
& Quist Group, Inc. owned 100% of the outstanding shares of the Tax-Exempt
Trust Fund.

The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered by the Trust's
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 annual report to
shareholders for the fiscal year ended November 30, 1995 (the "Annual Report")
are hereby incorporated herein by reference. No other parts of the Annual
Report are incorporated by reference. Copies of the Annual Report may be
obtained by writing to BISYS Fund Services, Inc. at P.O. Box 182697,
Columbus, Ohio 43219-3035 or by calling toll-free at 800-637-3759.

-85-

<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.

A-1

<PAGE>

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.

"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.

A-2

<PAGE>

"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-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.

A-3

<PAGE>

"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:

"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

A-4

<PAGE>

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 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.

A-5

<PAGE>

"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 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.

A-6

<PAGE>

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.

"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

A-7

<PAGE>

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.

"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:

A-8

<PAGE>

"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
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-9

<PAGE>

"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.

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

A-10

<PAGE>

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.

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-11

<PAGE>

APPENDIX B

As stated in the Prospectuses, certain of the Funds may enter into
futures contracts and options in an effort to have fuller exposure to price
movements in equity securities pending investment of purchase orders or while
maintaining liquidity to meet potential shareholder redemptions and for other
hedging purposes. Such transactions are described in this Appendix.

I. INTEREST RATE FUTURES CONTRACTS.

USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are established
in both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Fund may use interest rate futures
as a defense, or hedge, against anticipated interest rate changes and not for
speculation. As described below, this would include the use of futures contract
sales to protect against expected increases in interest rates and futures
contract purchases to offset the impact of interest rate declines.

A Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Fund, through using futures contracts.

DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by a Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.

B-1

<PAGE>

Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the Fund's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.

Interest rate futures contracts are traded in an auction environment
on the floors of several exchanges - principally, the Chicago Board of Trade and
the Chicago Mercantile Exchange. The Fund would deal only in standardized
contracts on recognized exchanges. Each exchange guarantees performance under
contract provisions through a clearing corporation, a nonprofit organization
managed by the exchange membership.

A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury bonds and
notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage-backed securities; three-month United States Treasury bills; and
ninety-day commercial paper. A Fund may trade in any futures contract for which
there exists a public market, including, without limitation, the foregoing
instruments.

EXAMPLES OF FUTURES CONTRACT SALE. A Fund would engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security in the Capital
Income Fund tends to move in concert with the futures market prices of long-term
United States Treasury bonds ("Treasury bonds"). The adviser wishes to fix the
current market value of this portfolio security until some point in the future.
Assume the portfolio security has a market value of 100, and the adviser
believes that, because of an anticipated rise in interest rates, the value will
decline to 95. The Capital Income Fund might enter into futures contract sales
of Treasury bonds for an equivalent of 98. If the market value of the portfolio
security does indeed decline from 100 to 95, the equivalent futures market price
for the Treasury bonds might also decline from 98 to 93.

B-2

<PAGE>

In that case, the five-point loss in the market value of the portfolio
security would be offset by the five-point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.

The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.

If interest rate levels did not change, the Fund in the above example
might incur a loss of 2 points (which might be reduced by an off-setting
transaction prior to the settlement date). In each transaction, transaction
expenses would also be incurred.

EXAMPLES OF FUTURES CONTRACT PURCHASE. A Fund would engage in an
interest rate futures contract purchase when it is not fully invested in long-
term bonds but wishes to defer for a time the purchase of long-term bonds in
light of the availability of advantageous interim investments, e.g., shorter-
term securities whose yields are greater than those available on long-term
bonds. The Fund's basic motivation would be to maintain for a time the income
advantage from investing in the short-term securities; the Fund would be
endeavoring at the same time to eliminate the effect of all or part of an
expected increase in market price of the long-term bonds that the Fund may
purchase.

For example, assume that the market price of a long-term bond that the
Capital Income Fund may purchase, currently yielding 10%, tends to move in
concert with futures market prices of Treasury bonds. The adviser wishes to fix
the current market price (and thus 10% yield) of the long-term bond until the
time (four months away in this example) when it may purchase the bond. Assume
the long-term bond has a market price of 100, and the adviser believes that,
because of an anticipated fall in interest rates, the price will have risen to
105 (and the yield will have dropped to about 9 1/2%) in four months. The Fund
might enter into futures contracts purchases of Treasury bonds for an equivalent
price of 98. At the same time, the Fund would assign a pool of investments in
short-term securities that are either maturing in four months or earmarked for
sale in four months, for purchase of the long-term bond at an assumed market
price of 100. Assume these short-term securities are yielding 15%. If the
market price of the long-term bond does indeed rise from 100 to 105, the
equivalent futures market price for Treasury bonds might also rise from 98 to
103. In that case, the 5-point increase in the price that the Capital Income
Fund pays for the long-term

B-3

<PAGE>

bond would be offset by the 5-point gain realized by closing out the futures
contract purchase.

The adviser could be wrong in its forecast of interest rates; long-
term interest rates might rise to above 10%; and the equivalent futures market
price could fall below 98. If short-term rates at the same time fall to 10% or
below, it is possible that the Fund would continue with its purchase program for
long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will be
reduced by the loss realized on closing out the futures contract purchase.

If, however, short-term rates remained above available long-term
rates, it is possible that the Fund would discontinue its purchase program for
long-term bonds. The yield on short-term securities in the portfolio, including
those originally in the pool assigned to the particular long-term bond, would
remain higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase. In each transaction, expenses would also be
incurred.

II. INDEX FUTURES CONTRACTS.

A stock or bond index assigns relative values to the stocks or bonds
included in the index and the index fluctuates with changes in the market values
of the stocks or bonds included. A stock or bond index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the difference
between the stock index value (which assigns relative values to the common
stocks or bonds included in the index) at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying stocks in the index is made. Some stock
index futures contracts are based on broad market indices, such as the Standard
& Poor's 500 or the New York Stock Exchange Composite Index. In contrast,
certain exchanges offer futures contracts on narrower market indices, such as
the Standard & Poor's 100 or indices based on an industry or market segment,
such as oil and gas stocks. Futures contracts are traded on organized exchanges
regulated by the Commodity Futures Trading Commission. Transactions on such
exchanges are cleared through a clearing corporation, which guarantees the
performance of the parties to each contract.

A Fund will sell index futures contracts in order to offset a decrease
in market value of their respective portfolio securities that might otherwise
result from a market decline. The Funds may do so either to hedge the value of
its respective portfolio as a whole, or to protect against declines, occurring
prior to sales of securities, in the value of the securities to

B-4

<PAGE>

be sold. Conversely, a Fund will purchase index futures contracts in
anticipation of purchases of securities. In a substantial majority of these
transactions, a Fund will purchase such securities upon termination of the long
futures position, but a long futures position may be terminated without a
corresponding purchase of securities.

In addition, a Fund may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. A Fund
may also sell futures contracts in connection with this strategy, in order to
protect against the possibility that the value of the securities to be sold as
part of the restructuring of their respective portfolios will decline prior to
the time of sale.

The following are examples of transactions in stock index futures (net
of commissions and premiums, if any).

B-5

<PAGE>

ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price

Portfolio Futures
--------- -------
-Day Hedge is Placed-

Anticipate Buying $62,500 Buying 1 Index Futures
Equity Portfolio at 125
Value of Futures =
$62,500/Contract

-Day Hedge is Lifted-

Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/
Increase in Purchase Price = Contract
$2,500 Gain on Futures = $2,500

HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Fund

Factors:

Value of Stock Fund = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Fund Beta Relative to the Index = 1.0

Portfolio Futures
--------- -------
-Day Hedge is Placed-

Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000

-Day Hedge is Lifted-

Equity Portfolio-Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Fund Value = $40,000 Gain on Futures = $40,000

If, however, the market moved in the opposite direction, that is,
market value decreased and a Fund had entered into an anticipatory purchase
hedge, or market value increased and a Fund had hedged its stock portfolio, the
results of the Fund's transactions in stock index futures would be as set forth
below.

B-6

<PAGE>

ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price

Portfolio Futures
--------- -------

-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/
Contract

-Day Hedge is Lifted-

Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/
Decrease in Purchase Price = $2,500 Contract
Loss on Futures = $2,500

HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Fund

Factors:

Value of Stock Fund = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Fund Beta Relative to the Index = 1.0

Portfolio Futures
--------- -------

-Day Hedge is Placed-

Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000

-Day Hedge is Lifted-

Equity Portfolio-Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Fund Value = $40,000 Loss of Futures = $40,000

III. FUTURES CONTRACTS ON FOREIGN CURRENCIES.

A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of a foreign currency, for an amount fixed in
U.S. dollars. Foreign currency futures may be used by the Aggressive Growth
Fund to hedge against exposure to fluctuations in exchange rates between the
U.S. dollar and other currencies arising from multinational transactions.

IV. MARGIN PAYMENTS.

Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
a Fund will be required to deposit with the broker or in a segregated account
with the Fund's custodian an amount of cash or cash equivalents (generally,
short-term U.S. Government securities), the value of

B-7

<PAGE>

which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. The nature of initial margin
in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin
is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures contract assuming
all contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instruments fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking-to-market. For example, when a Fund has purchased a futures contract
and the price of the contract has risen in response to a rise in the underlying
instruments, that position will have increased in value and the Fund will be
entitled to receive from the broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract
and the price of the futures contract has declined in response to a decrease in
the underlying instruments, the position would be less valuable and the Fund
would be required to make a variation margin payment to the broker. At any time
prior to expiration of the futures contract, the adviser may elect to close the
position by taking an opposite position, subject to the availability of a
secondary market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.

V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS.

There are several risks in connection with the use of futures by a
Fund as a hedging device. One risk arises because of the imperfect correlation
between movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may move
more than or less than the price of the securities being hedged. If the price
of the future moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the price of the
securities being hedged has moved in an unfavorable direction, the Fund would be
in a better position than if it had not hedged at all. If the price of the
securities being hedged has moved in a favorable direction, this advantage will
be partially offset by the loss on the future. If the price of the future moves
more than the price of the hedged securities, the Fund will experience either a
loss or gain on the future which will not be completely offset by movements in
the price of the securities which are the subject of the hedge. To compensate
for the imperfect correlation of movements in the price of securities being
hedged and movements in the price of futures contracts, a Fund may buy or sell
futures

B-8

<PAGE>

contracts in a greater dollar amount than the dollar amount of securities being
hedged if the volatility over a particular time period of the prices of such
securities has been greater than the volatility over such time period of the
future, or if otherwise deemed to be appropriate by the investment adviser.
Conversely, a Fund may buy or sell fewer futures contracts if the volatility
over a particular time period of the prices of the securities being hedged is
less than the volatility over such time period of the futures contract being
used, or if otherwise deemed to be appropriate by the adviser. It is also
possible that, where a Fund has sold futures to hedge its portfolio against a
decline in the market, the market may advance and the value of securities held
in the Fund may decline. If this occurred, the Fund would lose money on the
future and also experience a decline in value in its portfolio securities.

Where futures are purchased to hedge against a possible increase in
the price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest in
securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.

In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents (e.g., short-term U.S. Government
securities), equal to the market value of the futures contracts, will be
deposited in a segregated account with the Fund's custodian and/or in a margin
account with a broker to collateralize the position and thereby reduce the
leverage effect resulting from the use of such futures.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
securities being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the

B-9

<PAGE>

futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the adviser may still not
result in a successful hedging transaction over a short time frame.

Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although a Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, a Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.

Further, it should be noted that the liquidity of a secondary market
in a futures contract may be adversely affected by "daily price fluctuation
limits" established by commodity exchanges which limit the amount of fluctuation
in a futures contract price during a single trading day. Once the daily limit
has been reached in the contract, no trades may be entered into at a price
beyond the limit, thus preventing the liquidation of open futures positions.

Successful use of futures by a Fund is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if a Fund has hedged against the possibility of a decline in the market
adversely affecting securities held in its portfolio and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. A Fund may have to
sell securities at a time when it may be disadvantageous to do so.

B-10

<PAGE>

VI. OPTIONS ON FUTURES CONTRACTS.

The Funds may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer
or seller of a futures contract, the holder, or writer, of an option has the
right to terminate its position prior to the scheduled expiration of the option
by selling, or purchasing, an option of the same series, at which time the
person entering into the closing transaction will realize a gain or loss.

Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to a Fund because the maximum amount at risk is the
premium paid for the options (plus transaction costs).

VII. OTHER HEDGING TRANSACTIONS

A Fund is authorized to enter into hedging transactions in any other
futures or options contracts which are currently traded or which may
subsequently become available for trading. Such instruments may be employed in
connection with the Funds' hedging strategies if, in the judgment of the
adviser, transactions therein are necessary or advisable.

VIII. ACCOUNTING AND TAX TREATMENT.

Accounting for futures contracts and related options will be in
accordance with generally accepted accounting principles.

Generally, futures contracts and options on futures contracts held by
a Fund at the close of the Fund's taxable year will be treated for federal
income tax purposes as sold for their fair market value on the last business day
of such year, a

B-11

<PAGE>

process known as "mark-to-market." Forty percent of any gain or loss resulting
from such constructive sale will be treated as short-term capital gain or loss
and 60% of such gain or loss will be treated as long-term capital gain or loss
without regard to the length of time the Fund holds the futures contract or
option ("the 40%-60% rule"). The amount of any capital gain or loss actually
realized by a Fund in a subsequent sale or other disposition of those futures
contracts or options will be adjusted to reflect any capital gain or loss taken
into account by the Fund in a prior year as a result of the constructive sale of
the contracts or options. With respect to futures contracts to sell, which will
be regarded as parts of a "mixed straddle" because their values fluctuate
inversely to the values of specific securities held by the Fund, losses as to
such contracts to sell will be subject to certain loss deferral rules which
limit the amount of loss currently deductible on either part of the straddle to
the amount thereof which exceeds the unrecognized gain (if any) with respect to
the other part of the straddle, and to certain wash sales regulations. Under
short sales rules, which also will be applicable, the holding period of the
securities forming part of the straddle (if they have not been held for the
long-term holding period) will be deemed not to begin prior to termination of
the straddle. With respect to certain futures contracts and related options,
deductions for interest and carrying charges will not be allowed.
Notwithstanding the rules described above, with respect to futures contracts to
sell which are properly identified as such, a Fund may make an election which
will exempt (in whole or in part) those identified futures contracts and options
from being treated for federal income tax purposes as sold on the last business
day of the Fund's taxable year, but gains and losses will be subject to such
short sales, wash sales and loss deferral rules and the requirement to
capitalize interest and carrying charges. Under Temporary Regulations, a Fund
is allowed (in lieu of the foregoing) to elect either (1) to offset gains or
losses from portions which are part of a mixed straddle by separately
identifying each mixed straddle to which such treatment applies or (2) to
establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under either
election, the 40%-60% rule will apply to the net gain or loss attributable to
the futures contracts, but in the case of a mixed straddle account election, not
more than 50 percent of any net gain may be treated as long-term and no more
than 40 percent of any net loss may be treated as short-term.

Certain foreign currency contracts entered into by a Fund may be
subject to the marking-to-market process but gain or loss will be treated as
100% ordinary income or loss. To receive such federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the

B-12

<PAGE>

settlement value of the contract depends; (2) the contract must be entered into
at arm's length at a price determined by reference to the price in the interbank
market; and (3) the contract must be traded in the interbank market. The
Treasury Department has broad authority to issue regulations under the
provisions respecting foreign currency contracts. As of the date of this
Statement of Additional Information, the Treasury has not issued any such
regulations. Foreign currency contracts entered into by a Fund may result in
the creation of one or more straddles for federal income tax purposes, in which
case certain loss deferral, short sales, and wash sales rules and the
requirement to capitalize interest and carrying charges may apply.

Some investments of a Fund may be subject to special rules which
govern the federal income tax treatment of certain transactions denominated in
terms of a currency other than the U.S. dollar or determined by reference to the
value of one or more currencies other than the U.S. dollar. The types of
transactions covered by the special rules include the following: (i) the
acquisition of, or becoming the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations, preferred stock);
(ii) the accruing of certain trade receivables and payables; and (iii) the
entering into or acquisition of any forward contract, futures contract, option
and similar financial instrument. However, regulated futures contracts and non-
equity options are generally not subject to the special currency rules if they
are or would be treated as sold for their fair market value at year-end under
the mark-to-market rules, unless an election is made to have such currency rules
apply. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer also is treated as a transaction subject to the special currency rules.
With respect to transactions covered by the special rules, foreign currency gain
or loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable as ordinary gain or loss. A taxpayer may
elect to treat as capital gain or loss foreign currency gain or loss arising
from certain identified forward contracts, futures contracts and options that
are capital assets in the hands of the taxpayer and which are not part of a
straddle. In accordance with Treasury regulations, certain transactions subject
to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Code and the Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated consistently
for purposes of the Code. "Section 988 hedging transactions" are not subject to
the mark-to-market or loss deferral rules under the Code. It is anticipated
that some of the non-U.S. dollar denominated investments and foreign currency
contracts that such Funds may make or may enter into will be subject to the
special currency rules described above. Gain or loss attributable to the
foreign currency component of transactions engaged in by a Fund which are not
subject to special currency rules (such as foreign

B-13

<PAGE>

equity investments other than certain preferred stocks) will be treated as
capital gain or loss and will not be segregated from the gain or loss on the
underlying transaction.

Qualification as a regulated investment company under the Code
requires that a Fund satisfy certain requirements with respect to the source of
its income during a taxable year. At least 90% of the gross income of each Fund
must be derived from dividends, interests, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies, and other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to a Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains that are not
directly related to a Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Fund from a partnership or trust is treated for this purpose
as derived with respect to a Fund's business of investing in stock, securities
or currencies only to the extent that such income is attributable to items of
income which would have been qualifying income if realized by a Fund in the same
manner as by the partnership or trust.

An additional requirement for qualification as a regulated investment
company under the Code is the Short-Short test described above in "Additional
Information Concerning Taxes." With respect to futures contracts and other
financial instruments subject to the mark-to-market rules, the Internal Revenue
Service (the "Service") has ruled in private letter rulings issued to other
regulated investment companies that a gain realized from such a futures contract
or financial instrument will be treated as being derived from a security held
for three months or more (regardless of the actual period for which the contract
or instrument is held) if the gain arises as a result of a constructive sale
under the mark-to-market rules, and will be treated as being derived from a
security held for less than three months only if the contract or instrument is
terminated (or transferred) during the taxable year (other than by reason of
mark-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. Although private
letter rulings are not binding on the Service, management believes the Service
would take the same position on this issue with respect to the Funds. In
determining whether the 30% test is met for a taxable year, increases and
decreases in the value of a Fund's futures contracts and other investments that
qualify as part of a "designated hedge," as defined in the Code, may be netted.

B-14

<PAGE>

EMERALD FUNDS

Statement of Additional Information

for Institutional Shares and Service Shares
of the
* Prime Fund *
*Treasury Fund*
*Tax-Exempt Fund*

April 1, 1996

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Emerald Funds 3
Investment Objectives and Policies 3
Net Asset Value and Dividends 19
Additional Purchase and Redemption Information 21
Description of Shares 21
Additional Information Concerning Taxes 25
Management of Emerald Funds 30
Independent Accountants/Experts 40
Counsel 40
Additional Information on Yield 40
Miscellaneous 42
Financial Statements 45
Appendix A-1
</TABLE>

This Statement of Additional Information, which applies to the
Institutional Share and Service Share Classes of Emerald Funds' Treasury
Fund, Prime Fund and Tax-Exempt Fund, is meant to be read in conjunction with
the Prospectus dated April 1, 1996 for such Shares, and is incorporated by
reference in its entirety into those Prospectuses. Because this Statement of
Additional Information is not itself a prospectus, no investment in
Institutional Shares and Service Shares of the Treasury Fund, Prime Fund or
Tax Exempt Fund should be made solely upon the information contained herein.
Copies of the Prospectuses may be obtained by calling 800-637-3759.
Capitalized terms used but not defined herein have the same meanings as in
the Prospectuses.

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 INSURED 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,

- 1 -

<PAGE>

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.

- 2 -

<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 the Institutional Share and Service Share
Classes of three diversified portfolios of Emerald Funds -- the Treasury
Fund, the Prime Fund and the Tax-Exempt Fund (such portfolios are sometimes
called the "Funds"). Emerald Funds also offers other classes of shares in the
aforementioned Funds and in other investment portfolios which are described
in separate Prospectuses and Statements of Additional Information. For
further information, contact the Distributor at the telephone number stated
on the cover page of this Statement of Additional Information.

INVESTMENT OBJECTIVES AND POLICIES

As stated in the Prospectus for the Funds, the investment objective
of both the Treasury Fund and the Prime Fund is to seek a high level of
current income, and the investment objective of the Tax-Exempt Fund is to
seek a high level of current income exempt from federal income taxes, 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 for the
Funds.

PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Board of Trustees, Barnett
Banks Trust Company, N.A. (the "Adviser") makes decisions with respect to and
places orders for all purchases and sales of portfolio securities for the
Treasury Fund and Prime Fund. Rodney Square Management Corporation (the "Sub-
Adviser"), a wholly-owned subsidiary of Wilmington Trust Company, has similar
responsibilities for the Tax-Exempt Fund, subject to the general supervision
of both the Board of Trustees and the Adviser. (The Sub-Adviser does not
provide sub-advisory services for the Treasury and Prime Funds.)

Securities purchased and sold by each Fund are generally 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

- 3 -

<PAGE>

transactions, the Adviser for the Treasury and Prime Funds, and the Sub-Adviser
for the Tax-Exempt Fund, 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.
A Fund will engage in this practice, however, only when the Adviser (or, with
respect to the Tax-Exempt Fund, the Sub-Adviser) believes such practice to be
in the Fund's 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 the Adviser agrees with respect to the
Treasury and Prime Funds, and in its Sub-Advisory Agreement the Sub-Adviser
agrees with respect to the Tax-Exempt Fund, to 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 and Sub-Adviser shall consider factors they deem 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 respective
Agreements authorize the Adviser and Sub-Adviser to cause 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 (or Sub-Adviser with
respect to the Tax-Exempt Fund) 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 (or Sub-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.

- 4 -

<PAGE>

Supplemental research information so received is in addition to, and
not in lieu of, services required to be performed by the Adviser (and Sub-
Adviser) and does not reduce the advisory fees payable to the Adviser 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.

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 Sub-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 (and Sub-Adviser with respect to
the Tax-Exempt Fund) 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 or the Sub-Adviser, to take into account
the sale of Fund shares if the Adviser (or Sub-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 Distributor, the
Adviser or Sub-Adviser, 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
and Sub-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 (Sub-Adviser with

- 5 -

<PAGE>

respect to the Tax-Exempt Fund) 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 a Fund. To the extent permitted by law, the
Adviser and Sub-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 (Sub-Adviser with
respect to the Tax-Exempt Fund), pursuant to guidelines established by the
Board, will 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 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.

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.

- 6 -

<PAGE>

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. 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 for a particular Fund are not deemed to be
pledged for purposes of this limitation.

6. 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.

7. 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.

8. 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.

9. Purchase securities of companies for the purpose of exercising
control.

- 7 -

<PAGE>

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
(c) in the case of any Fund, 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 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 Prime Fund, could be changed only in the event that
such regulations of the Securities and Exchange Commission are amended in the
future.]

In addition, the Prime Fund and Tax-Exempt Fund may not:

11. 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 guaranteed by the United States, any
state, territory or possession of the United States, the District 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 Section 11 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.

- 8 -

<PAGE>

In addition, as summarized in to Prospectus, the Tax-Exempt Fund
must:

12. Invest at least 80% of its net assets in securities the
interest on which is exempt from federal income tax, except during defensive
periods or during periods of unusual market conditions. For the purposes of
this fundamental policy, municipal obligations that are treated as a specific
tax preference item under the federal alternative minimum tax are considered
taxable.

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
their Prospectuses and this Statement of Additional Information.

In order to permit the sale of Shares of the Funds in the State of
Texas, the Trust has agreed to the following additional restrictions with
respect to the Funds:

1. The Funds will not invest in oil, gas or
other mineral leases nor will they invest
in real estate limited partnerships.

Should the Trust determine that the above commitment to the state of
Texas or any other commitment made to permit the sale of a particular class of
a Fund's shares in any state are no longer in the best interests of such
class, the Trust will revoke the commitment by terminating sales of that class
in the state involved.

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
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.

- 9 -

<PAGE>

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 for each Fund, the
Adviser (Sub-Adviser with respect to the Tax-Exempt Fund) will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such 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 those 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 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.

- 10 -

<PAGE>

LENDING SECURITIES

When the Treasury Fund or the Prime 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 Securities or
additionally, in the case of the Prime 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 Fund. Collateral for the
Treasury Fund is limited to cash and U.S. Government Securities. There maybe
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 voting stock of any one investment company will be
owned by the Fund or by 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 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,

- 11 -

<PAGE>

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 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

- 12 -

<PAGE>

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.

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 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.

MUNICIPAL OBLIGATIONS

Assets of the Tax-Exempt 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. The Prime Fund may also acquire municipal obligations, which 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.

- 13 -

<PAGE>

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 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.

As described in the Prospectus, the Prime and Tax-Exempt Funds 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. Emerald, 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.

- 14 -

<PAGE>

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.

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 Tax-Exempt and Prime Funds may
invest in bonds and other types of tax-exempt instruments provided they have
remaining maturities that meet the Funds' maturity limitations.

As described in the Prospectuses, the Tax-Exempt and the Prime Funds
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 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. The Tax-Exempt Fund may, from time to time,
invest more than 25% of its total assets in municipal obligations covered by
insurance policies.

- 15 -

<PAGE>

obligations, or which proposals, if any, might be enacted. Such proposals,
while pending or if enacted, might materially and adversely affect the
availability of municipal obligations for investment by the Tax-Exempt Fund
and the liquidity and value of that Fund's portfolio. In such an event,
Emerald Funds would reevaluate the investment objective and policies of the
Tax-Exempt Fund and consider possible changes in its structure or possible
dissolution.

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 risks. 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.

- 16 -

<PAGE>

and in such a case the Fund involved may be required subsequently to place
additional assets in the separate account in order that 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 Fund, Prime Fund and Tax-Exempt 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 yearend 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 purchase 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.

STAND-BY COMMITMENTS

The Tax-Exempt Fund may acquire stand-by commitments with respect to
municipal obligations held in its portfolio.

- 17 -

<PAGE>

The amount payable to a Fund upon its exercise of a "stand-by commitment" is
normally (i) the Fund's acquisition cost of the municipal obligations
(excluding any accrued interest which the Fund paid on their acquisition),
less any amortized market premium or plus any amortized market or original
issue discount during the period the Fund owned the securities, plus (ii) all
interest accrued on the securities since the last interest payment date during
that period. Stand-by commitments may be sold, transferred or assigned by a
Fund only with the instruments involved. Stand-by commitments may be sold,
transferred or assigned by the Fund only with the instruments involved.

The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration.
However, if necessary or advisable, the Tax-Exempt Fund may pay for a stand-by
commitment either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the commitment (thus reducing the
yield to maturity otherwise available for the same securities). Where the
Fund has paid any consideration directly or indirectly for a stand-by
commitment, its cost would be reflected as unrealized depreciation for the
period during which the commitment was held by the Fund.

The Fund intends to enter into stand-by commitments only with
dealers, banks and broker-dealers which, in the Sub-Adviser's opinion, present
minimal credit risks. In evaluating the creditworthiness of the issuer of a
stand-by commitment, the Sub-Adviser will review periodically the issuer's
assets, liabilities, contingent claims and other relevant financial
information.

The Tax-Exempt Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. Stand-by commitments acquired by the Fund
would be valued at zero in determining net asset value.

PARTICIPATION INTERESTS AND TRUST RECEIPTS

The Prime Fund may purchase participation interests and trust
receipts as described in its Prospectus. 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 Fund
may invest pursuant to guidelines approved by the Board of Trustees. For
certain participation interests or trust receipts the Prime Fund will

- 18 -

<PAGE>

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 Fund will not purchase any such annuities. GICs acquired
by the Prime 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 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 Fund to be illiquid investments, and will be acquired
by the Fund subject to its limitation on illiquid investments.

NET ASSET VALUE AND DIVIDENDS

Net asset value per share of each class of shares in a particular
Fund is calculated by adding the value of all portfolio securities and other
assets belonging to the Fund that are attributable to a class, subtracting the
Fund's liabilities attributable to the class, and dividing the result by the
number of outstanding shares in the class. The net asset value per share for
each Fund and for each class of shares within a 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. The expenses that
are charged to a Fund are borne equally by each share of the Fund, except that
payments to Service Organizations are borne solely by Service Shares
as described in the Prospectuses for such Shares and payments under the
Combined Amended and Restated Distribution and Service Plan and the
Shareholder Processing Plan for Retail Shares are borne solely by Retail
Shares. In addition, each class of Shares bears certain miscellaneous "class
expenses" as described in the Prospectus.

- 19 -

<PAGE>

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 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 for Institutional Shares and Service Shares, 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.

- 20 -

<PAGE>

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, Institutional Shares
and Service Shares of the Treasury Fund, the Prime Fund and the Tax-Exempt
Fund are sold to the Adviser, its affiliated and correspondent banks and
other institutional investors (collectively "Institutions") acting on behalf
of themselves and persons maintaining accounts at the Institutions.

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 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 Funds'
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, the Sub-Adviser (with
respect to the Tax-Exempt Fund) or any other bank.

DESCRIPTION OF SHARES

- 21 -

<PAGE>

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. Nine of these classes (Institutional Shares,
Service Shares and Retail Shares) represent interests in the Treasury Fund,
the Prime Fund and the Tax-Exempt Fund, respectively. 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 Institutional Share, Service Share and Retail
Share in a Fund has a par value of $.001.

Except as noted below with respect to the Combined Distribution
and Services Plan and the Shareholder Processing and Services Plan for Retail
Shares (the "Retail Plans") and the Shareholder Processing and Services Plan
for Service Shares (the "Emerald Service Plan"), Institutional, Service and
Retail Shares bear pro rata the same expenses and are entitled equally to a
Fund's dividends and distributions. 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 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 the particular Fund involved in liquidation, based on
the number of shares of the Fund that are held by each shareholder, except that
each Fund's Service Shares shall be solely responsible for the Fund's payments
under the Emerald Service Plan, and each Fund's Retail Shares will be solely
responsible for the Fund's payments under the Retail Plans. In addition, each
class of Shares will be responsible for certain miscellaneous "class
expenses" as described in the Prospectuses.

Holders of all outstanding shares of a particular Fund will vote
together in the aggregate and not by class on all matters, except that only
Service Shares of a Fund will be entitled to vote on matters submitted
to a vote of shareholders pertaining to the Emerald Service Plan
and only Retail Shares of a Fund will be entitled to vote on matters submitted
to a vote of shareholders pertaining to the Retail Plans. (See "Other
Information Concerning Emerald Funds and Its Shares" in the Prospectus.)
Further, shareholders of all 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

- 22 -

<PAGE>

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 noncumulative voting rights and, accordingly, the
holders of more than 50% of Emerald Funds' outstanding shares (irrespective of
Fund or class) 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 upon the written request of shareholders
owning at least 10% of the outstanding shares entitled to vote.

- 23 -

<PAGE>

assets belonging to a Fund into money and, in connection therewith, to cause
all outstanding shares of such Fund to be redeemed at their net asset value;
or (c) combine the assets belonging to a Fund with the assets belonging to one
or more other funds if the Board of Trustees reasonably determines that such
combination will not have a material adverse effect on the shareholders of any
fund participating in such combination and, in connection therewith, to cause
all outstanding shares of any such Fund to be redeemed or converted into
shares of another fund 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 Fund after the assets belonging to such Fund have been distributed to its
shareholders.

SERVICE SHARES

As stated in the Prospectus, Service Shares are sold to institutional
investors ("Service Organizations") which enter into service agreements
requiring them to provide support services to their customers who
beneficially own Service Shares in consideration of the Funds' payment of not
more than .35% (on an annualized basis) of the average daily net asset value
of the Service Shares beneficially owned by the customers. For the fiscal
years ended November 30, 1995, 1994 and 1993, payments to Service
Organizations pursuant to the Emerald Service Plan totalled $1,898,193,
$1,678,991 and $1,332,955, respectively, with respect to Service Shares of
the Treasury Fund; $2,814,354, $2,409,889 and $1,937,188, respectively, with
respect to Service; Shares of the Prime Fund; and $10,478, $9,468 and $1,420,
respectively, with respect to Service Shares of the Tax-Exempt Fund. Of such
amounts, the Funds' distributor, affiliates of the Funds' distributor and the
Adviser and its affiliates earned $0, $0 and $1,898,193; $0, $0, and
$1,678,991; and $0, $0 and $1,332,665, respectively, for the fiscal years
ended November 30, 1995, 1994 and 1993 with respect to Service Shares of the
Treasury Fund; $0, $0, and $2,804,354; $0, $0 and $2,409,889; and $0, $0 and
$1,936,926, respectively, for the fiscal years ended November 30, 1995, 1994
and 1993 with respect to Service Shares of the Prime Fund; and $0, $0 and
$10,478; $0, $0 and $0, and $0, $0 and $0, respectively, for the fiscal years
ended November 30, 1995, 1994 and 1993 with respect to Service Shares of the
Tax Exempt Fund.

Services provided by Service Organizations under their service
agreements may include: (i) providing necessary personnel and facilities to
establish and maintain shareholder accounts and records for customers; (ii)
assisting in aggregating and processing purchase, exchange and redemption
transactions; (iii) placing net purchase and redemption orders with the
Distributor; (iv) arranging for wiring of funds; (v) transmitting and
receiving funds in connection with customer orders to purchase or redeem
Service shares; (vi) processing dividend payments; (vii) verifying and
guaranteeing customer signatures in connection with redemption orders and
transfers and changes in customer-designated accounts, as necessary; (viii)
providing periodic statements showing a customer's account balance, and to
the extent practicable, integrating such information with other customer
transactions otherwise effected through or with us; (ix) furnishing (either
separately or on an integrated basis with other reports sent to a customer by
us) periodic statements and confirmations of purchases, exchanges and
redemptions; (x) transmitting on behalf of the Funds, proxy statements,
annual reports, updating prospectuses and other communications from the Funds
to customers; (xi) receiving, tabulating and transmitting to the Funds
proxies executed by customers with respect to shareholder meetings; (xii)
providing the information to the Funds necessary for accounting or
subaccounting; and (xiii) providing such other similar services as a Service
Organization or customer may reasonably request.

- 24 -

<PAGE>

Pursuant to the Emerald Service Plan, the Board of Trustees will
review, at least quarterly, a written report of the amounts expended under
Emerald Funds' agreements with Service Organizations and the purposes for
which the expenditures were made. In addition, the arrangements with Service
Organizations must be approved annually by a majority of the Board of
Trustees, including a majority of the trustees who are not "interested
persons" of Emerald Funds as defined in the Investment Company Act of 1940
and have no direct or indirect financial interest in such arrangements (the
"Disinterested Trustees").

The Board of Trustees has approved the arrangements with Service
Organizations based on information provided by Emerald Funds' service
contractors that there is a reasonable likelihood that the arrangements will
benefit the Funds and their shareholders by affording the Funds greater
flexibility in connection with the servicing of the accounts of the beneficial
owners of their shares in an efficient manner.

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 for Institutional Shares and Service Shares.
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 a substitute for careful tax

- 25 -

<PAGE>

planning. Investors are advised to consult their tax advisers with specific
reference to their own tax situations.

TAX-EXEMPT FUND

As described above and in its Prospectus, the Tax-Exempt Fund is
designed to provide investors with current tax-exempt interest income. This
Fund is not intended to constitute a balanced investment program and is not
designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the Tax-Exempt
Fund may not be suitable for tax-exempt institutions, or for retirement plans
qualified under Section 401 of the Internal Revenue Code, H.R. 10 plans and
individual retirement accounts since such plans and accounts are generally tax-
exempt and, therefore, not only would not gain any additional benefit from the
Fund's dividends being tax-exempt, but such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the Tax-
Exempt Fund may not be an appropriate investment for entities which are
"substantial users" of facilities financed by private activity bonds or
"related persons" thereof. "Substantial user" is defined under U.S. Treasury
Regulations to include a nonexempt person who regularly uses a part of such
facilities in his or her trade or business and whose gross revenues derived
with respect to the facilities financed by the issuance of bonds are more than
5% of the total revenues derived by all users of such facilities, who
occupies more than 5% of the usable area of such facilities, or for whom such
facilities or a part thereof were specifically constructed, reconstructed or
acquired. "Related persons" include certain related natural persons,
affiliated corporations, a partnership and its partners and an S corporation
and its shareholders. Each shareholder is advised to consult his or her tax
adviser with respect to whether exempt-interest dividends would be excludable
from his or her gross income under Section 103(a) of the Internal Revenue
Code.

The percentage of total dividends paid by the Tax-Exempt Fund with
respect to any taxable year which qualify as federal exempt-interest dividends
will be the same for all shareholders of the Fund receiving dividends for such
year. In order for the Fund to pay exempt-interest dividends for any taxable
year, at the close of each quarter of its taxable year at least 50% of the
aggregate value of the Fund's portfolio must consist of federal tax-exempt
interest obligations. In addition, the Fund must distribute an amount that is
at least equal to the sum of 90% of the aggregate net tax-exempt interest
income and 90% of the investment company taxable income earned by the Fund for
the taxable year. Not later than 60 days after the close of its taxable year,
the Fund will notify each shareholder of the portion of the dividends paid by
the Fund to the shareholder with

- 26 -

<PAGE>

respect to such taxable year which constitutes an exempt-interest dividend.
However, the aggregate amount of dividends so designated cannot exceed the
excess of the amount of interest exempt from tax under Section 103 of the Code
received by the Fund during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code.

Interest on indebtedness incurred by a shareholder to purchase or
carry shares of the Tax-Exempt Fund generally is not deductible for federal
income tax purposes. If a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to
the extent of the amount of exempt-interest dividends earned with respect to
the shares. The Treasury Department, however, is authorized to issue
regulations that would reduce the six-month holding requirement to a period of
not less than the greater of 31 days or the period between regular
distributions for shareholders of an investment company that regularly
distributes at least 90% of its net tax-exempt interest. No such regulations
had been issued as of the date of this Statement of Additional Information.

Income itself exempt from federal income taxation may be considered
in addition to adjusted gross income when determining whether Social Security
payments received by a shareholder are subject to federal income taxation.

ALL FUNDS

Investment company taxable income earned by the Treasury Fund, the
Prime Fund or the Tax-Exempt Fund will be distributed by each Fund to its
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.

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. A Fund
generally will have no tax liability with respect to such gains and the
distributions (whether paid in cash or additional shares) 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.

- 27 -

<PAGE>

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). Each Fund intends 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, a Fund 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 issuer), 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 deduction for distributions to its shareholders). In such
event, dividend distributions (including amounts derived from interest on
municipal obligations) 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 sale proceeds paid to
shareholders who have failed to provide a correct tax identification number in
the manner

- 28 -

<PAGE>

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, when required to do so, to the Fund
that they are not subject to backup withholding or that they are "exempt
recipients."

- 29 -

<PAGE>

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:

Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ------------------------ ---------------- -----------------------------

Chesterfield H. Smith* Chairman of Senior Partner of the law
701 Brickell Avenue the Board firm of Holland and Knight;
Suite 3000 of Trustees Director, Greenwich Air
Miami, FL 33101 Services Inc. (an
Age 78 aircraft airframe 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,
Age 62 General Truck Equipment and
Trailer Sales; Director,
Greater Jacksonville Fair
Association.

Mary Doyle Trustee Professor of Law,
University of Miami University of Miami Law
Law School School, 1995 to present;
1311 Miller Drive Dean in Residence,
Coral Gables, FL 33124 Association of American Law
Age 52 Schools, 1994 to date; Dean,
University of Miami School
of Law, 1986-1994.

Albert D. Ernest* Trustee President, Albert Ernest
1560 Lancaster Terrace Enterprises (personal
Suite 1402 investments), 1991 to date;
Jacksonville, FL 32204 President and Chief
Age 65 Operating 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; Member,
Advisory Board, Coastal
Lumber Company.

- 30 -

<PAGE>

Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ------------------------ ---------------- -----------------------------

John G. Grimsley* Trustee and Member of the law firm of
50 N. Laura St. President Mahoney Adams & Criser,
Suite 3400 P.A. since 1966.
Jacksonville, FL 32201
Age 57

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;
Age 57 Vice President of Emerald
Asset Management Inc.
March 1995 to present;
Vice Chairman 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.

Hugh Fanning Vice President Employee of BISYS Fund
BISYS Fund Services Services, Inc.,
3435 Stelzer Road August 1992 to present;
Columbus, OH 43219-3035 Director of Marketing,
Age 42 Ketchum Communications, July
1987 to August 1992

J. David Huber Vice President Employee of BISYS Fund
BISYS Fund Services Services, Inc., June 1987
3435 Stelzer Road to present.
Columbus, OH 43219-3035
Age 49

Jeffrey A. Dalke Secretary Partner, Drinker Biddle &
PNB Building Reath (law firm).
1345 Chestnut Street
Philadelphia, PA 19107
Age 45

George Martinez Assistant Senior Vice President and
BISYS Fund Services Secretary Director of Legal and
3435 Stelzer Road Compliance Services, BISYS
Columbus, OH 43219-3035 Fund Services, Inc., March
Age 36 1995 to present; Senior Vice
President, Emerald Asset
Management, Inc., August 1995
to date; 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, June 1991 to
3435 Stelzer Road present; Assistant Secretary,
Columbus, OH 43219-3035 Emerald Asset Management,
Age 44 Inc., August 1995 to present;
Vice President and
Associate General Counsel
with National Securities
Research Corp., July 1990 to
June 1991.

- 31 -

<PAGE>

Principal
Position with Occupations During Past 5
Name and Address Emerald Funds Years and Other Affiliations
- ------------------------ ---------------- -----------------------------

Alaina Metz Assistant Chief Administrator,
BISYS Fund Services Secretary Administrative and
3435 Stelzer Road Regulatory Services, BISYS
Columbus, OH 43219-3035 Fund Services, Inc.,
Age 28 June 1995 to present;
Supervisor, Mutual Fund
Legal Department, Alliance
Capital Management, May 1989
to June 1995.

- -----------------
* 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 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' most recent 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 January 10, 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 Funds' trustees for their services as members of the
Board of Trustees and Committees thereof.

- 32 -

<PAGE>

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM
AGGREGATE RETIREMENT ESTIMATED EMERALD
COMPENSATION BENEFITS ANNUAL FUNDS
FROM ACCRUED AS BENEFITS AND FUND
EMERALD PART OF FUND UPON COMPLEX* PAID
NAME OF PERSON 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
</TABLE>

- ----------------------

* The "Fund Complex" consists solely of Emerald Funds.

** Mr. Ernest was appointed to the Board of Trustees on May 4, 1995.

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 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.

- 33 -

<PAGE>

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 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 AND SUB-ADVISORY SERVICES

As stated, Barnett Banks Trust Company, N.A. (the "Adviser") serves
as investment adviser to each Fund. In addition, Rodney Square Management
Corporation (the "Sub-Adviser"), a wholly-owned subsidiary of Wilmington Trust
Company ("WTC"), serves as sub-investment adviser to the Tax-Exempt Fund. In
rendering its sub-advisory services, the Sub-Adviser may occasionally
consult, on an informal basis, with personnel from the investment departments
of WTC; however, WTC will take no part in determining the investment policies
of the Tax-Exempt Fund or in deciding which securities are to be purchased or
sold by such Fund.

In their Investment Advisory and Sub-Advisory Agreements, the
Adviser and Sub-Adviser have agreed to pay all expenses incurred by them in
connection with their advisory and sub-advisory services 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 advisory agreements, Emerald
Funds has agreed to pay the Adviser fees, computed daily and paid monthly, at
the annual rate of .25% of the average net assets of each Fund. Under the
terms of the agreements, the fees payable to the Adviser are not subject to
reduction as the value of each Fund's net assets increases; however, the
Adviser has informed Emerald Funds of its intention to reduce the annual rate
of its advisory fees with respect to the Treasury Fund and the Prime Fund to
the following rates: .25% of the first $600 million of each Fund's net assets;
.23% of

- 34 -

<PAGE>

each Fund's net assets over $600 million but not exceeding $1 billion; .21% of
the next $1 billion of each Fund's net assets; and .19% of each Fund's net
assets over $2 billion. The Adviser has also agreed to pay the Sub-Adviser
for the Tax-Exempt Fund a sub-advisory fee at the rate of .15% of that Fund's
average net assets. The sub-advisory fee paid by the Adviser to the Sub-
Adviser is borne entirely by the Adviser and has no effect on the advisory fee
payable by the Tax-Exempt Fund. Emerald Funds has been advised that, until
further notice, the Adviser has voluntarily agreed to waive all advisory fees
with respect to the Tax-Exempt Fund in excess of the sub-advisory fees
payable by it to the Sub-Adviser.

The Adviser and Sub-Adviser have made certain additional voluntary
and contractual undertakings to waive their fees. 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 and Sub-Adviser with respect to the Funds. For the fiscal years ended
November 30, 1995, 1994 and 1993, the Adviser received (net of waivers)
advisory fees totalling $1,914,250, $2,231,677 and $2,207,189, respectively,
for the Treasury Fund; $3,677,324, $3,243,600 and $4,752,234, respectively, for
the Prime Fund; and $506,689, $222,183 and $150,753, respectively, for the Tax-
Exempt Fund. In fiscal years ended November 30, 1995, 1994 and 1993 the entire
advisory fee received by the Adviser with respect to the Tax-Exempt Fund was
paid to the Sub-Adviser. In addition, the Adviser waived an additional
$202,676, $186,758 and $131,253 in advisory fees with respect to the Tax-
Exempt Fund for the same fiscal years, respectively. For the fiscal year
ended November 30, 1995 the Adviser waived fees totaling $358,950 and
$134,960 for the Prime and Treasury Funds respectively. For the fiscal
years ended November 1994 and 1993, the Adviser did not waive any advisory
fees for the Treasury Fund or the Prime Fund. For the fiscal years ended
November 30, 1995, 1994 and 1993, the Sub-Adviser waived sub-advisory
fees totalling $53,487, $55,868 and $57,955 with respect to the
Tax-Exempt Fund.

Under the Investment Advisory and Sub-Advisory Agreements for the
Funds, the Adviser and Sub-Adviser are 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 such agreements, 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 or Sub-Adviser in the performance of their duties or from their
reckless disregard of their duties and obligations under the agreements.

- 35 -
<PAGE>

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 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 and Sub-Advisory Agreements and as contemplated by the
Prospectuses and this Statement of Additional Information, and the Sub-Adviser
believes, with respect to its activities as required by the Sub-Advisory
Agreement and as contemplated by the Prospectuses and this Statement of
Additional Information, that, if the question were properly presented, a court
should hold that the Adviser or Sub-Adviser, as the case may be, may each
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 Sub-Adviser and that future
changes in either federal or state statutes and regulations relating to
permissible activities of banks or 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 and Sub-Adviser from continuing to perform such services for the
Funds. If the Adviser or Sub-Adviser were prohibited from continuing to
perform advisory and sub-advisory services for the Funds, it is expected that
the Board of Trustees would recommend that the Funds enter into a new
agreement or would consider the possible termination of the Funds. Any new
advisory or sub-advisory agreement would be subject to shareholder approval.

On the other hand, as described herein, Emerald Funds are currently
distributed by Emerald Asset Management, Inc., and

- 36 -

<PAGE>

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 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 AGREEMENTS

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 holders of the Funds' Institutional
Shares and Service Shares (excluding preparation and printing expenses
necessary for the continued registration of such shares) and of printing and
distributing all sales literature. No compensation is payable by the Funds'
Institutional Shares or Service Shares 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 agreements, the Administrator has agreed to
provide administrative services as described in the Prospectuses for the
respective Funds. 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.

- 37 -

<PAGE>

For its services with respect to the Treasury Fund, Prime Fund and
Tax-Exempt Fund, Emerald Funds has agreed to pay the Administrator fees,
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 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. From time to
time the Administrator may waive its 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) administration fees
totalling $706,100, $885,278 and $876,466, respectively, for the Treasury Fund;
$1,418,076, $1,273,698 and $1,820,903, respectively, for the Prime Fund; and
$304,013, $211,853 and $280,138, respectively, for the Tax-Exempt Fund. For
the fiscal year ended November 30, 1995 the prior administrator waived fees in
the amount of $33,145, $11,028 and $0, respectively, for the Prime, Treasury and
Tax-Exempt Funds, respectively. The prior administrator did not waive any
administration fees for the Prime or Treasury Funds for the fiscal years
ended November 30, 1994 and 1995, however, during these periods, the prior
administrator waived $55,868 and $57,955, respectively, for the Tax-Exempt
Fund.

In addition, if the total expenses borne by either the Prime Fund or
the Treasury 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

- 38 -

<PAGE>

Administrator, respectively, or the Adviser and the Administrator will bear,
the amount of such excess to the extent required by such regulations in
proportion to the fees otherwise payable to them for such year. If the total
expenses borne by the Tax-Exempt Fund in any fiscal year exceed applicable
state expense limitations, the Adviser and Sub-Adviser have agreed to make
reimbursements, to the extent required by law, for half of such excess
expenses, and the Administrator has agreed to bear the other half, provided
that the SubAdviser's obligation with respect to such reimbursement is limited
to the amount of its sub-advisory fees. 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, the most restrictive expense
limitation applicable to the Funds limits aggregate annual expenses with
respect to each Fund, including management and advisory fees but excluding
interest, taxes, brokerage commissions, and certain other expenses, to 2-1/2%
of the first $30 million of its average net assets, 2% of the next $70
million, and 1-1/2% of its remaining average net assets.

The administration agreements provide 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
agreements, 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

Until May 18, 1996, DST Systems, Inc. will serve as transfer agent
of Emerald Funds. As of May 18, 1996, BISYS Fund Services, Inc., 3435
Stelzer Road, Columbus, Ohio 43219-3035, will provide transfer agency and
dividend disbursing services for the Funds.

OPERATING EXPENSES

- 39 -

<PAGE>

certain insurance premiums; outside auditing and legal expenses; costs of
preparing and printing prospectuses for regulatory purposes and for
distribution to shareholders; costs of 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 so incorporated 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 Funds'
Prospectuses.

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 yields for the respective share classes of each
Fund are computed separately for each class 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

- 40 -

<PAGE>

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
annualized yields for each Fund are computed by compounding a particular
Fund's unannualized base period returns (calculated as above) by adding 1 to
the base period returns, raising the sums to a power equal to 365 divided by
7, and subtracting 1 from the results. In addition, the Tax-Exempt Fund may
quote a standardized "tax-equivalent yield" of each of its classes of shares,
which is computed by: (a) dividing the portion of the Fund's yield (as
calculated above) for such class that is exempt from federal income tax by one
minus a stated federal income tax rate; and (b) adding the figure resulting
from (a) above to that portion, if any, of the Fund's yield for such class of
shares that is not exempt from federal income tax. The fees which may be
imposed by institutional investors directly on their customers for cash
management services are not reflected in Emerald Funds' calculations of yields
for the Funds.

The current yields for each of the Funds may be obtained by calling
the Distributor at 800-637-3759. For the seven-day period ended November 30,
1995, the annualized yields (after fee waivers) of Institutional Shares in
the Treasury Fund, Prime Fund and Tax-Exempt Fund were 5.40%, 5.57% and
3.48%, respectively, the effective yields (after fee waivers) of such Shares
were 5.41%, 5.56% and 3.44%, respectively, and the tax-equivalent yield
(after fee waivers) of Institutional Shares in the Tax-Exempt Fund was 5.37%
(assuming a federal income tax rate of 36%). For this same seven-day period,
the annualized yields (after fee waivers) of Service Shares in the Treasury
Fund, Prime Fund and Tax-Exempt Fund were 5.05%, 5.23% and 3.13%,
respectively, the effective yields (after fee waivers) of such Shares were
5.06%, 5.23% and 3.09%, respectively, and the tax-equivalent yield (after fee
waivers) of Emerald Service Shares in the Tax-Exempt Fund was 4.78% (assuming
a federal income tax rate of 36%). During this seven-day period, fee waivers
amounted to 0.00%, 0.00% and 0.10% of the average daily net assets of the
Treasury Fund, Prime Fund and TaxExempt Fund, 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

- 41 -

<PAGE>

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 or class means
the lesser of (1) 67% of the shares of the particular Fund or class
represented at a meeting at which the holders of more than 50% of the
outstanding shares of such Fund or class are present in person or by proxy, or
(2) more than 50% of the outstanding shares of such Fund or class.

- 42 -

<PAGE>

Street, Boca Raton, FL 33496 (5.18%); Small Capitalization Fund -Class A
Shares - John G. Grimsley, P.O. Box 4099, Jacksonville, FL 32201 (5.59%);
National Financial Services Corporation/FMTC Custodian FBO Randall W. Hall
IRA, 2954 Jeanette Cove, Oviedo, FL 32765 (11.00%); Small Capitalization Fund
- - Class B Shares -Spencer C. Whitehead & Janet A. Whitehead JTWROS, 225 East
Maine Avenue, Longwood, FL 32750 (8.58%); Balanced Fund - Class A Shares -
Turpin W. Barrett Jr. & Mary D. Barrett JTWROS, 2926 Forest Brook Drive East,
Lakeland, FL 33811 (7.13%); Susan A. Fairbank Trustee, Fairbank Revocable
Trust, 85 N. Pizarro Point, Lecanto, FL 34461 (7.82%); Katie M. Loeding and
Mary Ellen Ash and Claudia May Clark JTWROS, 1659 Calvin Circle, Kissinmee, FL
34746 (8.05%); Therese A. Gaudreau, 623 S.W. Palmetto Cove, Port St. Lucie, FL
34986 (5.38%); Short-Term Fixed Income Fund - Class A Shares - National
Financial Services Company/FMTC Custodian FBO Simon Brennan IRA, 2858 S.E.
Eagle Drive, Port St. Lucie, FL 34984 (24.24%); W. B. Marks, P.O. Box 963,
Lecanto, FL 34460 (6.09%); Robert J. Haggstrom Trust U/A, 1222 Oakmont Drive,
Niceville, FL 32578 (5.91%); Joan Marie Haggstrom Trust U/A, 1222 Oakmont
Drive, Niceville, FL 32578 (6.96%); National Financial Services Corporation
for the Exclusive Benefit of our Customers, Attn: Sal Macca, 200 Liberty
Street, One World Financial Center, New York, NY 10281 (5.18%); Robert D.
Blake & Frances S. Blake JTWROS, P.O. Box 772, Pensacola, FL 32501 (18.51%);
Short-Term Fixed Income Fund - Class B Shares - Ellie R. Lee and Woodrow W.
Lee and Barbara Moseley & James W. Lee TEN COMM, 5929 Duchess Road, Pensacola,
FL 32503 (17.15%); Josephine H. Johnson, 1700 North L Street, Apt. 102,
Pensacola, FL 32501 (23.19%); Mel S. Swauger & Irene B. Swauger JTWROS, 1570
Monica Joy Circle, Longwood, FL 32779 (58.38%); Short-Term Fixed Income Fund -
Institutional Shares - Harris Trust & Savings Bank, Custodian CSR America
Inc., P/S 401k Plan, Attn: Tony Kwilosz, 111 W. Monroe Floor 5 East, Chicago,
IL 60603 (66.91%); U.S. Government Securities Fund Class A Shares - National
Financial Services Corporation for the Exclusive Benefit of our Customers,
Attn: Sal Macca, 200 Liberty Street, One World Financial Center, New York, NY
10281 (55.93%); U. S. Government Securities Fund - Class B Shares - Raymond M.
Jones & Janet J. Bell JTWROS, 7100 Ulmerton Road, Lot 125, Rancho Village,
Largo, FL 34641 (10.14%); National Financial Services Corporation for the
Exclusive Benefit of our Customers, Attn: Mr. Sal Macca, 200 Liberty Street,
One World Financial Center, New York, NY 10281 (13.44%); Susan A. Fairbank
Trustee, Fairbank Revocable Trust, 85 N. Pizarro Point, Lecanto, FL 34461
(11.90%); Anita J. Doyle, 7252 Windy Way, Brookville, FL 34601 (6.34%);
National Financial Services Corporation for the Exclusive Benefit of our
Customers, Attn: Mr. Sal Macca, 200 Liberty Street, One World Financial
Center, New York, NY 10281 (6.72%); Managed Bond Fund - Class B Shares -
Torben Jensen & Bodil Jensen JTWROS, 6120 N. Misty Oak Terrace, Beverly Hills,
FL 34465 (5.67%); Hazel L. Lickliter, 327 Dania Street, Lehigh Acres, FL 33936
(6.64%); Ruby B. Henson and Betty J. Carroll and

- 43 -

<PAGE>

David Carroll JTWROS, 768 N.E. Maranta Terrado, Jensen Beach, FL 34958
(13.47%); Charles O. Reid and Carolyn N. Reid JTWROS, 2454 Australia Way East,
Unit 28, Clearwater, FL 34623 (5.34%); Ernest P. and Muriel C. Wood, Trustees,
Ernest P. and Muriel C. Wood Revocable Trust, 1675 Algonquin Drive,
Clearwater, FL 34615 (8.75%); Florida Tax-Exempt Fund - Class A Shares -
National Financial Services Corporation for the Exclusive Benefit of our
Customers, Attn: Sal Macca, 200 Liberty Street, One World Financial Center,
New York, NY 10281 (59.37%); Florida Tax-Exempt Fund - Class B Shares, David
S. Miller, Trustee, The David S. Miller Trust, 4687 Oak Leaf Drive, Naples, FL
33999 (5.83%); Emerald Treasury Fund Emerald Service Shares - Concord
Financial Services, Inc., Attn: Linda Zerbe, First and Market Building, 100
First Avenue, Suite 300, Pittsburgh, PA 15222 (96.30%); Emerald Treasury Fund
- - Emerald Investor Shares -National Financial Service Corporation for the
Exclusive Benefit of our Customers, Attn: Mike McLaughlin, 9 New York, 200
Liberty Street, New York, NY 10281 (99.74%); Emerald Prime Fund - Emerald
Service Shares - Concord Financial Services, Inc., Attn: Linda Zerbe, First
and Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222
(15.63%); Concord Financial Services, Inc., Attn: Linda Zerbe, First and
Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222 (84.10%);
Emerald Prime Fund -Emerald Investor Shares - National Financial Service
Corporation for the Exclusive Benefit of our Customers, Attn: Mike McLaughlin,
9 New York, 200 Liberty Street, New York, NY 10281 (98.92%); Emerald Tax-
Exempt Fund - Emerald Service Shares -Concord Financial Services, Inc., Attn:
Linda Zerbe, First and Market Building, 100 First Avenue, Suite 300,
Pittsburgh, PA 15222 (22.53%); Concord Financial Services, Inc., Linda Zerbe,
First and Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222
(77.46%); Emerald Tax-Exempt Fund - Emerald Investor Shares - National
Financial Service Corporation, Attn: Mike McLaughlin, 9 New York, 200 Liberty
Street, New York, NY 10281 (95.12%). At such date, Hambrecht & Quist Group,
Inc., owned 100% of the outstanding shares of the Tax-Exempt Trust Fund.

The Prospectus and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under
the Securities Act of 1933 with respect to the securities offered by the
Trust's 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

- 44 -

<PAGE>

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 Funds' 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") are hereby incorporated herein by reference. No other parts
of the Annual Report are incorporated by reference. Copies of the Annual
Report may be obtained by writing to BISYS Fund Services, Inc., P.O. Box 182697,
Columbus, OH 43219-3035 or by calling TOLL-FREE AT 800-637-3759.

- 45 -

<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."

"B" - Issue has only a speculative capacity for timely payment.

"C" - Issue has a doubtful capacity for payment.

"D" - Issue is in payment default.

"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.

A-1

<PAGE>

"Prime-2" - Issuer or related supporting institutions are considered
to have a strong capacity for repayment of short-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

A-2

<PAGE>

factors are larger and subject to more variation. Nevertheless, timely
payment is expected.

"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

A-3

<PAGE>

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-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-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.

"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.

A-4

<PAGE>

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

"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.

"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.

A-5

<PAGE>

"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 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.

"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:

A-6

<PAGE>

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 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.

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.

A-7
<PAGE>

"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.

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 "F1+."

A-8

<PAGE>

"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.

"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.

"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.

"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

A-9

<PAGE>

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 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-10

<PAGE>

"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.

MUNICIPAL NOTE RATINGS

"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.

"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.

A-11

<PAGE>

"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.

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>
EMERALD FUNDS

Statement of Additional Information
for the
*Treasury Trust Fund*
*Prime Trust Fund*

April 1, 1996

TABLE OF CONTENTS

Page
<S> <C>
Emerald Funds 2
Investment Objectives and Policies 2
Net Asset Value and Dividends 16
Additional Purchase and Redemption Information 17
Description of Shares 18
Additional Information Concerning Taxes 20
Management of Emerald Funds 22
Independent Accountants 32
Counsel 32
Additional Information on Yield 33
Miscellaneous 34
Financial Statements 37
Appendix A-1

</TABLE>

This Statement of Additional Information is meant to be read in
conjunction with Emerald Funds' Prospectus dated April 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 and the
Adviser, the Sub-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 generally 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 Sub-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.

-2-

<PAGE>

in this practice, however, only when the Sub-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 Sub-Advisory Agreement with respect to the Funds, the Sub-
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 Sub-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 Sub-Advisory Agreement authorizes the Sub-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 Sub-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 Sub-
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 Sub-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.

-3-

<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 Sub-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 Sub-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 or the Sub-Adviser,
to take into account the sale of Fund shares if the Sub-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, the Sub-
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
and the Sub-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 Sub-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 Sub-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 Sub-Adviser pursuant to
guidelines established by the Board and the Adviser, 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

-4-

<PAGE>

Commission. In addition, it is possible that unregistered securities purchased
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.

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.

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.

-5-

<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

-6-

<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.

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

-7-

<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 Sub-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.

-8-

<PAGE>

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
Securities or additionally, 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.
Collateral for the Treasury Trust Fund is limited to cash and U.S. Government
securities. 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

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,

-9-

<PAGE>

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.

-10-

<PAGE>

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.

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

-11-

<PAGE>

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.

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.
Emerald, 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

-12-

<PAGE>

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.

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.

-13-

<PAGE>

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
purchase 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.

-14-

<PAGE>

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.

PARTICIPATION INTERESTS AND TRUST RECEIPTS

The Prime Trust Fund may purchase participation interests and trust
receipts as described in its Prospectus. 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

-15-

<PAGE>

investments, and will be acquired by the Fund subject to its limitation on
illiquid investments.

RATINGS AND ISSUER'S OBLIGATIONS

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 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.

-16-

<PAGE>

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 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

-17-

<PAGE>

Prospectus, shares of the Treasury Trust Fund and the Prime Trust Fund are
presently sold only to Barnett Banks Trust Company, N.A. ("Barnett") and its
affiliated banks (collectively, "Banks") acting in a fiduciary capacity on
behalf of persons maintaining accounts at the Banks, as well as certain accounts
maintained at other institutions for which Barnett provides advisory or other
fiduciary services.

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 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, the Sub-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.

-18-

<PAGE>

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
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.

-19-

<PAGE>

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

-20-

<PAGE>

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.

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.

-21-

<PAGE>

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 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 backup 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:

-22-

<PAGE>

Principal Occupations
Position with During Past 5 Years and
Name and Address Emerald Funds Other Affiliations
- ---------------- ------------- ------------------------

Chesterfield H. Smith* Chairman of Senior Partner of the law
701 Brickell Avenue the Board firm of Holland and Knight;
Suite 3000 of Trustees Director, Greenwich Air
Miami, FL 33101 Services Inc. (an aircraft
Age 78 airframe and engine repair
company); Director, Citrus and
Chemical Bank; Director,
Citrus and Chemical
Bancorporation (bank holding
company of Citrus and Chemical
Bank).

Albert D. Ernest* Trustee President, Albert Ernest
1560 Lancaster Terrace Enterprises (personal
Suite 1402 investments), 1991 to date;
Jacksonville, FL 32204 President and Chief
Age 65 Operating 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 Member of the law firm of
50 N. Laura St. President Mahoney Adams & Criser,
Suite 3400 P.A. since 1966.
Jacksonville, FL 32201
Age 57

-23-

<PAGE>

Principal Occupations
Position with During Past 5 Years and
Name and Address Emerald Funds Other Affiliations
- ---------------- ------------- ------------------------

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;
Age 57 Vice 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 March 1995
Distributor, February 1987
to March 1995.

J. David Huber Vice President Employee of BISYS
BISYS Fund Services Fund Services, Inc., June 1987
3435 Stelzer Road to present.
Columbus, OH 43219-3035
Age 49

Jeffrey A. Dalke Secretary Partner, Drinker Biddle &
PNB Building Reath (law firm).
1345 Chestnut Street
Philadelphia, PA 19107
Age 45

George Martinez Assistant Senior Vice President and
BISYS Fund Services Secretary Director of Legal and
3435 Stelzer Road Compliance Services, BISYS
Columbus, OH 43219-3035 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
BISYS Fund Services Fund Services, Inc.,
3435 Stelzer Road April 1987 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,
Age 44 Inc., August 1995 to present;
Vice President and
Associate General Counsel
with National Securities
Research Corp., July 1990 to
June 1991.

-24-

<PAGE>

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
Age 28 1995 to present; Supervisor,
Mutual Fund Legal Department,
Alliance Capital Management,
May 1989 to June 1995.

* These Trustees may be deemed to be "interested persons" of Emerald
Funds as defined in the Investment Company Act of 1940.

-25-

<PAGE>

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' most recent 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 January 10, 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.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TOTAL
COMPENSATION
PENSION OR FROM
AGGREGATE RETIREMENT ESTIMATED EMERALD
COMPENSATION BENEFITS ANNUAL FUNDS
FROM ACCURED AS BENEFITS AND FUND
EMERALD PART OF FUND UPON COMPLEX* PAID
NAME OF PERSON 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
</TABLE>

______________________________

* The "Fund Complex" consists solely of Emerald Funds.

** Mr. Ernest was appointed to the Board of Trustees on May 4, 1995.

-26-

<PAGE>

SHAREHOLDER AND TRUSTEE LIABILITY

ADVISORY AND SUB-ADVISORY SERVICES

Barnett Banks Trust Company, N.A. (the "Adviser") serves as investment
adviser, and Rodney Square Management Corporation (the "Sub-Adviser"), a wholly-
owned subsidiary of

-27-

<PAGE>

Wilmington Trust Company ("WTC"), serves as sub-investment adviser, to each
Fund.

In their Investment Advisory and Sub-Advisory Agreements, the Adviser
and Sub-Adviser have agreed to provide the services described in the Prospectus
and to pay all expenses incurred by them in connection with their advisory and
sub-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. In rendering its sub-advisory services,
the Sub-Adviser may occasionally consult, on an informal basis, with personnel
from the investment departments of WTC; however, WTC will take no part in
determining the investment policies of the Funds or in deciding which securities
are to be purchased or sold by the Funds.

Because of state and federal regulations applicable to the fiduciary
accounts whose assets are invested in the Funds, the Funds' Advisory Agreement
provides that the Adviser will not be entitled to any compensation from the
Funds for its advisory services.

For the services provided and expenses assumed pursuant to the
sub-advisory agreement, Emerald Funds has agreed to pay the Sub-Adviser fees,
computed daily and paid monthly, at the annual rate of .15% of the average
net assets of each Fund. The fees payable to the Sub-Adviser are not subject
to reduction as the value of each Fund's net assets increases. From time to
time, however, the Sub-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 Sub-Adviser with respect to the Funds. For the fiscal
years ended November 30, 1995, 1994 and 1993 the Sub-Adviser 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, the Sub-Adviser 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 the
Sub-Adviser waived sub-advisory fees totalling $28,256 and

-28-

<PAGE>

$17,525 for the Treasury Trust Fund and $25,863 and $23,338 for the Prime
Trust Fund.

Under the Investment Advisory and Sub-Advisory Agreements, the Adviser
and Sub-Adviser are 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
such agreements, 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 or Sub-
Adviser in the performance of their duties or from their reckless disregard of
their duties and obligations under the Agreements.

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 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 and Sub-Advisory Agreements and as contemplated by the
Prospectus and this Statement of Additional Information, and the Sub-Adviser
believes, with respect to its activities as required by the Sub-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 or the Sub-Adviser, as the case may be, may each perform such
activities without violation of the Glass-Steagall Act or other applicable

-29-

<PAGE>

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 Sub-Adviser and that future changes in either
federal or state statutes and regulations relating to permissible activities of
banks or 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 and Sub-Adviser from
continuing to perform such services for the Funds. If the Adviser or Sub-
Adviser were prohibited from continuing to perform advisory and sub-advisory
services for the Funds, it is expected that the Board of Trustees would
recommend that the Funds enter into new agreements or would consider the
possible termination of the Funds. Any new advisory or sub-advisory agreement
would be subject to shareholder approval.

On the other hand, as described herein, Emerald Funds are 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 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

-30-

<PAGE>

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 adminstration 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 Sub-Adviser and the Administrator, respectively, or the Sub

-31-

<PAGE>

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 Sub-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. The Bank of New
York also provides the Funds with certain accounting, bookkeeping, pricing,
dividend and distribution calculation services with respect to the Funds
pursuant to a fund accounting agreement with the Administrator. Until May
18, 1996, DST Systems, Inc. will serve as transfer agent of Emerald Funds. As
of May 18, 1996, BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio
43219-3035 will provide 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, Sub-Adviser, Administrator or any of their affiliates; Securities and
Exchange Commission fees; state securities registration and qualification fees;
sub-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 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.

-32-

<PAGE>

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 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 on their

-33-
<PAGE>

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 November 30, 1995, the annualized yields (after fee waivers) of the
Treasury Trust Fund and Prime Trust Fund were 5.52% and 5.51%, respectively,
and the effective yields (after fee waivers) of such Funds were 5.42% and
5.51%, respectively. During this seven-day period, a portion of the
sub-advisory and administrative fees amounting to 0.05% and 0.03% of the
average daily net assets of the Treasury Trust Fund and Prime Trust Fund,
respectively, were reimbursed.

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.

-34-

<PAGE>

Institutional Shares (95.00%), Managed Bond Fund - Class A Shares (5.43%),
Managed Bond Fund - Institutional Shares (99.40%) Florida Tax Exempt Fund -
Class A Shares (0.10%), Florida Tax Exempt Fund - Class B Shares (2.20%) and
Florida Tax-Exempt Fund - Institutional Shares (94.90%) that were outstanding on
such date because the Adviser possessed voting or investment discretion with
respect to such shares. As of January 8, 1996, the name, address and percentage
of the outstanding shares held by those entities who may have owned of record or
beneficially 5% or more of the outstanding shares of a particular Fund of the
Trust (other than as stated above) were as follows: Equity Fund -Class A Shares
- - National Financial Services Corporation, Attn: Sal Macca, 200 Liberty Street,
One World Financial Center, New York, NY 10281 (54.67%); University of West
Florida Foundation, 11000 University Parkway, Pensacola, FL 32514 (7.95%);
Equity Fund - Class B Shares - National Financial Services Corporation/FMTC IRA
FBO Jerry E. Handy, 839 Cape Haze Lane, Naples, FL 33942 (5.22%); Harvey R.
Gelman, 2226 N.W. 60th Street, Boca Raton, FL 33496 (5.18%); Small
Capitalization Fund -Class A Shares - John G. Grimsley, P.O. Box 4099,
Jacksonville, FL 32201 (5.59%); National Financial Services Corporation/FMTC
Custodian FBO Randall W. Hall IRA, 2954 Jeanette Cove, Oviedo, FL 32765
(11.00%); Small Capitalization Fund - Class B Shares -Spencer C. Whitehead &
Janet A. Whitehead JTWROS, 225 East Maine Avenue, Longwood, FL 32750 (8.58%);
Balanced Fund - Class A Shares - Turpin W. Barrett Jr. & Mary D. Barrett JTWROS,
2926 Forest Brook Drive East, Lakeland, FL 33811 (7.13%); Susan A. Fairbank
Trustee, Fairbank Revocable Trust, 85 N. Pizarro Point, Lecanto, FL 34461
(7.82%); Katie M. Loeding and Mary Ellen Ash and Claudia May Clark JTWROS, 1659
Calvin Circle, Kissinmee, FL 34746 (8.05%); Therese A. Gaudreau, 623 S.W.
Palmetto Cove, Port St. Lucie, FL 34986 (5.38%); Short-Term Fixed Income Fund -
Class A Shares - National Financial Services Company/FMTC Custodian FBO Simon
Brennan IRA, 2858 S.E. Eagle Drive, Port St. Lucie, FL 34984 (24.24%); W. B.
Marks, P.O. Box 963, Lecanto, FL 34460 (6.09%); Robert J. Haggstrom Trust U/A,
1222 Oakmont Drive, Niceville, FL 32578 (5.91%); Joan Marie Haggstrom Trust U/A,
1222 Oakmont Drive, Niceville, FL 32578 (6.96%); National Financial Services
Corporation for the Exclusive Benefit of our Customers, Attn: Sal Macca, 200
Liberty Street, One World Financial Center, New York, NY 10281 (5.18%); Robert
D. Blake & Frances S. Blake JTWROS, P.O. Box 772, Pensacola, FL 32501 (18.51%);
Short-Term Fixed Income Fund - Class B Shares - Ellie R. Lee and Woodrow W. Lee
and Barbara Moseley & James W. Lee TEN COMM, 5929 Duchess Road, Pensacola, FL
32503 (17.15%); Josephine H. Johnson, 1700 North L Street, Apt. 102, Pensacola,
FL 32501 (23.19%); Mel S. Swauger & Irene B. Swauger JTWROS, 1570 Monica Joy
Circle, Longwood, FL 32779 (58.38%); Short-Term Fixed Income Fund -Institutional
Shares - Harris Trust & Savings Bank, Custodian CSR America Inc., P/S 401k Plan,
Attn: Tony Kwilosz, 111 W. Monroe Floor 5 East, Chicago, IL 60603 (66.91%); U.S.
Government Securities Fund --

-35-

<PAGE>

Class A Shares - National Financial Services Corporation for the Exclusive
Benefit of our Customers, Attn: Sal Macca, 200 Liberty Street, One World
Financial Center, New York, NY 10281 (55.93%); U. S. Government Securities Fund
- - Class B Shares - Raymond M. Jones & Janet J. Bell JTWROS, 7100 Ulmerton Road,
Lot 125, Rancho Village, Largo, FL 34641 (10.14%); National Financial Services
Corporation for the Exclusive Benefit of our Customers, Attn: Mr. Sal Macca, 200
Liberty Street, One World Financial Center, New York, NY 10281 (13.44%); Susan
A. Fairbank Trustee, Fairbank Revocable Trust, 85 N. Pizarro Point, Lecanto, FL
34461 (11.90%); Anita J. Doyle, 7252 Windy Way, Brookville, FL 34601 (6.34%);
National Financial Services Corporation for the Exclusive Benefit of our
Customers, Attn: Mr. Sal Macca, 200 Liberty Street, One World Financial Center,
New York, NY 10281 (6.72%); Managed Bond Fund - Class B Shares - Torben Jensen &
Bodil Jensen JTWROS, 6120 N. Misty Oak Terrace, Beverly Hills, FL 34465 (5.67%);
Hazel L. Lickliter, 327 Dania Street, Lehigh Acres, FL 33936 (6.64%); Ruby B.
Henson and Betty J. Carroll and David Carroll JTWROS, 768 N.E. Maranta Terrado,
Jensen Beach, FL 34958 (13.47%); Charles O. Reid and Carolyn N. Reid JTWROS,
2454 Australia Way East, Unit 28, Clearwater, FL 34623 (5.34%); Ernest P. and
Muriel C. Wood, Trustees, Ernest P. and Muriel C. Wood Revocable Trust, 1675
Algonquin Drive, Clearwater, FL 34615 (8.75%); Florida Tax-Exempt Fund - Class A
Shares - National Financial Services Corporation for the Exclusive Benefit of
our Customers, Attn: Sal Macca, 200 Liberty Street, One World Financial Center,
New York, NY 10281 (59.37%); Florida Tax-Exempt Fund - Class B Shares, David S.
Miller, Trustee, The David S. Miller Trust, 4687 Oak Leaf Drive, Naples, FL
33999 (5.83%); Emerald Treasury Fund - Emerald Service Shares - Concord
Financial Services, Inc., Attn: Linda Zerbe, First and Market Building, 100
First Avenue, Suite 300, Pittsburgh, PA 15222 (96.30%); Emerald Treasury Fund -
Emerald Investor Shares -National Financial Service Corporation for the
Exclusive Benefit of our Customers, Attn: Mike McLaughlin, 9 New York, 200
Liberty Street, New York, NY 10281 (99.74%); Emerald Prime Fund - Emerald
Service Shares - Concord Financial Services, Inc., Attn: Linda Zerbe, First and
Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222 (15.63%);
Concord Financial Services, Inc., Attn: Linda Zerbe, First and Market Building,
100 First Avenue, Suite 300, Pittsburgh, PA 15222 (84.10%); Emerald Prime Fund
- -Emerald Investor Shares - National Financial Service Corporation for the
Exclusive Benefit of our Customers, Attn: Mike McLaughlin, 9 New York, 200
Liberty Street, New York, NY 10281 (98.92%); Emerald Tax-Exempt Fund - Emerald
Service Shares -Concord Financial Services, Inc., Attn: Linda Zerbe, First and
Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222 (22.53%);
Concord Financial Services, Inc., Linda Zerbe, First and Market Building, 100
First Avenue, Suite 300, Pittsburgh, PA 15222 (77.46%); Emerald Tax-Exempt Fund
- - Emerald Investor Shares - National Financial Service Corporation, Attn: Mike
McLaughlin, 9 New York, 200 Liberty Street, New York,

-36-

<PAGE>

NY 10281 (95.12%). At such date, Hambrecht & Quist Group, Inc. , owned 100% of
the outstanding shares of the Tax-Exempt Trust Fund.

The Prospectus and this Additional Statement do not contain all the
information included in the Registration 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.

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")
are hereby incorporated herein by reference. No other parts of the Annual
Report are incorporated by reference. Copies of the Annual Report may be
obtained by writing to BISYS Fund Services, Inc., P.O. Box 182697,
Columbus, Ohio 43219-3035 or by calling 800-637-3759.

-37-

<PAGE>

APPENDIX A

COMMERCIAL PAPER RATINGS

"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."

"B" - Issue has only a speculative capacity for timely payment.

"C" - Issue has a doubtful capacity for payment.

"D" - Issue is in payment default.

"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.

"Not Prime" - Issuer does not fall within any of the Prime rating
categories.

"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.

A-2

<PAGE>

"Duff 5" - Issuer has failed to meet scheduled principal and/or
interest payments.

"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+."

"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.

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-4" - This designation indicates that the debt is regarded as non-
investment grade and therefore speculative.

"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.

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.

"CI" - This rating is reserved for income bonds on which no interest
is being paid.

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:

"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.

"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.

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>

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:

A-8

<PAGE>

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.

"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.

"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

"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.

"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.

"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